The cloud over California's mortgage lenders grew even darker Wednesday when the Mortgage Bankers Association of America!s national delinquency survey revealed a sharp increase in delinquency and foreclosures rates in the state. But mortgage lenders in the Golden State say they are, nonetheless, optimistic.
The statistics don't seem to give them reason to be. The MBA said that 11 of 13 Western states reported declines in delinquency rates from the previous year. But California's delinquency rate stood at 3.67% as of June 30, up 13 basis points from the same day in 1992.
More serious delinquencies - loans 90 days or more past due - increased by 17 basis points to 0.73% and loans in foreclosure on a year-over-year basis also rose 50 basis points to 1.22%.
But while the statistics are gloomy. the MBA said the sudden rise in delinquency rates might actually be a precursor for improvement in the mortgage lending industry there. The increase reflects the fact that California is settling its problems and foreclosing on many loans, said David Lereah, the MBA's chief economist. once those loans are off those portfolios, improvements will be seen.
"That's probably an accurate assessment," said Buddy Greene, senior loan officer for Cal Coast Mortgage Corp. in San Diego. "A lot of [homeowners] lost their jobs, moved from the area and just left their houses without thinking twice about keeping or selling them. Many of them bought homes with just 5% or 10% down and had only a couple thousand dollars in equity built up, so they just walk away. They had nothing to lose. Getting those loans out of the portfolios will definitely help."
Despite the changes, Greene said Cal Coast, the largest mortgage lender in San Diego, had seen steady improvements and recorded their best month ever in July.
"Things are picking up," Greene said. The resale market is 100% better than it was because of low interest rates. The combination of lower home prices and interest rates has created a market where you can get a home for what people were paying four or five years ago," he said. "And at rates that make it difficult for many people not to qualify."
Other California lenders agreed.
"We see an increase in the purchase market here, too," said Willis Newton, chief financial officer at First Republic Bancorp Inc., in San Francisco. Newton said that First Republic's volume - charted at $ 1.1 billion by the MBA in 1992 - was up 20% so far in 1993. The company deals almost exclusively in California, and he attributed the increase to tighter uriderwriting standards, an expanded loan origination staff and greater concentration on single-family lending.
"Homes are being sold here, thanks to low interest rates and some declines in real-term prices," Newton said. "And as a company, we feel comfortable with the state's growing economic strength - we're not projecting any dramatic increases, but there is reason to be optimistic. The people, at least in our markets, reflect that optimism with purchases."
No one expects California resurgence to take place ovemight, but the feeling among mortgage bankers appears favorable toward the distant future.
In regards to short-term improvements in delinquency and foreclosure rates, "I'm not as encouraged about California's prospects as I am the rest of the country's, Lereah said. "The state's economy - particularly in the South - is not that good. They're still having problems. The manufacturing sector, retail sales and residential investments are all very weak.
But as the economy recovers, California will begin to participate. I'm still pessimistic about California for the near term, but I'm very optimistic for the long term."