TRENDS IN DELINQUENCIES AND FORECLOSURES IN …...San Diego Regional Data Maps Areas Affected by Concentrated Foreclosures J 2009June 2009 Source: Lender Processing Services Inc. Applied

TRENDS IN DELINQUENCIES AND FORECLOSURES IN CALIFORNIACALIFORNIA

August 2009

Community Development Department, Federal Reserve Bank of San Francisco

Outline of Presentation

National TrendsRecession and turmoil in financial markets has had broad repercussions, especially for lower-income households

Signs of stabilization in financial markets and consumer spendingSigns of stabilization in financial markets and consumer spending

CaliforniaRising unemployment across broad range of sectorsg p y g

Ongoing weakness in the labor market may continue to push up foreclosures and poses risks to the recovery of the housing sector

Trends in foreclosuresTrends in foreclosuresCalifornia saw a sharp rise in foreclosure starts in 1st quarter 2009, followed by slight drop

H i ti d d t dHouse prices continue downward trend

N i l T dNational Trends

Weakness in Labor Market Grave Concern

0U.S. Unemployment Rate

8

9

10

6

7

nt R

ate

3

4

5

Une

mpl

oym

e

1

2

Source: Bureau of Labor Statistics

01989 1993 1997 2001 2005 2009

Recession

National Foreclosure Starts Rose Sharply in 1st Quarter of 2009Quarter of 2009

National Foreclosures Starts P t f All L

1.40

1.60

Percent of All Loans

1.00

1.20

0.60

0.80

0.20

0.40

Source: Mortgage Bankers Association, National Delinquency Survey

0.002000 2002 2003 2004 2005 2006 2007 2008 2009

In Last 2 Years, Foreclosure Crisis Has Spread Beyond “Rust Belt” CitiesBeyond Rust Belt Cities

June 2007

In Last 2 Years, Foreclosure Crisis Has Spread Beyond “Rust Belt” CitiesBeyond Rust Belt Cities

June 2009

House Prices Rose Slightly in 2nd Quarter 2009

Case Shiller National House Price Index

200

Case-Shiller National House Price Index (2000 = 100, quarterly)

180

140

160

120

Source: Case - Shiller Home Price Index

1002000 2001 2002 2003 2004 2005 2006 2007 2008 2009

How Does This Compare to Great Depression?

Current Crisis The Great Depression

GDP decline 3.9% 36%GDP decline 3.9% 36%

Unemployment 9.4% 25%

Stock Market decline 48% 87%

Mortgage Delinquency 10.5% 50%

Bank Failures 100 ThousandsBank Failures 100 Thousands

Source: FRBSF and Haver Analytics, as of July 2009.

And Certain Market Indicators are Looking Up

Financial markets are improving, and the crisis mode that has characterized the past year is subsiding.

The housing sector, which has been at the center of the g ,economic and financial crisis, also looks to be stabilizing—albeit, at a very depressed level. Housing starts and new home sales have leveled off, and existing home sales have d d i h edged up in recent months.

Income from the federal fiscal stimulus, as well as some ,improvement in confidence, has helped stabilize consumer spending. Since consumer spending accounts for two-thirds of all economic activity, this is a key precondition for economic recovery.

Nevertheless, Recession is Likely to Have Long-Lasting Impacts Especially for Lower-Income FamiliesImpacts, Especially for Lower-Income Families

48 states face significant budget shortfalls, and are cutting public services such as health benefits for children and public education.

Tightening lending standards will make it more difficult for families and small businesses to access credit: the Federal R ’ t l S i L Offi O i i S Reserve’s quarterly Senior Loan Officer Opinion Survey on Bank Lending Practices found that 65 percent reported tightened standards for the fourth quarter of 2008.

CDFIs are increasingly facing liquidity constraints; their borrowers are in more need of ‘patient’ capital at the same bo owe s a e o e eed o pa e cap a a e sa e time it is becoming harder to provide it.

C lif i T dCalifornia Trends

Unemployment Rate Rising Steeply in 1st Half of 20091st Half of 2009

14.0

12.0

8.0

10.0

men

t Rat

e

4.0

6.0

Une

mpl

oym

United States

California

2.0

United States

Source: Bureau of Labor Statistics

0.02000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Recession

California Has Seen Significant and Steep Decline in House PricesDecline in House Prices

FHFA (formerly OFHEO) House Price Index

230

250

( 2000 = 100, quarterly)

California

e Pr

ice

Inde

x0=

100

190

210

FHFA

Hou

se20

00

150

170

United States

110

130

Source: Federal Housing Finance Agency (formerly OFHEO)

902000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Northern CA MSAs Experiencing Significant House Price DeclinesHouse Price Declines

FHFA House Price Index: Northern California

230

250

FHFA House Price Index: Northern California(2000 = 100, quarterly)

Sacramento

e Pr

ice

Inde

x0=

100

190

210 Oakland

FHFA

Hou

se20

00

150

170 San Francisco

110

130


902000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Southern California MSAs also Experiencing Declining House Prices

FHFA House Price Index: Southern California

Declining House Prices

270

290

(2000 = 100, quarterly)

Inland Empire

e Pr

ice

Inde

x0=

100

210

230

250

Los Angeles

FHFA

Hou

se20

00

170

190San Diego

110

130

150


902000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Central Valley Cities Have Seen Greatest House Price DeclinesPrice Declines

FHFA House Price Index: Central California

270

290

FHFA House Price Index: Central California(2000 = 100, quarterly)

e Pr

ice

Inde

x0=

100

210

230

250Fresno

FHFA

Hou

se20

00

170

190

210Stockton

Visalia

110

130

150

Merced


90

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Foreclosures in California are Above the National Average

Foreclosure Starts (Percent of All Loans)

National Average

3

3.5

4

2

2.5

3

1

1.5

2

0

0.5

Alaska Washington Oregon Utah Hawaii Idaho US California Arizona Nevada

2006 Q2 2007 Q2 2008 Q2 2009 Q2


California Saw a Sharp Rise in Foreclosure Starts in 1st Quarter 2009 Followed by Slight DropQuarter 2009, Followed by Slight Drop

California: Foreclosure Starts

2.0

2.5California: Foreclosure Starts

1.5

2.0

Loan

s

1.0Perc

ent o

f A

ll L

0.5


0.02005 2006 2007 2008 2009

Growing Concerns over Sustainability of Loans with Payment Options (in subprime prime and Alt-A markets)Payment Options (in subprime, prime and Alt-A markets)

Characteristics of Remaining “Current” Loans

25.0

30.0

Characteristics of Remaining Current Loans

20.0

al C

urre

nt L

oans

10.0

15.0

Perc

ent o

f To

ta

0.0

5.0

ARM Option ARM Interest Only (Fixed and ARM)

Jumbo

California US

S & L l D MState & Local Data Maps

California Data Maps

Areas Affected by Concentrated ForeclosuresJ 2007June 2007

Source: Lender Processing Services Inc. Applied Analytics

Areas Affected by Concentrated ForeclosuresJ 2008


June 2008





Bay Area Data Maps



Bay Area Data Maps

Areas at Risk of Additional ForeclosuresJ 2009June 2009


Sacramento Valley Data Maps


Source: McDash Analytics & FRBSF Calculations, November 2008 Source: Lender Processing Services Inc. Applied Analytics

Areas at Risk of Additional ForeclosuresJ 2009

Sacramento Valley Data Maps

June 2009

Source: McDash Analytics & FRBSF Calculations, November 2008 Source: Lender Processing Services Inc. Applied Analytics

San Joaquin Valley Data Maps



San Joaquin Valley Data Maps



Southern Central California Data Maps



Southern Central California Data Maps



Los Angeles Metro Region Data Maps












Orange County Data Maps



Orange County Data Maps



Inland Empire Regional Data Maps



Inland Empire Regional Data Maps



San Diego Regional Data Maps



San Diego Regional Data Maps

Neighborhoods at Risk of Additional ForeclosuresJune 2009June 2009


C l iConclusions

Continued Need for Foreclosure Prevention

Important to reach borrowers with ‘preventable’ p pforeclosures

Borrower Outreach EventsC t f l ti kb k f l Create a foreclosure prevention workbook -- for an example see Arizona’s: http://www.pima.gov/current/2008_November%20English%20Workbook.pdf

Making Homes AffordableMaking Homes AffordableFederal program provides both loan modification and refinance optionsO li f il bl th t ll w b w t if th lif Online form available that allows borrowers to assess if they qualify for the program

http://makinghomeaffordable.gov/eligibility.html

Preventing Foreclosure Scamsg

Foreclosure scams are proliferating, especially in p g, p ymarkets with investor interest

Some counties are sending notices to all delinquent borrowers to warn them about foreclosure scamsborrowers to warn them about foreclosure scamsFree media kit available from the Federal Reserve which includes a PSA and other resources: h // f d l d i / f d/ di ki fhttp://www.federalreserveeducation.org/pfed/mediakit.cfm

NeighborWorks PSA: http://www.youtube.com/nwpadOther 5 Tip brochures and resources available from the Other 5 Tip brochures and resources available from the Federal Reserve http://www.federalreserve.gov/consumerinfo/fivetips.htm

Stabilizing Communities and Helping Families After ForeclosureAfter Foreclosure

Develop service delivery and resources for families who p ygo through foreclosure

Rental housing assistanceC di iCredit repairMinimizing disruption for children (e.g. allowing them to finish the school year in their old school)

Minimize negative spillover effects of vacant properties on surrounding neighborhood

f OEnsure servicer maintenance of REOsWork with lenders/servicers to acquire and rehab foreclosures for affordable housingg

For More Information: FRBSF Comm nit De elopment WebsiteFRBSF Community Development Website

Links to other resources and research on foreclosure trends and mitigation strategiesmitigation strategiesAll publications, presentations available on pour websiteConference materials also

t d h tl ft posted shortly after events

http://www.frbsf.org/community/

Documents

TRENDS IN DELINQUENCIES AND FORECLOSURES IN …...San Diego Regional Data Maps Areas Affected by Concentrated Foreclosures J 2009June 2009 Source: Lender Processing Services Inc. Applied