In was September 2007 when properties started to pile on California foreclosure listings, caused by the mortgage market meltdown, according to industry experts.
Orange County is the poster child of economic devastation and foreclosure crisis in California. It is also the home of subprime mortgage deals, involving Ameriquest, Fremont and New Century. In August 2007, the subprime mortgage market started to crumble as many loans went unpaid. In addition, investors who typically gobbled up low-risk-mortgages of banks have realized that they have made a very costly mistake.
Investors set aside loan buying, leaving banks with piles of troubled loans and forcing them to reduce lending.
Economists said that the financial industries realized too late the bad underwriting standards used to make loans. Many home buyers, investor groups and investment brokers found their investments in trouble causing a widespread panic, recession and overburdened California foreclosure listings.
The Federal Reserve tried to cushion the market collapse by keeping its lending rate at about 5.25 percent. The Federal Reserve's lending rate is the benchmark for short-term loan rates. The agency also provided liquidity to extend the life of the financial market.
Industry analysts said that in only a short time, the subprime loan business, which blossomed in Orange County, mutated to become a global problem. American Strategic Capital financial adviser Charles Rother said that it was August 10, 2007 when the financial crisis started. He said that around that time, the drastic drop of home prices in California, Arizona and Nevada were hitting hard the country's economy and impacting the financial markets worldwide.
The dam of foreclosures burst and distressed properties flooded the market. In Orange County, about 14,800 homeowners lost their properties to foreclosures since August 2007. And industry analysts are expecting another wave of foreclosures in the coming months.
The foreclosure crisis did not only confine its devastation on homeowners. Many lenders closed their operations. Employment statistics showed that about 12,800 Orange County lenders lost their jobs. Consequently, home construction also dried up, resulting to the loss of about 27,000 construction jobs or 25 percent.
The problem crossed over to other sectors of the economy, resulting to about 45,000 unemployed in the non-real estate sector. In July, the employment rate in Orange County declined to nearly 1.42 million, the lowest since February 2003.
Industry analysts said that the only good thing that came out of this crisis is the increase in housing affordability due to the abundance of bargain-priced foreclosure houses on the market.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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