The Los Angeles Times ran a story today about record new levels of home foreclosures in California. Year over year data for the second quarter between 2006 and 2007  shows a 799% increase in home foreclosures for the state - a stunning increase that impacted nearly 18,000 Californians. The article also notes that this jump eclipsed the previous record for foreclosures, set back in 1996. The LA Times mentions the strong regional variance in foreclosure rates between counties. Riverside, Contra Costa, Sacramento and most Central Valley counties all experienced record levels of foreclosure, while Los Angeles county was far from its previous record in 1996.

Perhaps most interesting are the reasons for the foreclosure record cited by DataQuik chief analyst: the ease with which borrowers accessed adjustable rate mortgage debt to become homeowners. DataQuik speculates that lax lending standards, and the temptation of introductory rates, which adjust significantly upward after a few years, are at the root of the foreclosure boom. For the whole article, click below:

Foreclosures soar in California
By David Streitfeld, Times Staff Writer

LOS ANGELES — A sagging real estate market and tighter lending standards are exacting a growing toll on Californians, forcing them from their homes in record numbers, figures released Tuesday show.

Foreclosures soared to 17,408 for the three months ended June 30, an increase of 799 percent from the same period last year. The current rate handily exceeds the previous foreclosure peak set in 1996, when the state was in the final throes of six-year slump.

Matt Fellowes from the Brookings Institution argues that it costs a lot to be poor. Fellowes notes that low-income communities pay a high premium for financial services simply because mainstream banks and credit unions effectively ceded this market to high-cost financial institutions. You can read more about the consequences of such neglect here.

Yet another aspect of financial neglect is the fact that financial institutions are not developing competitive products to meet the needs of low-income communities. Take payday lenders for example. Payday lenders provide loans and charge the most that they can charge according to state law. In California, the law allows payday lenders to charge up to 459% APR. So, what’s the incentive for payday lenders to provide competitive products that would drive down such costs? None. They can charge top dollar. Why change that? As long as competition from banks and credit unions is kept at bay - and state law is not changed - business for payday lenders is, well, good.

Slowly, this may be changing. A report by the Woodstock Institute release earlier this year notes that some credit unions are developing products to compete with payday lenders. Indeed, competition may well be what drives down the high-cost of being poor. But until all banks and credit unions jump in and compete, life for neglected borrowers will continue to be more expensive.

Underpinning the many visions of the America Dream is the idea that a person can work hard, play by the rules and move up the social economic ladder so that their kids can have more opportunities for a better life. This ideal, in my view, is the glue that keeps this nation together. It turns out, however, that it’s becoming increasingly harder for low-wage families in America to realize this dream.

A report by the Organization for Economic Cooperation and Development, comparing the probabilities for social mobility in five Nordic countries and the U.S., found that a male offspring of a parent in the bottom fifth of the earning’s distribution in the U.S. will have a 42 percent chance of staying in that same economic rung as his parents; the probability is 24 percent in Denmark. Social mobility for low-income families turned out to be hardest in the U.S. The Nordic Dream, it seems, may be more real than the American Dream. (click here to see chart)

These findings are very troubling because impeding social mobility in the U.S. by neglect or omission is indeed a direct threat to the glue that keeps us together as a nation.

NYTimes Editorial: The Land of Opportunity?

When questioned about the enormous income inequality in the United States, the cheerleaders of America’s unfettered markets counter that everybody has a shot at becoming rich here. The distribution of income might be skewed, but America’s economic mobility is second to none.

That image is wrong, and these days it abets far too many unfair policies, including cuts in essential programs like Head Start or Medicaid. The poor, we are told, can use their own bootstraps. President Bush got away with huge tax cuts for the rich in part because nonrich Americans, who make up most of the population, believe everybody has a chance of making it into the club. Unfortunately, the American dream is not that broadly accessible.

This week the CA Department of Finance released a startling report on the expected population growth in California by mid-century. According to the report, the number of Californians will grow from 34.1 million in 2000 to 59.5 million by 2050. The report details its population growth projections on a county-by-county basis.

The report’s projections are a signal to responsible legislators and advocates to start thinking in practical and rational terms about how to overcome the challenges that come with such growth. Make no mistake, there will be those that will scream and shout at the future, holding on to their golden memories of yesteryear. Some others may even work to sabotage efforts to prepare for such a future, hoping not to lose power or status in a California with a Latino majority. At the end of the day, however, we have to count our blessings that California will yet again reinvent itself as we lead the country into the future. Indeed, the future is noting to fear; it’s something that we can prepare for as we continue to build a Golden State where everyone counts and everyone matters.

60 million Californians by mid-century

Riverside will become the second most populous county behind Los Angeles and Latinos the dominant ethnic group, study says.
By Maria L. La Ganga and Sara Lin
Times Staff Writers, July 10, 2007

Over the next half-century, California’s population will explode by nearly 75%, and Riverside will surpass its bigger neighbors to become the second most populous county after Los Angeles, according to state Department of Finance projections released Monday.

California will near the 60-million mark in 2050, the study found, raising questions about how the state will look and function and where all the people and their cars will go. Dueling visions pit the iconic California building block of ranch house, big yard and two-car garage against more dense, high-rise development.

The current wave of foreclosures, as the story below indicates, is not attributed to an economic slump that would have caused working families to lose their jobs and thus fall behind on their mortgage payments; rather, it was created by the mortgage industry itself that pushed unsustainable loans on families that are overwellmed with debt. The NYTimes reports on how this crisis is affecting communities in Atlanta.

Increasing Rate of Foreclosures Upsets Atlanta
By VIKAS BAJAJ

Despite a vibrant local economy, Atlanta’s surge in foreclosures offers a glimpse of what experts fear may be in store for other U.S. cities.

Like others across the country, homeowners here took out aggressive mortgages in the last few years when interest rates were low and housing prices were soaring. Now many are falling behind — some have lost jobs or experienced other financial difficulties, but many others are not able to refinance because their homes are worth less than they paid for them and their credit is now too weak for them to qualify for another loan.