Aug. 31--Some North County homeowners have gone months without paying their mortgages and have yet to receive a foreclosure notice, a development that suggests banks are overloaded and that also might mean foreclosure reports are understating the region's housing crisis.

Foreclosure numbers already are staggering, with about 4,000 foreclosures since January in North County, compared to about 1,300 a year ago. Since January, about 7,500 homes have entered foreclosure, outpacing sales during that time, according to monthly reports from several data firms. Many analysts point to foreclosures as a leading contributor to a 30 percent decline in home values since a 2005 peak for San Diego County.

But even that rate probably fails to include the total number of distressed homeowners in North County.

Several homeowners interviewed last week said that they stopped paying their mortgages six to eight months ago and still have not received a notice of default, which typically comes by the fourth month of nonpayment.

Further, many foreclosures have yet to hit the market, meaning about 500 North County bank-owned homes have not affected prices yet.

Combined with high foreclosure rates and rising delinquency numbers, North County's foreclosure problem appears likely to persist, if not increase, through the end of the year -- at least.

"It's not even volume anymore. It's a mountain of foreclosures. ... There's no comparison in history," said Ramsey Su, a real estate investor in San Diego who used to run a brokerage firm that sold foreclosures.

About 1,000 default notices, the first step in foreclosure, have showed up on North County doorsteps each month since January, according to ForeclosureRadar, a Northern California research firm. In contrast, about 820 homes have been sold per month during the same time, according to a monthly housing report by the North San Diego County Association of Realtors.

Typically, the foreclosure process takes about eight months from the first missed payment, analysts said.

But now, real estate agents, mortgage brokers and homeowners are reporting that as many as eight months can pass before a notice of default is filed. From that notice, it takes five to seven more months to complete the foreclosure process.

One San Marcos homeowner, who did not want her name released for fear of initiating foreclosure, said she missed her first mortgage payment in January and has yet to receive a notice of default. Several other homeowners interviewed had similar concerns.

"We have a couple of clients where we're just like, 'Wow, how long are you going to let them live rent-free?'" said John Woodall, a real estate agent who specializes in short sales, a process by which banks agree to sell the home for less than the mortgage amount.

Short sales are notoriously tricky transactions that can take months of negotiations, during which banks will often suspend foreclosure action.

Also, new legislation has extended the amount of time a foreclosure can take by encouraging loan modifications, a process by which banks alter payments to help homeowners avoid foreclosure.

But often, it appears that the delays in foreclosures are simply a result of system overload, analysts said.

"We have found several families, more than a few, who have paperwork that says the house is foreclosed, but the bank is still working with them" on a loan modification, said Gabe Del Rio, director of homeownership at Community HousingWorks, a San Diego nonprofit. "All the while, the family is still in the home."

A delay in the foreclosure process has raised the prospect of analysts encouraging homeowners to stop paying their mortgages.

Several counselors are starting to offer that advice to homeowners who are "upside down," meaning that they owe more than the value of their home, said Nathan Moeder, a principal with The London Group, a San Diego real estate firm.

Whether homeowners are actually heeding the advice to intentionally enter foreclosure is unclear, but some advisers are saying it's better to rent for several years after losing a house than to pay on an upside-down mortgage.

"Foreclosure is the right thing" for everybody who is struggling to make the house payment, Su said.

Other organizations, such as Del Rio's Community HousingWorks, advise homeowners to try and stay in the house by working toward a loan modification that makes payments affordable.

As government agencies and major lenders press programs that keep homeowners out of foreclosure, the number of homeowners not paying their bills has shot up. Nationally, the number of delinquent homeowners -- those who are at least 60 days late -- has gone up each month, reaching a new high at 1.9 million in July, according to data from the Hope Now Alliance, a coalition of major banks and government agencies.

Though no statistics exist on how many homeowners have not paid their mortgages, still reside in their homes and have not received notices of default, the association's statistics show plenty of unresolved delinquencies.

From the third quarter of last year through the first quarter of 2008, about 455,000 homeowners in California became delinquent on their mortgages. Allowing time for a notice of default to be filed, there have been 413,000 foreclosure starts or loan modifications from the third quarter through the second quarter of this year. That leaves 37,000 California homeowners who are delinquent but have not received a foreclosure notice or loan modification.

"Most alarming is the fact that, in spite of all these programs that are trying to save or stop the process, more and more people are not paying," said Su. "The question is, are these programs encouraging people to not pay?"

In times of high foreclosure numbers, it is common to see the foreclosure process drag, he said. During the last housing recession of the early 1990s, Su said one homeowner lived in a home without paying the mortgage for seven years as the banks tried to figure out who actually owned the mortgage.

Even discounting the thousands of delinquent homeowners who have not received foreclosure notices, many foreclosures have yet to hit the market.

About 27 percent of the roughly 1,800 houses that were seized by banks within the last 120 days have not been listed for sale, according to a North County Times analysis of listing, sales, expired listing and foreclosure data compiled from Redfin, a listing Web site, and ForeclosureRadar. That amounts to about 500 North County foreclosures yet to affect prices. The number is down from March, when about 750 bank-owned homes, or 60 percent of all foreclosures at the time, were not yet listed on the open market, according to a similar analysis.

Further, California has not yet completely worked through payment increases on many of the exotic loan products that some analysts say are a major contributor to foreclosures, according to data from First American CoreLogic, a mortgage data company based in Santa Ana.

Over the next year, about 150,000 subprime mortgages across the state, reserved for riskier borrowers, are going to see payments increase.

That has raised concern among local analysts and economists that San Diego County's foreclosure problem will get worse before it gets better -- potentially dragging down further an economy many believe is already in recession.

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Copyright 2008 North County Times