Industry News

California real estate loan risk levels increase

Consumer Web site reports risk up 28.6% from first half of 2005

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Lending institutions in California have increased their scrutiny of home loan applications because of higher default risk, the result of a shift in sales patterns and of a real estate market nearing the end of its boom cycle, a consumer Web site reported. Risk levels for new mortgages statewide increased 28.6 percent from the first half of 2005 to the second half of the year. Mortgage risk has increased most sharply in the Salinas and Santa Cruz- Watsonville areas, while trending down in rural areas north of Sacramento like Chico and Yuba City, according to San Juan Capistrano- based HomeSmartReports.com. "The frenzy we saw in more coastal markets last year moved inland at the same time as interest rates were edging up. Some neighborhood sales patterns are showing signs of market stress, and buyers may be stretching their finances. Lenders are evaluating loan applications and appraisals much more carefully," said Mike Ela, HomeSmartReports.com president. The financial institutions th...