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 that originate and buy securitized mortgages now have access to much more accurate risk management and trend information than a few years ago. In a “when in doubt, don’t” lending business, the result has been to open the doors of home ownership to many new categories of buyers who previously could not qualify for a home loan, the company said.

Consumer-oriented HomeSmartReports.com provides homeowners and potential homeowners with online access to sales trends and property value estimates. The Web site also provides consumers with more technical information, including risk data, that until now has only been available to real estate industry professionals.

“We want to level the playing field for consumers,” according to Ela, who has been in the real estate data field for 25 years.

Risk and trend information is generated as an index and incorporates changes in default and flipping activity, sales trends, value changes and neighborhood characteristics.

While on the rise statewide, mortgage risk is lowest in coastal Southern California and the Bay Area, according to HomeSmartReports. Risk is highest in rural Central Valley communities.

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