First-quarter foreclosure activity in California increased to the highest level in more than two years, the result of slower home-price increases, a real estate information service reported.

Lending institutions sent 18,668 default notices to California homeowners during the January-to-March period. That was up 23.4 percent from 15,122 for the prior quarter, and up 28.7 percent from 14,501 for 2005’s first quarter, according to DataQuick Information Systems.

Foreclosure activity hit a low during the third quarter of 2004 when 12,145 default notices were recorded. Defaults peaked in 1996’s first quarter at 59,897, according to DataQuick, whose default statistics go back to 1992.

“A number of factors are driving defaults higher,” said Marshall Prentice, DataQuick’s president. “The main one right now is that home values are rising more slowly than they have been the past couple of years, which makes it more difficult for homeowners to sell their homes and pay off the lender. Other factors that influence default activity include the amount of equity people have in their property, the type of mortgage they used and how long they’ve had that mortgage.”

Statewide, the annual rate of home-price increases hit a high of 22.8 percent during the second quarter of 2004. Since then, price appreciation has cooled to an annual gain of 12.4 percent in the first quarter of this year. Last quarter, San Diego County saw home values rise 4.8 percent, while its default activity jumped 59.7 percent. San Bernardino County saw home values rise 26.2 percent and defaults increase 17 percent.

The median first-quarter default amount on a primary mortgage last quarter was $9,220 on a loan of $280,000. On second mortgages and lines of credit the median amount owed was $3,386 on a loan of $56,760.

Only about 5 percent of homeowners who find themselves in default actually lose their homes to foreclosure, DataQuick reported. Most are able to stop the foreclosure process by bringing their mortgage payments current, or by selling their home and paying the home loan(s) off.

On a loan-by-loan basis, mortgages are least likely to go into default in the San Francisco Bay Area. The likelihood is highest in the Central Valley and Inland Empire.

While foreclosure properties tugged property values down by almost 10 percent in some areas nine years ago, the effect on today’s market is negligible, DataQuick reported.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The numbers count recorded notices of default, the first step of the formal foreclosure process.

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