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County's foreclosures up 63% from prior year

April 12, 2006

By COCO SALAZAR

Foreclosures surged in Los Angeles County as rising rates stressed
borrowers who used "aggressive financing" to get into homes they could
not otherwise afford.

The number of foreclosures in Los Angeles County during the first
quarter totaled 5,949, up 17 percent from the previous three-month
period and a whopping 63 percent above the total in the comparable
quarter a year earlier, Default Research Inc. said in an e-mailed
statement to MortgageDaily.com.

"With rising interest rates, the economy slowing down in that part of
California, and a quarter of L.A. residents working at jobs that do not
pay a living wage, the significant increase in foreclosures is a very
alarming trend in the largest county in the nation," said Serdar
Bankaci, president and chief executive of Default Research, in an
announcement.

The tough battle the average L.A. homeowner faces to retain their
property is underscored by the foreclosures in single-family homes and
duplexes --which were "hit the hardest" with increases of 77 percent and
88 percent, respectively, according to the announcement.

"The rising foreclosures are due to the 'average Joe' buying a house he
cannot afford because of inflated home prices," he added. "Then, with
the rising interest rates, he cannot pay for the mortgage. Many of the
homeowners used 'aggressive financing' to buy homes they could not
afford."

Such financing includes 100 percent financing and interest-only
mortgages, with most having adjustable-rate features, Bankaci told
MortgageDaily.com.

Additionally, he said many of these borrowers created a bigger bind for
themselves by extracting much equity when home appreciation was highest,
from 2002 to about the second quarter 2005.