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ForeclosureS.com releases 1st quarter report
May 24, 2006

By COCO SALAZAR

Foreclosure activity has picked up this year and the outlook isn't rosy.

Across 918 counties nationwide, first quarter foreclosures amounted to
217,849, rising 23% from the fourth quarter and 31% above the level a
year earlier, according to ForeclosureS.com, a nationwide foreclosure
lists publisher.

In the West, high-risk adjustable-rate mortgage resets to fully
amortized payment schedules, in combination with rising interest rates,
flattening price appreciation, and growing inventories of unsold homes
are responsible for the increased levels of foreclosure activity, the
distressed property investment advisory firm reported.

ForeclosureS.com recorded 28,550 notices of default and foreclosures in
California during the first quarter, and 9,222 new defaults this April.

With coastal markets "badly" overheating for over five years, more
borrowers used "exotic" mortgages to qualify for more and more expensive
homes. For example, during recent years in San Diego, more than half of
purchase money loans consisted of interest-only ARMs or option ARMS with
very low teaser rates, ForeclosureS.com said.

"Someone paying $800 per month on an option ARM could see their payment
jump to $3000 per month," company President Alexis McGee said in the
announcement. "That's likely to result in default."

For Colorado, ForeclosureS.com said there was a 50% quarter-to-quarter
upturn in new foreclosures and a 96% year-over-year increase.

In Nevada, foreclosure activity has more than doubled this year from
fourth quarter of 2005, as first quarter foreclosures amounted to 4,544
and April alone added 1,700, the foreclosure listing service reported.

"That market was in the hands of speculators with over 25% of new home
sales going to out of state investors," McGee said. "Now they're being
washed out of the market."

Meanwhile, Northeastern foreclosure activity is up sharply from 2005
levels, ForeclosureS.com said.

Massachusetts saw 1551 new foreclosure filings in April and, as of May
13, foreclosure filings were up 35% from the same period in 2005,
according to an announcement.

Foreclosure activity in New Jersey reportedly reached 4,425 filings in
the first quarter -- almost a ten-fold increase from 459 in the same
period a year earlier -- and McGee expects the situation to get worse
through the rest of 2006 and into 2007.

"With markets cooling down and prices leveling off, that's another
recipe for disaster," said McGee, referring to activity by some lenders
who are still pushing home equity loans and lines of credit up to 125%
of the home's value.

A wave of mortgage defaults could ensue in the Southeast as demand for
housing slows and increases the inventory of unsold homes.

"The situation is particularly acute in Florida," where foreclosure
filings increased 42.55% in the first quarter over the fourth quarter,
the ForeclosureS.com president noted.

"Prices have gone completely flat in Miami and have even started to
slide a little," and the situation in Tampa is similar, McGee said.

In the last six months, the inventory of unsold homes in Miami surged
more than 88%, while in Tampa the inventory climbed more than 64%,
according to the announcement.

"This growing number of unsold homes is a harbinger of price corrections
to come," McGee said. "Speculators are dumping their properties and
moving on," and will cause mortgage defaults to rise as they become
trapped by negative cash flows and declining prices.