Mortgage Defaults Beyond the Numbers

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Yesterday, a San Diego real estate information service called MDA DataQuick released numbers that show a rising number of mortgage defaults in California. 135,431 notices of default were sent out to California homeowners between January and March—an 80 percent increase over the previous three month period and a 19 percent increase over the same period last year. The number of foreclosures in the state, meanwhile, dropped 6 percent compared to the previous three month period.

Both the Los Angeles Times and the San Francisco Chronicle reported on these new numbers. But while the Chronicle sticks with a simple angle, the LAT goes deeper, providing the nuance and context that can help these sorts of number-heavy stories resonate with readers.

In the LAT, reporter William Heisel writes that the default numbers “suggest that rising unemployment and the continuing recession are still claiming fresh victims,” while the drop in foreclosures is largely due to “moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac.”

The Chronicle, meanwhile, focuses on what the numbers will mean for the real estate market. Caroline Said writes:

The huge rise in defaults means that scores of bargain-priced bank-owned properties could inundate the struggling real estate market during the key spring and summer selling season.

The focus (as this and the story’s headline, “Mortgage Defaults Hit Record in State, Bay Area,” suggest) is not on why homeowners are defaulting on payments, but on how the defaults themselves will likely affect the housing market—a valid angle, but one that only superficially notes the possible reasons for the increase.

For instance, the story eventually skims past the overarching reasons for the increase—“due to the moratoriums” and “due to the faltering economy”—before alighting on the facts, oft-reported in California papers, that many California homeowners aren’t eligible for help under the plan because they have “significant negative equity” (a mortgage’s balance that is more than 105 percent the value of the home), or because the plan “doesn’t really deal with second mortgages,” as one professor is quoted as saying.

But these are statements—about who will and won’t be helped by the president’s housing rescue plan—with which most regular readers of the paper would be familiar. It’s fine to state them, and to conclude that “the big unknown is what effect the administration’s housing rescue plan…might have,” since the plan’s impact remains to be measured. But the Chronicle leaves it at that, rather than taking an extra step to investigate some of the less apparent reasons for the increase in defaults.

The LAT, for its part, takes time to explain more of the why of the increasing mortgage defaults, offering a more nuanced picture of how homeowners are dealing with both the perks and the limitations of the housing plan. Heisel writes:

But another factor in the soaring default rate could be that some struggling homeowners are purposely skipping their payments so that they can get their loans refinanced, industry experts say.

Heisel’s example is an elderly couple who had trouble with their mortgage payments. Their loan servicer “ignored their pleas to renegotiate terms – until they quit paying, that is”:

Suddenly, she said, they were presented with new ways to lower their payments and are currently negotiating new terms through the Hope Now program set up by the federal government and some of the country’s largest mortgage lenders.

Heisel’s not saying that this sort of decision—stopping payments in order to “get the bank’s attention”—is widespread in California. But in choosing to focus on how one aspect of the plan can backfire, he highlights the confusing choices that homeowners face. In doing so, the increase in mortgage defaults tells a bigger, more significant story: instead of painting in broad it’s-the-economy strokes, it brings the story down to the level of individual homeowners. It, in short, acknowledges that there are different possible reasons for the increase in defaults—that the news is not simply the new data.

Mortgage defaults aren’t increasing in California simply because homeowners are purposefully ceasing mortgage payments, as the elderly couple did. But it’s one piece of the puzzle. The Chronicle’s report isn’t faulty; it just makes the story the upward-trending number—whereas the LAT tries to go beyond that to hunt for a piece of what, in the end, is a very human puzzle.

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Jane Kim is a writer in New York.