Last week I noted the enduring downtrend in new San Diego foreclosures.  As a potential explanation, I offered the anecdotal trend of many borrowers going delinquent (fancy talk for not paying the mortgage) without getting the default notices that officially put them into foreclosure.

A reader has since pointed me to a timely Union-Tribune article reporting that 10 percent of San Diego mortgage borrowers are delinquent.  The phrasing of the initial paragraph implies that this 10 percent does not include borrowers who have already received default notices, but rather includes only newer delinquencies who may yet enter foreclosure.  An interviewee estimates that 60,000 households may be in this situation.  That’s a lot of people.    And the homes in question should be considered along with homes already in foreclosure as potential shadow inventory that could come onto the market eventually.  (Some of the homes in question may already be on the market, but many surely are not).

More to the point of my latest entry, the UT piece includes a graph showing that unlike default notices, delinquency rates rose steadily throughout 2009.  So the decline in foreclosure activity does not reflect any improvement (or even just lack of deterioration) in the tendency for San Diegans to pay their mortgage.  It’s just that lenders are choosing not to foreclose on many borrowers who aren’t making their payments.

— RICH TOSCANO

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