Ben Marrone/Sun Post - Lost:This recently built house on Victory Lane in Manteca was scheduled for the auction block Wednesday, April 25, after the owners defaulted on their mortgage payments. Foreclosures in the county have skyrocketed this year.

Foreclosures have picked up speed in San Joaquin County, where the number of homes to hit the auction block has reached more than 12 times last year’s levels.

Through March 2007, 539 homes were sold in the county’s courthouse auctions. Compare that with just 44 in the same period in 2006, according to Foreclosure Radar, a tracking service based in Discovery Bay.

And with the biggest rise of the past two years coming in March — when auctioned homes jumped from 172 to 234 per month — a trend expected to continue.

“We don’t see any signs of a peak at this point,” said Sean O’Toole, head of Foreclosure Radar, a real estate consultant who has followed the foreclosure market the past five years.

The cause is not just risky loans backfiring, but also a major change in the housing market, which has seen a drop from skyrocketing home values to stalled or declining prices.

The now-infamous sub-prime loan, which allows people to buy a home with little or no down payment, has been popular since 2003 but has not caused problems until recently, local mortgage broker Deborah Romero said.

Many sub-prime loans offer low interest rates to start, with dramatic increases after two or three years. In the past, people who took these loans often were able to sell for a profit or switch to more manageable lending agreements before their payments went up because of the rising value of their homes.

But when prices stopped climbing last year, many buyers found themselves stuck with loans they could never afford in the long term.

It’s a situation some lenders had ignored the past several years because the housing market was able to satisfy everyone, Romero said.

“A lot of common sense went out the window when real estate became so valuable,” she said.

Judy Thompson, a housing counselor in Stockton, said that lack of common sense has meant that a lot more people show up at her office in a disastrous financial state.

Thompson works for the nonprofit ByDesign Financial Services, one of two agencies licensed by the state to help people who face foreclosure in San Joaquin County.

When homeowners fail to make a mortgage payment, they get a notice telling them to meet with Thompson for advice.

She said she now deals almost exclusively with people who took out sub-prime loans. Many, she said, never understood the way their payments would increase.

“What I find is that people that have got into some of these predatory-type loans have no idea what they got in it,” Thompson said. “They listened to their lenders, and their lenders say, ‘Don’t worry, you qualify for this loan.’ And they’re shocked when they find out they now owe thousands of dollars.”

Some of her clients face mortgage payments nearly equal to their income, while at the same time, their houses have gone down in value. At that point, there’s very little that can stop the property from going to auction, Thompson said.

Still, the sub-prime loan business could continue with a few changes, California Mortgage Bankers Association spokesman Dustin Hobbs said.

The uproar over the rise in foreclosures has caused many sub-prime lenders to tighten their regulations. But as long as there are people who fail to qualify for loans from banks and other traditional lenders, there will be a venue for sub-prime loans, he said.

“This is one of those situations where, in a lot of ways, the industry has corrected itself,” Hobbs said. “The market is not going anywhere.”

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