'Bad' loans dog homeowners years after housing crisis

The foreclosure crisis may be a distant nightmare for much of California, but thousands of homeowners are still struggling with loans made before the housing bubble burst.

More than half of today's foreclosures originated from "bad" loans issued between 2004 and 2008, according to Daren Blomquist of the Irvine-based RealtyTrac research firm.

"There’s a long tail of these foreclosures still lingering from the crisis," said Blomquist, a senior vice president. 

Blomquist said in some cases, homeowners enter into foreclosure after years of trying to make payments on these mortgages — often issued with little income verification and teaser interest rates. In other cases, he said, banks and other mortgage services have been delayed in pursuing foreclosures because post-crisis reforms forced them to clean up their filing processes.

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Since the peak of the crisis, foreclosures in California have fallen dramatically, from more than 250,000 in April 2009 to about 25,000 today, according to RealtyTrac.

But there is significantly more help for today's homeowners than before the downturn.

Keep Your Home California, a federally funded program, continues to provide up to $100,000 in mortgage assistance to each applicant, even though the worst of the housing crisis is over.

Applicants just need to show why they can’t make home loan payments. Spokesman Steve Gallagher said that the cause could be job loss, significant medical expenses, divorce or a death in the family.

Created in 2011, Keep Your Home has helped more than 72,000 Californians in six years. 

"We know the economy is a lot better than it was in 2011, but the recovery hasn't been everywhere, and there are still people that need this assistance," Gallagher said, citing counties like San Bernardino, which has the state's second highest foreclosure rate.

The program still has hundreds of millions of dollars in mortgage assistance to spend down. The program operates until 2020, or until the money runs out. Gallagher said it will likely be the latter. 

Blomquist said Keep your Home California and other similar programs are one positive by-product of the post-housing crisis world. 

Now, the industry has "the benefit of the lessons learned from the housing bubble and crash, and bad loans at their disposal, Blomquist said. "That is helpful for homeowners even though there are fewer that are facing foreclosures these days."