Surging Defaults in West Linked to Risky Loans

Foreclosure activity is surging in several Western housing markets, partly as a result of "high-risk mortgages," according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm and publisher of foreclosure information.The company said Los Angeles County reported over 14,000 notices of default as of June 22, with over 700 properties that have gone to foreclosure. Foreclosure activity is also rising sharply in Denver and Phoenix, according to Alexis McGee, president of ForeclosureS.com. "Interest-only loans and so-called option adjustable-rate mortgages with very low initial rates and high negative amortization are financial time bombs," Mr. McGee said. "When these loans reset to full amortization and market rates, the payment shock to homeowners is severe." The company can be found on the Web at http://www.foreclosures.com.