I found some great information on a blog post today from the OC Register. The story was focused on the Orange County area, but clearly shows the degree and areas that were hard hit with unsavory loans in the Inland Empire.
The loans that shook the financial world started small.
In 2004, the first year that the Fed’s Home Mortgage Disclosure Act database tracked high-priced subprime loans, subprime was a bit player in the California home market.
But a Register analysis of HMDA data shows that subprime quickly grabbed market share in lower middle-class neighborhoods up and down the state in 2005 and 2006. In 2007, as subprime giants like Orange-based Ameriquest and Irvine-based New Century downsized or shut down, subprime again became a bit player.
These maps show the spread and retreat of subprime loans in Orange County and neighboring counties from 2004 through 2007. Another set of maps below describe a similar pattern statewide.
These maps represent what we’re calling the subprime penetration rate, the percentage of total home loan volume in each census tract that was high-priced. Yellow on the map indicates that subprime accounted for 15 percent or less of total loan volume; green is for 15 percent to 25 percent; light blue for 25 percent to 35 percent; dark blue for more than 35 percent.
A caution: The industry defines subprime using credit scores; the Fed defines high-priced loans as those that cost at least 3 percentage points higher than a Treasury bill of comparable maturity. The two terms don’t match, but the Fed’s high-priced category appears to capture most subprime and some alt-A loans.
In 2004 there are just a few pockets where subprime lenders grabbed more than 15 percent of the market: most notably in central Los Angeles between the I-110 and I-710 freeways, and in the Inland Empire, especially along the I-10 corridor.
In 2005 and 2006, however, the picture changed dramatically. Suddenly the subprime guys and gals were making more than 35 percent of home loan volume in a huge swath of LA and the Inland Empire. They also started doing big business in Orange County, where many of them were headquartered. Look at the I-5 corridor and especially at Anaheim, Garden Grove and Santa Ana.
By 2007, business was cooling down almost everywhere outside central L.A. and portions of San Bernardino County.
For many Southern Californians, the desert and the San Joaquin Valley are windshield territory — places best crossed at high speed on the way to someplace else. But there’s a remarkable economic story to be told here: These regions are adding new residents by the tens and hundreds of thousands, drawn by cheap housing and new jobs.
Subprime lenders played a big role in financing the valley’s and the desert’s growth. The proof is in the maps.
Watch the spreading blue zone — the tracts where subprime accounted for at least 35 percent of total home loan volume. In 2004, it’s isolated to a few patches in the desert and the southwestern corner of Tulare County in the San Joaquin Valley.
By 2005 the entire valley from Bakersfield north to Stockton is blue. The bluest areas are along State Highway 99, which connects the valley’s urban centers. And subprime is now spreading north to Sacramento and to the farm counties above it.
In 2006 the urban parts of the San Joaquin Valley are solid subprime turf. Today cities in this zone including Merced and Stockton have some of the highest foreclosure rates in the nation. Note too how subprime spread to virtually the entire high desert, from Lancaster and Palmdale in northern L.A. County to Victorville in San Bernardino County.
That was subprime’s peak year. In 2007 the map shows far fewer blue areas, though subprime continues to be common in most of the San Joaquin Valley. The largest blue areas, by the way, are lightly populated tracts — the vicinity of Death Valley National Park in Inyo County on the state line, and the Santa Barbara County back-country.
