Investment Firm Predicts 2nd Wave of Foreclosures in San Diego

San Diego County is in for a second wave of foreclosures, and this time, it will be even bigger than before, according to ""Blue Sky Capital"":http://www.blueskycapital.com/, a San Diego-based real estate investment firm.

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Blue Sky Capital tracked area properties and found that loans funded with Option Arm, which is a type of adjustable rate mortgage, and Alt-A are about see higher interest rates.

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This will lead to higher mortgage payments for homeowners and will cause those who can't afford the new payments to potentially go into foreclosure.

""While these Option Arm and Alt-A loans exist throughout the county, areas like Carmel Valley are filled with them. During our tracking of distressed properties in the county we found many homes in areas like Carmel Valley were purchased with zero, or a small amount down, so there is very little equity in theses properties,"" said Chris Williams, CEO of Blue Sky Capital.

With more than 36 percent of all mortgages in San Diego underwater, the investment firm said it expects things to get worse before they get better.

Blue Sky Capital also tracks housing supply and home prices and gave credit to negative equity for the rise in home prices since it is preventing people from listing their homes.

Williams explained that the increase is only temporary and not a real sign that things are improving.

""These situations are unsustainable and certainly short lived. Strategic defaults, foreclosures and property value declines have to happen for the market to reset and clear itself of the toxicity from the greatest mortgage mess of this century,"" he said.