“La Jolla, CA.——The number of mortgage default notices filed against California homeowners jumped last quarter to the highest level in more than eight years, a real estate information service reported.

Lending institutions sent homeowners 37,273 default notices during the October-to-December period. That was up by 36.9 percent from 27,218 the previous quarter, and up 145.3 percent from 15,196 for fourth-quarter 2005″, according to DataQuick Information Systems.

The sea is drawing back quickly as the tsunami comes. Right now it is just a thin line on the horizon. But it is moving fast. It is driven by:

• Fraud - “liar’s loans”, the “cashback” fraud, appraisal fraud and doubtless many more.
• Time bombs - pay-option loans reaching their negative amortization limits, interest rate adjustments, etc.
• Speculation - according to the NAHB, half of the units on the market are vacant. Too many seats, not enough butts.
• Rates - interest rates are rising, making it harder for new buyers.

Stand back from the beach.