California Foreclosure Activity Lowest Since Early 2007

October 17, 2012

La Jolla, CA.--Three and a half years after peaking, the number of California homes entering the foreclosure process fell last quarter to the lowest level since the early stages of the housing bust. Mortgage default filings hit their lowest point since first-quarter 2007, due in large part to a stronger economy and housing market and more short sales, a real estate information service reported.

A total of 49,026 Notices of Default (NoD) were recorded on residential properties during the third quarter. That was down 10.2 percent from 54,615 for the prior three months, and down 31.2 percent from 71,275 in third-quarter 2011, according to San Diego-based DataQuick.

Last quarter's number was the lowest since 46,760 NoDs were recorded in first-quarter 2007. NoDs peaked in first-quarter 2009 at 135,431. DataQuick's NoD statistics go back to 1992.

"A foreclosure happens when a homeowner owes more on the property than the property's worth. Otherwise it could be sold and the mortgage paid off. So foreclosures go up when home values go down. Prices in most areas today are up significantly from their low point in early 2009," said John Walsh, DataQuick president.

"Additionally, during the past year, we've seen short sales overtake the foreclosure process as the procedure of choice to deal with homeowner distress. That may change after New Year's because the temporary 'debt forgiveness'' feature in the tax code is set to expire as part of the so-called 'fiscal cliff'," he said.

The median price paid for a California home last quarter was $300,000, which was 32.2 percent off the $227,000 bottom in first-quarter 2009, DataQuick reported.

Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 26.0 percent of statewide resale activity last quarter. That was up from an estimated 24.0 percent the prior quarter and up from 22.9 percent of all resales a year earlier. The estimated number of short sales last quarter rose 19.0 percent from a year earlier.

Foreclosure resales accounted for 20.0 percent of all California resale activity last quarter, down from a revised 27.8 percent the prior quarter and 34.2 percent a year ago. The figure peaked at 57.8 percent in the first quarter of 2009. The level of foreclosure resales - homes foreclosed on in the prior 12 months - varied significantly by county last quarter, from 5.5 percent in San Francisco County to 35.5 percent in Sutter County.

NoD filings fell last quarter across all home price categories. But mortgage defaults remained far more concentrated in California's most affordable neighborhoods. Zip codes with third-quarter 2012 median sale prices below $200,000 collectively saw about 8 NoDs filed for every 1,000 homes in those zip codes, while the ratio was about 5 NoDs filed per 1,000 homes for zip codes with $200,000 to $800,000 medians. For the group of zip codes with median sale prices above $800,000, there were just under 2 NoDs filed per 1,000 homes.

Most of the loans going into default are still from the 2005-2007 period: the median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for three years, indicating that weak underwriting standards peaked then.

The most active "beneficiaries" in the formal foreclosure process last quarter were Bank of America (8,061), JP Morgan Chase(6,713) and Wells Fargo (5,780).

The trustees who pursued the highest number of defaults last quarter were ReconTrust Co (mostly for Bank of America and Bank of New York), Quality Loan Service Corp (Bank of America) and NDEx West (Wells Fargo).

On primary mortgages, California homeowners were a median eight months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $16,414 on a median $315,000 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $4,779 on a median $78,804 credit line. The amount of the credit line that was actually in use cannot be determined from public records.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 49,026 default notices were filed last quarter, they involved 48,257 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).

Of the state's larger counties, mortgages were least likely to go into default in San Francisco, San Mateo and Santa Clara counties. The probability was highest in Madera, Riverside and Yuba counties.

On average, homes foreclosed on last quarter took 7.9 months to wind their way through the formal foreclosure process, beginning with an NoD. That's up a tad from an average of 7.7 months the prior quarter and down from 9.9 months a year earlier.

Trustees Deeds recorded (TDs), or the finalized loss of a home to the formal foreclosure process, totaled 22,949 during the third quarter. That was up 5.0 percent from 21,851 for the prior quarter, and down 41.0 percent from 38,895 for third-quarter 2011. The all-time peak was 79,511 in third-quarter 2008. The state’s all-time low was 637 in the second quarter of 2005, DataQuick reported.

Just as with mortgage default filings, foreclosures remained far more concentrated in the state's most affordable neighborhoods. Zip codes with third-quarter 2012 median sale prices below $200,000 collectively saw 4.8 homes foreclosed on for every 1,000 homes in existence. That compares with 2.0 foreclosures per 1,000 homes for zip codes with medians from $200,000 to $800,000, and less than one foreclosure per 2,000 homes in the group of zip codes with over-$800,000 medians.

While 1.48 million of California's roughly 8.71 million houses and condos have been involved in a foreclosure proceeding the past five years, 847,067 have gone through the whole foreclosure process. The other 633,000 were either sold, or the payments were brought current.

At formal foreclosure auctions held statewide last quarter, an estimated 39.4 percent of the foreclosed properties were bought by investors or others who don't appear to be lender or government entities. That was up from an estimated 39.2 percent the previous quarter and up from 31.0 percent a year earlier, DataQuick reported.

Notices of Default (Trustees Deeds further down)
houses and condos

County/Region    2011Q3      2012Q3    Yr/Yr%
       
Los Angeles              14,367      10,064      -30.0%
Orange                     4,817       3,255      -32.4%
San Diego                  5,048       3,727      -26.2%
Riverside                  6,923       5,032      -27.3%
San Bernardino             5,504       4,308      -21.7%
Ventura                    1,535       1,090      -29.0%
Imperial                     360         196      -45.6%
Socal                    38,554      27,672      -28.2%
       
San Francisco                472         257      -45.6%
Alameda                    2,654       1,555      -41.4%
Contra Costa               3,022       1,822      -39.7%
Santa Clara                2,176       1,236      -43.2%
San Mateo                    908         506      -44.3%
Marin                        295         241      -18.3%
Solano                     1,406         918      -34.7%
Sonoma                       896         597      -33.4%
Napa                         263         152      -42.2%
Bay Area                  12,092       7,284      -39.8%
       
Santa Cruz                   310         217      -30.0%
Santa Barbara                590         426      -27.8%
San Luis Obispo              418         260      -37.8%
Monterey                     643         422      -34.4%
Coast                      1,961       1,325      -32.4%
       
Sacramento                 4,351       2,766      -36.4%
San Joaquin                1,933       1,313      -32.1%
Placer                       998         695      -30.4%
Kern                      1,989       1,343      -32.5%
Fresno                     2,031       1,416      -30.3%
Madera                       368         258      -29.9%
Merced                       619         415      -33.0%
Tulare                      868         636      -26.7%
Yolo                         301         233      -22.6%
El Dorado                    459         284      -38.1%
Stanislaus                 1,491         938      -37.1%
Kings                        245         193      -21.2%
San Benito                   141          75      -46.8%
Yuba                         219         130      -40.6%
Colusa                        39          32      -17.9%
Sutter                       244         143      -41.4%
Central Valley           16,296      10,870      -33.3%
       
Mountains*                   742         607      -18.2%
       
North Calif*               1,630       1,268      -22.2%
       
Statewide*               71,275      49,026      -31.2%

 includes additional counties

Trustees Deeds Recorded (number of homes foreclosed on)
houses and condos

County/Region               2011Q3     2012Q3   Yr/Yr%
       
Los Angeles               6,453       3,652      -43.4%
Orange                    1,898       1,007      -46.9%
San Diego                 2,460       1,456      -40.8%
Riverside                 4,229       2,612      -38.2%
San Bernardino            3,419       2,360      -31.0%
Ventura                     669         408      -39.0%
Imperial                    234         132      -43.6%
Socal                     19,362      11,627      -39.9%
       
San Francisco               162         112      -30.9%
Alameda                   1,357         674      -50.3%
Contra Costa              1,708         931      -45.5%
Santa Clara                 915         418      -54.3%
San Mateo                   352         146      -58.5%
Marin                       131          55      -58.0%
Solano                      910         518      -43.1%
Sonoma                      493         304      -38.3%
Napa                        114          66      -42.1%
Bay Area                  6,142       3,224      -47.5%
       
Santa Cruz                  174          99      -43.1%
Santa Barbara               290         184      -36.6%
San Luis Obispo             246         123      -50.0%
Monterey                    368         173      -53.0%
Coast                     1,078         579      -46.3%
       
Sacramento                2,867       1,544      -46.1%
San Joaquin              1,252         773      -38.3%
Placer                      533         302      -43.3%
Kern                      1,264         840      -33.5%
Fresno                    1,468         854      -41.8%
Madera                      279         145      -48.0%
Merced                      446         221      -50.4%
Tulare                      613         421      -31.3%
Yolo                        233         103      -55.8%
El Dorado                   277         135      -51.3%
Stanislaus                1,003         596      -40.6%
Kings                       144         103      -28.5%
San Benito                   69          37      -46.4%
Yuba                        147          85      -42.2%
Colusa                       29          27       -6.9%
Sutter                      134          81      -39.6%
Central Valley            10,758       6,267      -41.7%
       
Mountains*                  477         394      -17.4%
       
North Calif*              1,078         858      -20.4%
       
Statewide*                38,895      22,949      -41.0%

* includes additional counties

Source: DataQuick; DQNews.com

Media calls: Andrew LePage (916) 456-7157

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