California Foreclosure Activity Drops

January 24, 2012

La Jolla, CA.--The number of California homes going into foreclosure dropped in the fourth quarter of 2011 to the second-lowest level in more than four years, the result of evolving lender and mortgage servicer policies as well as shifting market conditions, a real estate information service reported.

A total of 61,517 Notices of Default (NODs) were recorded at county recorders offices during the fourth quarter. That was down 13.7 percent from 71,275 for the prior three months, and down 11.9 percent from 69,799 in fourth-quarter 2010, according to San Diego-based DataQuick.

Last quarter's 61,517 NODs marked the lowest level since 56,633 NODs were filed in second-quarter 2011, and the second-lowest since 53,943 NODs were recorded in second-quarter 2007. New foreclosure filings (NODs) peaked in first-quarter 2009 at 135,431.

"We are certainly seeing a lower level of foreclosure activity than a year or two ago. The question is, how much of that decline is due to market conditions, and how much is due to policy changes that try to address economic distress and lower home values," said John Walsh, DataQuick president.

"Five years ago almost all mortgage payment delinquencies would have triggered a default notice after a certain amount of time. Strategies now include short sales, refinances, interest rate changes, principal reduction as well as just plain waiting longer. It will be interesting to see how this plays out as the economy improves and the housing market finds its footing," Walsh said.

The most active "beneficiaries" in the formal foreclosure process last quarter were Bank of America (14,453), Bank of New York (9,612), and Wells Fargo (7,187).

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), Cal-Western Reconveyance Corp (Wells Fargo), NDEx West (Wells Fargo) and California Reconveyance Co (JP Morgan Chase).

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.

As the foreclosure problem surged four years ago, newer neighborhoods in affordable areas were hit the hardest. The problem spread gradually into other areas, but that spreading appears to have leveled off. In third-quarter 2008, well over half of all recorded NODs were in neighborhoods that represented one-fourth of California's housing stock. By third-quarter 2010 those neighborhoods' share of all NODs had fallen to 41.1 percent as other neighborhoods got hit, too. But more than a year later, in fourth quarter 2011, the relatively affordable neighborhoods' NOD share wasn't much different - 37.9 percent.

While the number of mortgage defaults dropped across all home-price ranges last quarter, NODs remained far more concentrated in the more affordable areas. Zip codes with median sale prices last year below $200,000 collectively saw 9.4 NODs for every 1,000 homes, while the ratio was 7.0 NODs per 1,000 homes for all zips statewide, and 2.3 NODs per 1,000 homes in zip codes with 2011 median sale prices above $800,000.

On primary mortgages, California homeowners were a median nine months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $19,949 on a median $333,036 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $4,664 on a median $69,943 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 61,517 default notices were filed last quarter, they involved 60,289 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, Marin and San Mateo counties. The probability was highest in Sacramento, San Joaquin and Stanislaus counties.

Trustees Deeds recorded (TDs), or the actual loss of a home to the formal foreclosure process, totaled 31,260 during the fourth quarter. That was down 19.6 percent from 38,895 for the prior quarter, and down 11.8 percent from 35,431 for fourth-quarter 2010. 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 defaults, foreclosures remained far more concentrated in the state's most affordable neighborhoods. Last quarter zip codes with 2011 median sale prices below $200,000 collectively saw 6.0 foreclosures for every 1,000 homes, compared with 3.7 foreclosures per 1,000 homes for all zip codes statewide and less than one - 0.7 - foreclosure per 1,000 homes in zip codes with $800,000-plus medians.

There are 8.7 million houses and condos in the state.

Foreclosure resales accounted for 33.7 percent of all California resale activity last quarter. It was 34.2 percent the prior quarter, and a year ago it was 37.5 percent. It peaked at 57.8 percent in the first quarter of 2009. Foreclosure resales varied significantly by county last quarter, from 9.8 percent in San Francisco County to 56.6 percent in Yuba County.

Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 19.8 percent of statewide resale activity last quarter. That was up slightly from an estimated 17.8 percent the prior quarter and 17.9 percent a year earlier. Two years earlier, in fourth-quarter 2009, short sales made up an estimated 16.4 percent of the resale market.

On average, homes foreclosed on last quarter took 9.7 months to wind their way through the formal foreclosure process, beginning with an NOD. That's roughly even with 9.9 months the prior quarter and up from 8.8 months a year earlier.

At formal foreclosure auctions held statewide last quarter, an estimated 30.0 percent of the foreclosed properties were bought by investors or others who don't appear to be lender or government entities. That was up insignificantly from an estimated 29.7 percent the previous quarter and up from 22.1 percent from a year earlier, DataQuick reported.

Notices of Default (first step in foreclosure process)
houses and condos

County/Region 2010Q4 2011Q4 Yr/Yr%
       
Los Angeles                 14,188       12,355        -12.9%
Orange                       4,388        4,297         -2.1%
San Diego                    4,917        4,813         -2.1%
Riverside                    6,885        6,014        -12.7%
San Bernardino               5,744        4,827        -16.0%
Ventura                      1,470        1,437         -2.2%
Imperial                       376          270        -28.2%
Socal                       37,968       34,013        -10.4%
       
San Francisco                  435          409         -6.0%
Alameda                      2,660        2,117        -20.4%
Contra Costa                 2,931        2,398        -18.2%
Santa Clara                  2,325        1,847        -20.6%
San Mateo                      820          712        -13.2%
Marin                          276          263         -4.7%
Solano                       1,441        1,245        -13.6%
Sonoma                         884          815         -7.8%
Napa                           226          206         -8.8%
Bay Area                    11,998       10,012        -16.6%
       
Santa Cruz                     293          295          0.7%
Santa Barbara                  509          524          2.9%
San Luis Obispo                364          359         -1.4%
Monterey                       632          509        -19.5%
Coast                        1,798        1,687         -6.2%
       
Sacramento                   3,954        3,791         -4.1%
San Joaquin                  1,989        1,745        -12.3%
Placer                         988          871        -11.8%
Kern                         2,011        1,562        -22.3%
Fresno                       1,944        1,675        -13.8%
Madera                         402          274        -31.8%
Merced                         645          487        -24.5%
Tulare                         874          777        -11.1%
Yolo                           319          300         -6.0%
El Dorado                      463          352        -24.0%
Stanislaus                   1,469        1,259        -14.3%
Kings                          232          175        -24.6%
San Benito                     130          139          6.9%
Yuba                           210          189        -10.0%
Colusa                          52           45        -13.5%
Sutter                         245          210        -14.3%
Central Valley              15,927       13,851        -13.0%
       
Mountains*                     663          579        -12.7%
       
North Calif*                 1,445        1,375         -4.8%
       
Statewide*                  69,799       61,517        -11.9%

 includes additional counties

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

County/Region 2010Q4 2011Q4 Yr/Yr%
       
Los Angeles    5,597        5,380         -3.9%
Orange    1,693        1,508        -10.9%
San Diego    2,433        2,044        -16.0%
Riverside    3,942        3,397        -13.8%
San Bernardino    3,272        2,718        -16.9%
Ventura      630          595         -5.6%
Imperial      243          194        -20.2%
SoCal   17,810       15,836        -11.1%
       
San Francisco      156          162          3.8%
Alameda    1,362        1,038        -23.8%
Contra Costa    1,559        1,354        -13.1%
Santa Clara      901          718        -20.3%
San Mateo      302          290         -4.0%
Marin      129           96        -25.6%
Solano      786          697        -11.3%
Sonoma      443          391        -11.7%
Napa      126           85        -32.5%
Bay Area    5,764        4,831        -16.2%
       
Santa Cruz      134          132         -1.5%
Santa Barbara      250          287         14.8%
San Luis Obispo      217          171        -21.2%
Monterey      353          281        -20.4%
Coast      954          871         -8.7%
       
Sacramento    2,398        2,194         -8.5%
San Joaquin    1,264        1,006        -20.4%
Placer      548          460        -16.1%
Kern    1,286        1,013        -21.2%
Fresno    1,159        1,029        -11.2%
Madera      256          187        -27.0%
Merced      453          351        -22.5%
Tulare      505          469         -7.1%
Yolo      158          151         -4.4%
El Dorado      213          207         -2.8%
Stanislaus      956          793        -17.1%
Kings      132          125         -5.3%
San Benito       65           64         -1.5%
Yuba      135          148          9.6%
Colusa       25           23         -8.0%
Sutter      105          144         37.1%
Central Valley    9,658        8,364        -13.4%
       
Mountains*      373          425         13.9%
       
North Calif*      872          933          7.0%
       
Statewide*   35,431       31,260        -11.8%

* includes additional counties

Source: DataQuick; DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2012 DataQuick. All rights reserved.

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