California: Foreclosure Starts Lowest Since 2006

January 23, 2013

La Jolla, CA.--The number of California homeowners pushed into the foreclosure process fell last quarter to the lowest level in six years, the result of rising home values, an improving economy and a shift toward short sales, a real estate information service reported.

During fourth-quarter 2012 lenders recorded a total of 38,212 Notices of Default (NoDs) on California houses and condos. That was down 22.1 percent from 49,026 during the prior three months, and down 37.9 percent from 61,517 in fourth-quarter 2011, according to San Diego-based DataQuick.

Last quarter's number was the lowest since 37,994 NoDs were recorded in fourth-quarter 2006. New foreclosure filings (NoDs) peaked in first-quarter 2009 at 135,431. DataQuick's NoD statistics go back to 1992.

"Home values increased through most of 2012, and the rate of increase picked up toward the end of the year. That means fewer and fewer homeowners are underwater, where they owe more than their homes are worth. That in turn means they can sell and pay off the mortgage, or perhaps refinance at today's low interest rates. This trend alone suggests we'll see a continued decline in foreclosure rates this year. Another factor is the foreclosure-avoidance goals of various settlements between lenders and the government," said John Walsh, DataQuick president.

The median price paid for a home last quarter was $300,000 in California, up 22.4 percent from a year ago and 32.2 percent off the median's $227,000 bottom in first-quarter 2009, DataQuick reported.

Foreclosure resales accounted for 16.6 percent of all California resale activity last quarter, down from 20.0 percent the prior quarter and 33.6 percent a year ago. It peaked at 57.8 percent in the first quarter of 2009. Foreclosure resales - properties foreclosed on in the prior 12 months - varied significantly by county last quarter, from 5.0 percent in San Francisco County to 31.4 percent in Sutter County.

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 down from an estimated 26.4 percent the prior quarter and up from 25.7 percent of all resales a year earlier. The estimated number (rather than percentage) of short sales last quarter rose 4.2 percent from a year earlier.

NoD filings fell in all home price categories last quarter. But mortgage defaults remained far more concentrated in California's most affordable neighborhoods. Zip codes with fourth-quarter 2012 median sale prices below $200,000 collectively saw 5.5 NoDs filed for every 1,000 homes in those zip codes. The ratio was 3.5 NoDs filed per 1,000 homes for zip codes with $200,000 to $800,000 medians, while there were 1.3 NoDs filed per 1,000 homes for the group of zips with medians above $800,000.

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 Wells Fargo (6,611), JP Morgan Chase (4,275) and Bank of America (2,005).

The trustees who pursued the highest number of defaults last quarter were NDex West (mostly for Wells Fargo), Cal-Western Reconveyance (also Wells Fargo) and Quality Loan Service Corp (Bank of America).

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 $14,364 on a median $308,885 mortgage.

On home equity loans and lines of credit in default, borrowers owed a median $4,693 on a median $77,187 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 38,212 default notices were filed last quarter, they involved 37,343 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 Mateo, Santa Clara and Marin counties. The probability was highest in Yuba, Madera and Tulare counties.

Trustees Deeds recorded (TDs), or the finalized loss of a home to the formal foreclosure process, totaled 21,127 during the fourth quarter. That was down 7.9 percent from 22,949 foreclosures in the prior quarter, and down 32.4 percent from 31,260 in fourth-quarter 2011. Last quarter's foreclosure tally was the lowest for any quarter since second-quarter 2007, when 17,458 homes were foreclosed on. The all-time peak was 79,511 foreclosures in third-quarter 2008. The state's all-time low was 637 in second-quarter 2005, DataQuick reported.

Just as with mortgage default filings, foreclosures remained far more concentrated in the state's most affordable communities. Zip codes with fourth-quarter 2012 median sale prices below $200,000 collectively saw 4.3 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 0.5 foreclosure per 1,000 homes in the group of zips with medians over $800,000.

On average, homes foreclosed on last quarter took 8.9 months to wind their way through the formal foreclosure process, beginning with an NoD. That's up from an average of 7.9 months the prior quarter and down from 9.7 months a year earlier.

While 1.1 million of California's 8.7 million houses and condos have been involved in a foreclosure proceeding the past five years, 780,000 - less than ten percent, were actually lost to foreclosure. The other 320,000 were either sold, or the payments brought current.

At formal foreclosure auctions held statewide last quarter, an estimated 42.0 percent of the foreclosed properties were bought by investors or others who don't appear to be lender or government entities. That was up from an estimated 39.2 percent the previous quarter and up from 31.2 percent a year earlier, DataQuick reported.

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

County/Region 2011Q4      2012Q4 Yr/Yr%
       
Los Angeles             12,355       8,100      -34.4%
Orange                    4,297       2,169      -49.5%
San Diego                 4,813       2,655      -44.8%
Riverside                 6,014       3,887      -35.4%
San Bernardino            4,827       3,165      -34.4%
Ventura                   1,437         728      -49.3%
Imperial                    270         175      -35.2%
Socal                   34,013      20,879      -38.6%
       
San Francisco               409         236      -42.3%
Alameda                   2,117       1,194      -43.6%
Contra Costa              2,398       1,342      -44.0%
Santa Clara               1,847         867      -53.1%
San Mateo                   712         346      -51.4%
Marin                       263         149      -43.3%
Solano                    1,245         696      -44.1%
Sonoma                      815         452      -44.5%
Napa                        206         117      -43.2%
Bay Area                10012       5,399      -46.1%
       
Santa Cruz                  295         168      -43.1%
Santa Barbara               524         316      -39.7%
San Luis Obispo            359         221      -38.4%
Monterey                    509         377      -25.9%
Coast                     1,687       1,082      -35.9%
       
Sacramento                3,791       2,195      -42.1%
San Joaquin               1,745       1,098      -37.1%
Placer                      871         469      -46.2%
Kern                      1,562       1,082      -30.7%
Fresno                    1,675       1,150      -31.3%
Madera                      274         209      -23.7%
Merced                      487         332      -31.8%
Tulare                      777         515      -33.7%
Yolo                        300         173      -42.3%
El Dorado                   352         262      -25.6%
Stanislaus                1,259         798      -36.6%
Kings                       175         172       -1.7%
San Benito                  139          65      -53.2%
Yuba                        189         114      -39.7%
Colusa                       45          18      -60.0%
Sutter                      210         121      -42.4%
Central Valley          13,851       8,773      -36.7%
       
Mountains*                  579         551       -4.8%
       
North Calif*              1,375       1,528       11.1%
       
Statewide*              61,517      38,212      -37.9%

 includes additional counties

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

County/Region           2011Q4 2012Q4 Yr/Yr%
       
Los Angeles              5,380       3,496      -35.0%
Orange                   1,508         941      -37.6%
San Diego                2,044       1,285      -37.1%
Riverside                3,397       2,400      -29.3%
San Bernardino           2,718       2,025      -25.5%
Ventura                     595         330      -44.5%
Imperial                    194         127      -34.5%
Socal                   15,836      10,604      -33.0%
       
San Francisco               162          79      -51.2%
Alameda                  1,038         541      -47.9%
Contra Costa             1,354         779      -42.5%
Santa Clara                 718         330      -54.0%
San Mateo                   290         149      -48.6%
Marin                        96          56      -41.7%
Solano                      697         500      -28.3%
Sonoma                      391         269      -31.2%
Napa                         85          62      -27.1%
Bay Area                 4,831       2,765      -42.8%
       
Santa Cruz                  132          87      -34.1%
Santa Barbara               287         177      -38.3%
San Luis Obispo             171         123      -28.1%
Monterey                    281         180      -35.9%
Coast                       871         567      -34.9%
       
Sacramento               2,194       1,639      -25.3%
San Joaquin              1,006         703      -30.1%
Placer                      460         281      -38.9%
Kern                     1,013         744      -26.6%
Fresno                   1,029         770      -25.2%
Madera                      187         145      -22.5%
Merced                      351         255      -27.4%
Tulare                      469         350      -25.4%
Yolo                        151         123      -18.5%
El Dorado                   207         146      -29.5%
Stanislaus                  793         512      -35.4%
Kings                       125         108      -13.6%
San Benito                   64          30      -53.1%
Yuba                        148          68      -54.1%
Colusa                       23          18      -21.7%
Sutter                      144         104      -27.8%
Central Valley           8,364       5,996      -28.3%
       
Mountains*                  425         351      -17.4%
       
North Calif*                933         844       -9.5%
       
Statewide*              31,260      21,127      -32.4%

* includes additional counties

Source: DataQuick; DQNews.com

Media calls: Andrew LePage (916) 456-7157

Copyright 2013 DataQuick. All rights reserved.

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