Temporary Drop in California Foreclosure Activity

January 27, 2009

La Jolla, CA.--The number of mortgage default notices filed against California homeowners fell last quarter to its lowest level in more than a year, the temporary result of a procedural change that took effect in September, a real estate information service reported.

Lending institutions sent homeowners 75,230 default notices during the October-through-December period. That was down 20.2 percent from 94,240 for the prior three months, and down 7.7 percent from 81,550 for fourth-quarter 2007, according to MDA DataQuick.

Recorded default notices peaked in second-quarter 2008 at 121,673.

Last year lenders filed about 40,000 "notices of default" monthly from March through August. In September default recordings plunged to 14,995 as a new state law took effect requiring lenders to take added steps to keep troubled borrowers in their homes.

While recordings were back up to 39,993 in December it's unclear whether lenders were mainly playing catch-up, or whether a new wave of foreclosure activity was building.

"No one expected defaults to stay at the much lower levels we saw immediately after the new law took effect last fall. The bigger question is whether or not the housing market has hit a low and is dragging along bottom, or if the markets that so far have remained unaffected by the foreclosure problem are due for a fall. With today's atypical market trends, it's impossible to predict," said John Walsh, DataQuick president.

Most foreclosure activity was still concentrated in affordable inland areas where the availability of so-called subprime financing fueled a buying and refinancing frenzy in 2005/2006. Those sub-markets, which represent about 25 percent of the state's housing stock, account for more than 50 percent of the default activity. That ratio is the same now as a year ago, indicating that the problem has not yet migrated into more established, expensive markets.

Most of the loans that went into default last quarter were originated between October 2005 and January 2007. The median age was 29 months, up from 21 months a year earlier. More than three million home loans were originated in 2006. That dropped to two million in 2007, and 1.1 million last year.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,867 on a median $351,000 mortgage.

On home equity loans and lines of credit, borrowers owed a median $4,267 on a median $60,000 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA 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 75,230 default notices were filed last quarter, they involved 73,575 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties â€“ the historical norm. The probability was highest in Merced, Stanislaus and San Joaquin counties.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 46,183 during the fourth quarter. That's 41.9 percent below 79,511 for the prior quarter, and up 45.8 percent from 31,676 for fourth-quarter 2007. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all-time low was 637 in the second quarter of 2005.

There are 8.5 million houses and condos in the state. For 2008 as a whole, 236,231 homes, or 2.8 percent of California's housing stock, was foreclosed on, MDA DataQuick reported.

Foreclosure resales have emerged as a significant market factor, accounting for 55.1 percent of all California resale activity last quarter. A year ago it was 19.0 percent. Foreclosure resales varied significantly by area, from 10.7 percent in San Francisco County to 79.2 percent in Merced County.

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

County/Region	2007Q4	2008Q4	Yr/Yr%

Los Angeles	13,613	14,410	5.9%
Orange	4,276	4,481	4.8%
San Diego	6,151	5,543	-9.9%
Riverside	9,913	9,151	-7.7%
San Bernardino	7,288	7,437	2.0%
Ventura	1,504	1,308	-13.0%
Imperial	401	496	23.7%
Socal	43,146	42,826	-0.7%

San Francisco	334	302	-9.6%
Alameda	2,573	2,363	-8.2%
Contra Costa	3,805	3,135	-17.6%
Santa Clara	2,162	2,101	-2.8%
San Mateo	625	651	4.2%
Marin	224	194	-13.4%
Solano	1,793	1,418	-20.9%
Sonoma	968	809	-16.4%
Napa	220	184	-16.4%
Bay Area	12,704	11,157	-12.2%

Santa Cruz	312	217	-30.4%
Santa Barbara	563	437	-22.4%
San Luis Obispo	291	309	6.2%
Monterey	1,048	806	-23.1%
Coast	2,214	1,769	-20.1%

Sacramento	5,807	4,186	-27.9%
San Joaquin	3,746	2,546	-32.0%
Placer	850	892	4.9%
Kern	2,631	2,566	-2.5%
Fresno	2,103	2,004	-4.7%
Madera	375	425	13.3%
Merced	1,413	1,006	-28.8%
Tulare	817	896	9.7%
Yolo	363	292	-19.6%
El Dorado	304	311	2.3%
Stanislaus	2,594	1,978	-23.7%
Kings	134	155	15.7%
San Benito	232	142	-38.8%
Yuba	302	236	-21.9%
Colusa	65	53	-18.5%
Sutter	210	200	-4.8%
Central Valley	21,946	17,888	-18.5%

Mountains*	444	463	4.3%

North Calif*	1,096	1,127	2.8%

Statewide*	81,550	75,230	-7.7%

* includes additional counties

Trustees Deeds Recorded (signal homes were lost to foreclosure)
houses and condos

County/Region	2007Q4	2008Q4	Yr/Yr%

Los Angeles	4,536	6,744	48.7%
Orange	1,538	2,088	35.8%
San Diego	2,296	3,442	49.9%
Riverside	4,520	5,791	28.1%
San Bernardino	3,058	4,609	50.7%
Ventura	542	718	32.5%
Imperial	193	295	52.8%
SoCal	16,683	23,687	42.0%

San Francisco	66	112	69.7%
Alameda	1,026	1,681	63.8%
Contra Costa	1,558	2,310	48.3%
Santa Clara	612	1,347	120.1%
San Mateo	193	340	76.2%
Marin	40	87	117.5%
Solano	704	1,068	51.7%
Sonoma	298	561	88.3%
Napa	76	171	125.0%
Bay Area	4,573	7,677	67.9%

Santa Cruz	84	171	103.6%
Santa Barbara	246	278	13.0%
San Luis Obispo	100	182	82.0%
Monterey	378	736	94.7%
Coast	808	1,367	69.2%

Sacramento	2,641	3,167	19.9%
San Joaquin	1,609	2,051	27.5%
Placer	348	450	29.3%
Kern	1,086	1,512	39.2%
Fresno	751	1,198	59.5%
Madera	154	349	126.6%
Merced	660	940	42.4%
Tulare	240	460	91.7%
Yolo	146	211	44.5%
El Dorado	101	157	55.4%
Stanislaus	998	1,559	56.2%
Kings	31	50	61.3%
San Benito	71	138	94.4%
Yuba	130	163	25.4%
Colusa	21	35	66.7%
Sutter	90	148	64.4%
Central Valley	9,077	12,588	38.7%

Mountains*	177	283	59.9%

North Calif*	358	581	62.3%

Statewide*	31,676	46,183	45.8%

* includes additional counties

Source: DataQuick Information Systems

Media calls: Andrew LePage (916)456-7157 or John Karevoll (909)867-9534