The number of California homes that went into foreclosure fell to a four-year low last quarter, the result of a more stable housing market as well as policy changes in the mortgage servicing industry, a real estate information service reported.
A total of 56,633 Notices of Default (NoDs) were recorded at county recorders offices during the April-to-June period. That was down 17.0% from 68,239 for the prior quarter, and down 19.2% from 70,051 in second-quarter 2010, according to San Diego-based DataQuick.
Last quarter's activity was the lowest for any quarter since 53,493 NoDs were recorded in the second quarter of 2007. It was well below half the record 135,431 default notices recorded in the first quarter of 2009.
"A lot of theories are being floated as to why the numbers are down. Bank policy changes. Legal challenges. Politics. Holding back temporarily so as not to flood the market. The fact of the matter is that no one really knows, outside of lending and servicing industry insiders. One thing is certain: Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us," said John Walsh, DataQuick president.
The statewide median sales price was $250,000 in the second quarter this year, down 7.4% from $260,000 a year earlier. In first-quarter 2009, when foreclosure activity peaked, the $227,000 median was down 39.5% from $375,000 a year earlier. The latter decline reflected not only steep home-price depreciation but very weak high-end sales amid robust sales of low-cost inland foreclosures.
Most of the loans going into default today are from the 2005-2007 period: the median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than two years, indicating that weak underwriting standards peaked then.
Most of the loans made in 2006 are owned and/or serviced by institutions other than those that made the loans.
The most active lender "beneficiaries" in the formal foreclosure process last quarter were JPMorgan Chase (JPM) (9,422), Wells Fargo (WFC) (8,228) and Bank of America (BAC) (7,601).
The "servicers" (or the Trustees in the formal foreclosure process) that pursued the highest number of defaults last quarter were ReconTrust Co (mostly for Bank of America and MERS), Quality Loan Service Corp (Bank of America), California Reconveyance Co (JPMorgan Chase), Cal-Western Reconveyance Corp (Wells Fargo) and NDEx West (Wells Fargo).
The filing of notices of default fell quarter-to-quarter and year-over-year across the home-price spectrum last month. However, the declines in NoDs were greatest in the least expensive communities, where foreclosure activity has been most severe in recent years.
Zips codes with median sale prices this year below $200,000 saw second-quarter defaults drop 18.6% from the prior quarter and drop 23.9% from a year earlier. For zip codes with $200,000-to-$800,000 medians, default filings fell 16.9% quarter-to-quarter and 18.7% year-over-year. In the market's high end, zips with medians over $800,000, mortgage defaults dropped 15.0% quarter-to-quarter and 10.7% year-over-year.
However, the concentration of mortgage defaults remains far greater in lower-cost neighborhoods: Last quarter, zips with sub-$200,000 median sale prices collectively saw 8.7 default notices filed per 1,000 homes. That compares with 6.4 filed per 1,000 homes for all zip codes statewide, and just 2.4 default notices filed per 1,000 homes in zips with $800,000-plus medians.
On primary mortgages, homeowners were a median six months behind on their payments when the lender filed the Notice of Default last quarter. Those borrowers owed a median $16,525 on a median $324,413 mortgage.
On home equity loans and lines of credit that went into default last quarter, borrowers owed a median $4,382 on a median $65,000 credit line. However 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 56,633 default notices were filed last quarter, they involved 55,153 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).
Mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties. The probability was highest in Kings, Sutter and Yuba counties.
Trustees Deeds recorded (TDs), or the actual loss of a home to foreclosure, totaled 42,465 during the second quarter. That was down 1.4 % from 43,052 for the prior quarter, and down 10.9% from 47,669 for second-quarter 2010. The all-time peak was 79,511 in third-quarter 2008.
Last quarter's trustees deeds total was the lowest since 35,431 were filed in fourth quarter 2010, and the second-lowest since fourth quarter 2007, when 31,676 were filed.
In the prior real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all-time low in DataQuick's TD statistics, which go back to 1988, was 637 in second quarter 2005, DataQuick reported.
The decline in foreclosures last quarter was most pronounced in higher-cost areas. California zip codes with $800,000-plus median sale prices this year saw foreclosures drop 8.7% quarter-to-quarter drop and 34.3% year-over-year. In zips with sub-$200,000 medians, foreclosures dipped 2.1% quarter-to-quarter and dropped 12.9% year-over-year.
Just as with mortgage defaults, foreclosure concentrations remain far greater in lower-cost neighborhoods: Zips with sub-$200,000 medians logged nine foreclosures per 1,000 homes last quarter. That compares with three foreclosure per 1,000 homes across all zip codes statewide, and one foreclosures per 1,000 homes for the group of zips with $800,000-plus medians.
There are 8.6 million houses and condos in the state.
Foreclosure resales accounted for 35.6% of all California resale activity last quarter. That was down from 39.8% the prior quarter and up a tad from 35.5% a year earlier. Foreclosure resales peaked at 57.8% in the first quarter of 2009. Foreclosure resales varied significantly by county last quarter, from 8.7% in San Francisco County to 57.4% in Madera County.
Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 17.4% of statewide resale activity last quarter. That was down slightly from an estimated 18.1% the prior quarter and 18.9% a year ago. Two years ago, in second quarter 2009, short sales made up an estimated 12.6% of all resales.
On average, homes foreclosed on last quarter took 10 months to wind their way through the formal foreclosure process, beginning with an NoD. That's up from 9.1 months in the prior quarter and 9.1 months a year earlier. The increase could reflect, among other things, lender backlogs and paperwork problems, legal and regulatory challenges and extra time needed to pursue loan modifications and short sales.
At formal foreclosure auctions held statewide last quarter, an estimated 28.3% 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 23.6% the previous quarter and 25.5% a year earlier, DataQuick reported.