Mortgage Defaults are Dropping in California
Source: Dataquick January 24, 2012
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 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.
Orange County saw fourth-quarter foreclosure filings fall from 4,388 in 2010 to 4,297 in 2011… a 2.1% decrease. And, for all of 2011, Orange County foreclosures were down 8.7% according to the O.C. Register, for details see: http://lansner.ocregister.com/2012/01/27/foreclosures-down-8-7-in-11/157393/
“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.
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.
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.
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.
For questions about buying and selling real estate in Orange County, contact Scot Campbell. He is the President of The Scot Campbell TEAM at Coldwell Banker-Campbell Realtors in Huntington Beach, CA. He has been a licensed broker for over 21 years and has brokered over 1000 homes and just about every type of transaction imaginable. Read his profile and client reviews at www.ScotCampbell.com He can be reached at 714-960-0700 at the office, 714-336-0394 on his mobile number or via email at Scot.Campbell@ColdwellBanker.com
