Housing default notices up 19%
Fresh data show the number of California homes entering foreclosure jumped nearly 19% in the third quarter from the previous quarter, the first time the Golden State has logged an increase in the key measure since hitting a peak early last year.
It is too soon to tell whether the increase represents a further deterioration in homeowners’ ability to pay their mortgages or just improved efficiency on the part of lenders, analysts said. Big banks were overwhelmed in 2009 by the number of delinquent borrowers and efforts to work with troubled homeowners, and the lenders could be playing catch-up, analysts said.
A total of 83,261 default notices were filed against California properties in the third quarter, the first formal step in the foreclosure process. Despite the uptick from the second quarter, the number was still down 25.5% from the same period last year and 38.5% off the peak reached in the first quarter of 2009, according to statistics released Tuesday by San Diego research firm MDA DataQuick.
But it was the first time since hitting that 2009 peak that the number of homes entering foreclosure increased on a quarter-over-quarter basis. The default-notice figure is important because any new foreclosure wave in the state would be preceded by a jump in such default notices.
“It looks like foreclosures are picking up a little bit,” said Gerd-Ulf Krueger, principal economist at Housing- econ.com. “There are more coming, but I don’t believe we will hit the previous peak.”
The numbers do not reflect the slowdown in repossessions after revelations that many lenders used faulty paperwork to conduct foreclosures in states where courts have jurisdiction over the process. Bank of America Corp. is the only major lender to have formally declared a freeze in foreclosure sales in California, where the vast majority of repossessions are conducted outside of the court system.
The rate at which higher-end properties entered the foreclosure process slowed in the third quarter, DataQuick said. Homes in neighborhoods where the median price is more than $800,000 saw a 1% decline in default notices and a 28.3% decrease from the same quarter a year earlier.
The most affordable neighborhoods, which represent about 25% of the state’s housing stock, accounted for 41.2% of all defaults last quarter, up from 40% the previous quarter and down from 42.9% a year earlier. Those less expensive markets accounted for 53.3% of all default notices filed in the fourth quarter of 2007.
Californians were a median five months behind on their mortgages when their lenders filed a default notice and owed a median $15,516 in missed payments.
The financial institutions that made the most loans going into default in the third quarter were Countrywide, now owned by Bank of America; Bank of America; World Savings, whose portfolio is now owned by Wells Fargo & Co.; Wells Fargo; and Washington Mutual, which was bought by JPMorgan Chase & Co.
California has bucked a national increase in bank repossessions this year and that trend continued in the third quarter. Repossessions of California homes by lenders fell 4.8% from the second quarter and 9.3% from the third quarter of last year, DataQuick said. They also were down 43% from the foreclosure peak hit two years ago in the third quarter of 2008.
Foreclosures accounted for 35.5% of the state’s resale market in the third quarter, down from 35.8% the previous quarter and 42.7% in the year-earlier quarter. A healthy chunk of demand for foreclosed homes is coming from investors. At formal foreclosure auctions statewide last quarter, 22.7% of foreclosed homes were bought by investors, DataQuick said.
“There is still a lot of investor money out there,” said Leo Nordine, a Los Angeles real estate agent who sells foreclosure properties on behalf of several lenders. “It’s a funny economy: The regular people seem totally broke, but there is a lot of investor cash out there.”
Bank of America and Wells Fargo, as well as mortgage titans Fannie Mae and Freddie Mac, have instituted policies that allow offers from people who will live in the homes to trump offers from investors, he said.
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