Dramatic decline in foreclosures in California
The central Valley Business Times reported that foreclosures dropped dramatically in California in December of 2009. But…………….that’s not the rest of the story. The reason behind this drop is because of the holiday foreclosure moratoriums that were in place. Lenders weren’t foreclosing. Expect a dramatic increase in foreclosures in January with delinquencies and unemployment going way up.
Another interesting part of the story involved lenders auction prices. The price that lenders set when auctioning properties at the courthouse step increased by almost 7%. Investors that have been banking on purchasing properties at auction are now paying more for their properties. What does this mean? Who knows. It could mean that the market is stabilizing or it could mean that the banks are getting greedy. You decide!
Dramatic decline in foreclosures in California
DISCOVERY BAY
• December sees 32.5 percent drop by one measure
• ‘May have been a Christmas gift to homeowners”
Who knew Santa Claus looked like a banker? Hard-pressed homeowners in the Central Valley and elsewhere in California got a sort of Christmas gift from the banks last month when foreclosure rates dropped dramatically, according to a report from ForeclosureRadar Inc. of Discovery Bay, which tracks the state’s foreclosures daily.
Foreclosure activity dropped dramatically in December, especially when looked at on a daily average basis, the company’s newest report says. While Notices of Default dropped 17.5 percent in aggregate, they actually dropped 32.5 percent on a daily average basis due to the fact that December had 22 days on which documents were recorded, versus 18 in November.
“The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners,” says Sean O’Toole, founder and CEO of ForeclosureRadar. “However, given rising mortgage delinquencies it is becoming increasingly clear that foreclosure activity no longer fully represents market realities.” One of the largest declines came in the number of properties sold to third parties, he says.
Auction buying opportunity only exists because lenders have been discounting opening bids to levels attractive to investors, the report says. That discounting declined in December, and with it so did third party sales.
“The discounts received by third party investors at the courthouse steps dropped dramatically in December, likely explaining the steep drop in the number of foreclosures sold to third parties. For most of the last year lenders discounted the opening bid from the amount they were owed by nearly 40 percent, last month that dropped to 33.7 percent,” he says. “The percentage of sales that were discounted also declined, from nearly 90 percent one year ago, to just 75 percent in December.’
On an average daily basis, cancellations only increased 3.5 percent — a smaller increase than expected given the Obama administration’s drive to make trial loan modifications under their Home Affordable Modification Program permanent, Mr. O’Toole says.
“Based on the timing of these cancellations, we believe 21 percent were canceled due the statutory requirement that a foreclosure sale be held within one year, thus forcing cancellation; 61.9 percent were likely due to some form of loan workout, whether it be through a HAMP modification, short sale or refinance; and 17.1 percent most likely due to a filing error,” he says.
In the Central Valley, ForeclosureRadar reports the following foreclosure activity by county. The number of Notices of Default for last month are listed first, followed by Novembers in parentheses and by December 2008 in brackets.