Notices of Default, the first step in the foreclosure process, reached a record level – nearly 26 percent higher than the previous historic peak in April 2008. Notices of Trustee sale, which set the auction date and time, rose 82.3 percent from the prior month, though not yet reaching the prior record level set in July 2008. While foreclosure notices rose dramatically, sales at auction decreased 41.4 percent, to reach the lowest levels seen since the third quarter of 2007. While there is a lag between foreclosure filings and foreclosure sales, these dramatic differences are likely best explained by the unintended consequences of government intervention in the foreclosure process.
Notices of Trustee sale, which set the auction date and time, rose 82.3 percent from the prior month, though not yet reaching the prior record level set in July 2008.
While foreclosure notices rose dramatically, sales at auction decreased 41.4 percent, to reach the lowest levels seen since the third quarter of 2007. While there is a lag between foreclosure filings and foreclosure sales, these dramatic differences are likely best explained by the unintended consequences of government intervention in the foreclosure process.
While banks still take back the majority of foreclosures at trustee sale, third party bidding has continually increased since January 2008.
o Lender discounts at auction increased substantially from February, reaching an average of 44.1 percent. The largest percentage discounts were seen in Monterey County with an averagediscount of 56.1 percent, while San Mateo County was among the lowest at 20.7 percent.
percent. The largest percentage discounts were seen in Monterey County with an average
discount of 56.1 percent, while San Mateo County was among the lowest at 20.7 percent.
Government programs currently impacting the foreclosure numbers in California:
o California Senate Bill 1137, which requires lenders to contact homeowners before filing a Notice of Default. This bill resulted in a significant, but temporary, drop in foreclosure filings starting in September of 2008. While the bill failed to address the issue of negative equity that many Californians now face, it did likely create a backlog of foreclosure filings, which may partially explain the recent rise in filings. More significantly this law perfectly explains at least a portion of the decrease in sales, as the average time from the filing of a Notice of Default to foreclosure sale was 176 days in March, which aligns exactly with the September drop in Notice of Default filings.
o The California Foreclosure Prevention Act, which goes into effect this summer, adds an additional 90 days to the foreclosure process if lenders fail to take certain actions. It is quite possible that the dramatic rise in foreclosure notices occurring now is an attempt by lenders to process as many foreclosures as possible before this law takes effect.
o U.S. Congressional requests for foreclosure moratoriums – many lenders instituted foreclosure moratoriums, at the request of Congress, to allow the incoming Administration time to put housing programs in place. Many of these moratoriums were in full force through March, although some are now being lifted – notably Fannie Mae and Freddie Mac – which both lifted their moratoriums effective March 31, 2008.
o U.S. efforts to stabilize financial institutions, including TARP, PPIP and changes to “mark-tomarket” accounting practices, among others, may be leading some lenders to avoid completing foreclosures in the hopes of selling the troubled loans, to gain government guarantees for those loans or to continue avoiding losses by holding the assets on their books at higher values than they could get in today’s real estate market. Contact Thomas Ray for more Foreclosure/REO/Short Sale info.www.LAexclusiveProperty.comwww.RealEstateBlogLA.com
Contact Thomas Ray for more Foreclosure/REO/Short Sale info.www.LAexclusiveProperty.comwww.RealEstateBlogLA.com
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