California foreclosure sales increase 24.7 percent
July 14, 2009
• Central Valley still leads the state
• State’s new Foreclosure Prevention Act has unexpected impact
Foreclosure sales jumped significantly in June for the third consecutive month as lenders came off a foreclosure moratorium, according to ForeclosureRadar Inc., of Discovery Bay, a firm that tracks foreclosures in California on a daily basis.
Foreclosure sales increased by 24.7 percent year-over-year following a 31.9 percent increase in May, and a 35 percent April increase.
But “Notices of Trustee Sale” dropped by an unexpected 28.7 percent, with the timing of the drop indicating that it was in response to the California Foreclosure Prevention Act, the report says.
This law was widely believed to have little or no impact on foreclosure filings, as it exempted the majority of large lenders that operate in the state, says ForeclosureRadar’s CEO, Sean O’Toole.
In terms of foreclosure sales per population, counties in the Central Valley lead the state and make up six of the “top ten.”
• (1st) Merced County, 422 sales in June or one for every 605 residents
• (2nd) Stanislaus County, 748 sales or one per 702 residents
• (3rd) Yuba County, 99 sales or one for every 727 residents
• (4th) San Joaquin County, 934 sales or one for every 734 residents
• (7th) Madera County, 179 sales or one per 843
• (10th) Kern County, 887 sales or one for every 922 residents.
Other findings for June include:
• After a 4.2 percent drop the prior month, Notices of Default, the initial step in the foreclosure process, rose by 11.8 percent to the second highest level on record at 45,691 filings. Year-over-year filings increased by 10.0 percent from June 2008.
• Notices of Trustee Sale, which set the auction date and time, dropped by 28.9 percent from May to 29,853 filings. Notice of Trustee Sale filings also dropped year-over-year by 14.8 percent.
• A total of 22,291 foreclosures were taken to sale at auction, representing loan value of $9.57 billion dollars -- a 24.7 percent increase from the prior month, though 8.2 percent lower than the prior year.
The opening bids set by lenders were an average 39.3 percent lower than the loan balance, with 46.0 percent of sales discounted by 50.0 percent or more.
• Sales to third party bidders at auction in June increased by 18.3 percent from May to 2,687 foreclosures. As a percentage of sales, the majority of foreclosures still continue to be taken back by the lender -- 87.9 percent or 19,604 sales, with a total loan value of $8.44 billion, were taken back by the lender in June.
Mr. O’Toole says his research is also tracking the number of properties actively scheduled for sale – meaning that a Notice of Trustee Sale has been filed to set the auction date and time, but the foreclosure has not yet been sold or cancelled. Under California’s foreclosure code, a foreclosure sale can be postponed repeatedly for one year before a new Notice of Trustee Sale has to be filed.
While postponements are quite common, they have reached record levels in recent months, he says, swelling the number of scheduled foreclosures 90.1 percent year-over-year to 113,141.
“A number of lenders appear to have self-imposed California’s latest foreclosure moratorium on themselves, despite having received an exemption from it,” says Mr. O’Toole. “Given the number of exempt lenders it was quite surprising to see Notice of Trustee Sale filings drop by nearly 50 percent the day the new law went into effect.”
The California Foreclosure Prevention Act adds an additional 90 days to the time before which a lender can file a Notice of Trustee Sale. Lenders can avoid this additional requirement by putting in place a comprehensive loan modification program. Nearly all major lenders operating in the state were exempt as of June 16, yet filings still dropped significantly, Mr. O’Toole says.
Among the many approved lenders whose filings dropped from May to June, Bank of America’s filing declined by 48 percent, and Litton Loan Servicing Declined by 41 percent. At the same time, a handful of lenders dramatically increased their filings in June including CitiMortgage by 69 percent and Downey Savings by 45 percent.
Notice of Trustee Sale filings were climbing late in the month so it remains unlikely this law will have any long term impact on foreclosure activity, he says.
Comments on this story
unlawflcombatnt 7/15/09 6:20 PM
If over 88% of homes are being taken back by the lender, how are they ever going to get rid of the excess inventory? All that's doing is keeping the price up, and delaying the still large fall in prices that must occur.
Economic Populist Forum
Meth Lab Homes. Com 10/13/09 7:02 AM
The number of foreclosures that are occurring in California is troubling for many reasons. One that concerns me is how many of these homes were former meth labs. I suspect there are many, considering the number of meth labs that have been found in the state. In addition, thousands more have never been found by police.
In my opinion, banks should have to either get these homes decontaminated before they sell them or at a minimum disclose whether or not a home was ever used as a meth lab to a potential buyer.
Contaminated homes pose a significant health risk to anyone living in them, especially children and pregnant women. Additionally, the cost of decontaminating these homes can rise as high as $150,000, a cost handed over the home buyers once they take ownership of the property.
The end result is, these homes often end up back in foreclosure, while the bank continues to rake in down-payment money and closing costs, every time the house gets sold. The innocent buyers, on the other hand, end up with no place to live and a ruined credit record.
When it comes to foreclosures - BUYER BEWARE.