July 25, 2010

California Mortgage Defaults down, Foreclosures Up

Mortgage defaults in California at 3-year low

The number of default notices in the second quarter falls 43.8% compared with the same period in 2009. Meanwhile, banks step up repossession of foreclosed homes.

By Alejandro Lazo, Los Angeles Times

The number of Californians entering foreclosure slid dramatically in the second quarter to a three-year low as the fallout from the worst of the housing crisis continued to abate.

Default notices, the first stage of the foreclosure process initiated by banks on troubled homeowners, plummeted 43.8% in the second quarter over the same period last year to 70,051, and 13.6% from the first three months of the year, research firm MDA DataQuick of San Diego said Wednesday.

DataQuick Notice of Defaults Q2 2010

Well, we’ve got some good news, and we’ve got some bad news.  The good news is fewer Golden State homedebtors are defaulting on their mortgages.  The bad news is that there’s plenty of already defaulted property for the banks to foreclose on, and foreclose they did.  The average loan has taken 9.1 months from Notice of Default to foreclosure, and the number of California NODs peaked in the first quarter of 2009.

"We are now three-plus years into the housing crisis, and at this point of time we are seeing stabilization across the board," said Stuart Gabriel, director of UCLA‘s Ziman Center for Real Estate. "The stabilization is in fits and spurts … but it is evidenced in a variety of indicators."

 

One of the things that the subprime mortgage meltdown has led to are a rash of professors at actual accredited institutions of higher learning using the word “evidence” as a verb.  You’ll have to read the article yourself to find out what the Real Estate Erudite from Cal and USC have to say.  Well, I’ll give you a hint.  The guy from USC thinks fewer people are going to walk away from underwater mortgages than predicted, but didn’t bother to share any actual reasoning for this supposition other than home prices trending back up.  It’s fairly easy to find experts suggesting that housing prices will stay down and could go even lower, so I definitely want a glass of that SoCal Kool-Aid.

But don’t forget the “Bad News” portion: 4.4% more trustee’s deeds were filed on California properties from the same quarter a year earlier, and 11.2% from the previous quarter, for a total of 47,669.  The last stage of foreclosure is recording the TD.  Foreclosure filings were up 38% nationally, and California was well represented in those numbers.

Mortgage rates went down this week, from 4.57 to 4.56 percent for a 30 year fixed conventional loan.  (These are national averages, and California rates are usually higher.)  That last .01 percent is going to be the trigger for everyone who refinanced at 4.59% to jump in for a new set of appraisal documents.  And all those newly foreclosed homeless are going to jump at this opportunity, right?  Best of all, you’re all going to get a chance to refinance at 4.55%, because Bernanke (Chairman of the Federal Reserve, but you knew that) says as the economic outlook is “unusually uncertain” he may have to lower interest rates even more!

Comments (11) -- Posted by: madhaus @ 5:02 am

11 Responses to “California Mortgage Defaults down, Foreclosures Up”

  1. SEA Says:

    “The guy from USC thinks fewer people are going to walk away from underwater mortgages than predicted, but didn’t bother to share any actual reasoning for this supposition other than home prices trending back up.”

    I know a few people that expected GM stock to bounce right back up to $70 per share too. That expectation was finally put to an end when the bankruptcy was filed.

    So many are hanging on with the expectation of that bounce back.

    Using the data at housingtracker.net, the median asking price:

    LA has gone from $580k to $389k
    Orange County $695k to $460k
    Riverside $461k to $247k
    Sacramento $439k to $219k
    San Diego $539k to $399k

    And then those closest to the RBA:

    San Francisco $749k to $500k
    San Jose $749k to $500k

    Obviously this is all useless aggregate data, and so on. It does not target the elusive RBA, and so on and so forth.

    That said, we also do not know if suddenly if the cheaper homes are listed on the market. That is all the more expensive homes might no longer be listed for sale, and that’s why the median asking price has gone down. Only the junk homes, you know, those priced at under $500k, which is definitely not a lot of money, are left on the market.

    Rather than continue to pay in a down market, I suspect that at some point in time more people will simply give up, but then again, we are not talking about a lot of money, right?

    Unless price bounce back up, I expect the number of foreclosures will be heading back up.

    One last comment, we know that the number of foreclosures doesn’t give us any idea of lost value or the distribution of the value of the homes. The next thing I expect to hear is that only cheap crappy homes are foreclosed upon. You know those people who should not have purchased in the first place. Those really bad people. They are the ones who are causing bad for the good people, or so some people seem to think.

  2. madhaus Says:

    And those million dollar homes being foreclosed on? Not problem for the RBA. All those homes, even in prime zips that used to be in the rba, are on busy streets, near railroad tracks, runways, power lines etc. clearly owned by bad people who should never have been allowed to buy there. See, we should bring back restrictive covenents, but instead of using them to exclude families by race or religion, they should be used to keep out non-RBA types like realtards and mortgage brokers and Ponzi schemers and used-car sellers. Also anyone who says they’re working on a megaproject.

    It’s all about keeping our property values up.

  3. SEA Says:

    Oh, yes! We need higher taxes, higher HOA fees, and so on. That will keep the bad people out. Never mind that if you eliminate the current bottom 10% there will be a new bottom 10%. Put differently, those higher taxes, and higher HOA fees, will marginalize those who were just above the line between “good” and “bad” people, but we will have higher standards! …and those bad people can live in a flyover state.

    (Small correction: SF went from $669k to $499k, not $749k to $500k, but the underlying asking price decrease remains–it’s “only” $170k down instead of $250k down, like San Jose.) Remember we’re not talking about much money anyway, since it’s below $500k.

  4. madhaus Says:

    Today’s Mercury News:

    Many Bay Area Homeowners in Real Estate Limbo

    About the people more than 90 days behind on the mortgage who haven’t been foreclosed on yet.

    40,283 homeowners across 7 counties (including South Bay, East Bay, and SF Metro) in this position. 11,558 in SJ Metro, 23,155 in East Bay (hi A Lewis!)

    Nationally, there are 3.5 MILLION loans in “limbo,” (more than 90 days late but not foreclosed).

    But Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said banks and the government “are being quite rational” in stretching out the foreclosure process to avoid displacing homeowners and depressing prices. He estimated that fewer than 15 percent of Bay Area mortgage-holders who are 90 days overdue will get foreclosed on. “Most people will catch up if they can get a job” or a loan modification, he said. In the San Jose metro area, about 1.9 percent of mortgages were in foreclosure in May, or about 4,900 loans, CoreLogic said. In the East Bay, the rate was 2.5 percent, or about 10,090 loans. Bay Area median home prices, though rebounding from lows reached last year, are down 38 percent from their peak in July 2007.

    Had to quote from a Real Estate professor. Ha. All of the Real Estate departments at the 3 colleges mentioned in the LA Times article have last names attached. I’m waiting for the Google Center for Creative Finance.

  5. madhaus Says:

    Irvine-style housing ATM:

    Pinole resident Charles Rinne, 63, is no longer employed, but the retired postal worker says he could keep paying the $1,300-a-month mortgage on his two-bedroom condominium. Instead, in February, he stopped.

    He considers defaulting a way to live more affordably after years of racking up debt.

    Rinne purchased his condo for $26,500 in 1973 and over the years refinanced it several times. He said he ran up credit card debt and had some dental surgery that was not fully covered by insurance.

    “All of a sudden late last year I just could not pay all the bills down to zero,” he said. So he plans to file for bankruptcy, which will delay foreclosure proceedings.

    “That will allow me to save as much money as possible so I have the money to move,” he said.

    Did you get that? He bought the condo for $26,500 in 1973. Instead of owning it free and clear by 1983 (inflation was leaping along through the 70s), he pulled money out.

    “All of a sudden” he couldn’t pay down his bills? It didn’t happen all of a sudden. It happened each time he refinanced and pulled more money out!

    He bought the place new in ’73 and it’s assessed for $45,000. Too bad he’s going to lose his Prop 13 basis. I guess that’s what happens when you “consider defaulting a way to live more affordably.”

  6. Pralay Says:

    Too bad he’s going to lose his Prop 13 basis. I guess that’s what happens when you “consider defaulting a way to live more affordably.”
    —-

    I suggest new proposition. Prop 133 – for Prop 13 loyalty clause. Those who enjoyed Prop 13 long enough will be able to transport their Prop 13 benefit to their new home purchases.

  7. anon Says:

    Amazing. All of a sudden Guy’s house wasn’t earning money anymore and he couldn’t pay his bills.

  8. nomadic Says:

    He bought the place new in ’73 and it’s assessed for $45,000. Too bad he’s going to lose his Prop 13 basis. I guess that’s what happens when you “consider defaulting a way to live more affordably.”

    Don’t worry, madhaus. He’s a retired postal worker. His government pension is probably $50k/year and he’s only 63!

    I suggest new proposition. Prop 133 – for Prop 13 loyalty clause. Those who enjoyed Prop 13 long enough will be able to transport their Prop 13 benefit to their new home purchases.

    There kind of is such a thing, Pralay. People of over 55 can move and take their tax basis with them as long as they stay within the participating counties. Within the same county is Prop 60 and to another (participating) county, it’s Prop 90.

    http://www.wwlaw.com/prop60.htm

  9. bob Says:

    … and I suppose everyone saw the “great” news that (gasp) new homes sales were up but only because the previous month was the worst on record.

  10. A. Lewis Says:

    #4 – hi Madhaus! Thanks for remembering the East Bay exists!

  11. Tuno Says:

    “He estimated that fewer than 15 percent of Bay Area mortgage-holders who are 90 days overdue will get foreclosed on. “Most people will catch up if they can get a job” or a loan modification, he said.”

    Yeah, right. IF they get a job or a loan modification.
    Or maybe not, even then.


Leave a Reply

Please be nice. No name calling, no personal attacks, no racist stuff, no baiting, etc. Let's be nice to each other in the true Bay Area spirit! (Comments may be edited/removed without notice.)