California foreclosure starts drop 12% in 4Q
Mortgage servicers filed roughly 61,500 notices of default in California during the final three months of 2011, down nearly 12% from the same level the year before, according to real estate analytics firm DataQuick. The pace is the second-lowest level in more than four years. In the second quarter, notices of default totaled roughly 56,600 but increased the next three months to more than 71,200. From there, DataQuick said, new foreclosure filings dropped 13.7% in three months ended Dec. 31. More than half of those notices of default were filed by Bank of America (BAC), Bank of New York Mellon (BK) and Wells Fargo (WFC). DataQuick said the peak occurred in the first quarter of 2009 when mortgage servicers filed more than 135,400 default notices. DataQuick President John Walsh said it's difficult to tell if the lower numbers, which are half the levels of two years ago, are a result of an actual recovery in the market or shifts in policy. "Five years ago almost all mortgage payment delinquencies would have triggered a default notice after a certain amount of time," Walsh said. "Strategies now include short sales, refinances, interest rate changes, principal reduction as well as just plain waiting longer. It will be interesting to see how this plays out as the economy improves and the housing market finds its footing." The steepest decline came in Madera County, just north of Fresno, Calif., where notices of default dropped nearly 32% from the end of 2010. Borrowers were behind a median of nine months on the mortgage before the lender filed a notice in the fourth quarter. The loans that completed foreclosure in that period spent an average 9.7 months in the process, up from 8.8 months a year earlier. Most of the mortgages hitting foreclosure were originated in the middle of 2006. This has been the case for three years now, indicating how weak underwriting standards were then, DataQuick said. The share of REO as part of the market in California dropped to 33.7% in the fourth quarter, down steadily from a peak of more than 57.8% in the first three months of 2009. Short sales, meanwhile are growing slightly more popular, reaching 19.8% of all home sales from 16.4% at the end of 2009. Write to Jon Prior. Follow him on Twitter @JonAPrior.