We’ve written for months now that extending foreclosure timelines — either via the use of legislation to lengthen notice periods, or through more direct moratoria efforts — will accomplish little more than delaying defaults, while simultaneously driving up costs and stretching servicers to a whole new level of thin. Proving that point yet again is ForeclosureRadar’s latest report on California foreclosure activity during December, released late Tuesday evening. The company specializes in monitoring California residential mortgage defaults. Notices of Default, which represent the first step towards a foreclosure, rebounded sharply from an earlier stall caused by California State Senate Bill 1137, ForeclosureRadar reported. With 42,421 filings recorded in December, Notices of Default are back to the record levels reached in the second quarter of 2008, nearly doubling the 21,557 Notices of Default recorded in November alone. NOD filing levels in Dec. were 24.7 percent above year-ago totals, as well. Notice of Trustee Sale filings were relatively flat month-over-month, but were still up 29.8 percent compared to last Dec.; such notices are filed an average 116 days after the Notice of Default, and indicate an imminent foreclosure sale, so a rebound in NTS levels in coming months seems likely. Properties taken to sale at auction increased only slightly between November and December, to 16,298 sales — but a 72.6 percent increase from the same time last year. (And let’s all recall, for the record, that December 2007 wasn’t exactly a walk in the park for the nation’s housing markets.) Third party purchases at trustee sale auction decreased 12.5 percent from one month earlier, but were still 156 percent above third party purchases in Dec. 2007; lenders took back nearly 95 percent of the 16,298 properties sold at auction, with a combined loan value of $8.95 billion. “The effort by the California State Legislature to reduce foreclosures has now clearly failed,” said Sean O’Toole, founder of ForeclosureRadar. “While State Senate Bill 1137 was well intentioned, forcing lenders to talk to homeowners won’t fix this problem. “While a number of lenders have announced significant loan modification programs to reduce payments to affordable levels, these plans fail to address the fact that the average foreclosure in California now has $180,000 in negative equity. “Lowering payments may provide a temporary fix, but lenders simply don’t have sufficient reserves to lower principal balances enough to help homeowners in foreclosure escape the prison of debt their home now represents.” The SB 1137 legislation in the state that added 45 days to the borrower notice period for defaults. The story of arcing defaults resuming in California follows the experience that has been observed in other states, even during the current cycle. Massachusetts implemented such a 90-day stay on the foreclosure process in early 2008, a move that generated ton of press coverage initially, but little follow up since. The number of foreclosures recorded in the state shrank for a few months, until the stays began to expire; the state saw a more than 400 percent increase in foreclosure volume mere months after the moratorium went into effect, suggesting little action was taken on severely delinquent loans during the pause. The current issue of HousingWire Magazine, out now, takes an in-depth and critical look at the history and likely future for foreclosure moratoria in the United States. If you aren’t a subscriber, click here. Write to Paul Jackson at firstname.lastname@example.org.
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