Lenders started foreclosure proceedings on a record number of California homeowners last quarter, although the pace of quarterly increases in default activity slowed somewhat, a real estate information service reported Tuesday.
Mortgage servicers recorded 121,341 notices of default during the April-through-June period, up 6.6 percent from 113,809 during Q1, and up 124.9 percent year-ago totals, according to DataQuick Information Systems
The second quarter default activity is the highest on record, DataQuick said in a press statement
; but the slowing number of new defaults has led to some speculation that the run-up in default activity may be nearing an end.
"The small increase in defaults from the first to the second quarter may indicate that we're nearing a plateau," said John Walsh, DataQuick president. "We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process.
"Of course, they may just be swamped and can't handle processing any more paperwork," he said.
Last quarter's default numbers were a record in almost all of the state's 58 counties, as well. That included Los Angeles County, where last quarter's 21,632 residential defaults surpassed the prior record of 21,444 recorded during first-quarter 1996.
Perhaps most telling, however, was the finding that only an estimated 22 percent of troubled borrowers emerge from the foreclosure process successfully -- in other words, nearly 80 percent of those that default on their mortgage in California are losing their home.
As DataQuick noted, this isn't likely evidence of a failure on the part of servicers; it's evidence of just how far so many borrowers got in over their heads during the housing boom.
"The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work- outs' difficult," the company said.
Foreclosures made up 40 percent of statewide real estate resales last year, up dramatically from 5.4 percent one year earlier. Merced County has perhaps been the hardest hit, with more then 75 percent of all resales in the county in the second quarter coming from foreclosed real estate.
For more information, visit http://www.dataquick.com