Foreclosures Drop in California, As Lenders Boost Workout Attempts
Foreclosure sales in California dropped a sharp 39.1 percent between September and October, according to a report released by ForeclosureRadar late Wednesday. The drop, however, has largely been ascribed to recent legislation in the state that is effectively stalling most foreclosures amid new borrower notice requirements. Notice of Default filings increased slightly in October, up 2.8 percent from September, to a total of 16,810 filings, according to the report. Year over year, hoever, NOD filings are down 42.3 percent, according to ForeclosureRadar's statistics. Notices of Trustee Sale, which schedule the auction date and time, increased by 32.9 percent in October, to 25,408 filings, while properties taken to sale at auction declined by 39.1 percent from September during the month. (Properties begin the foreclosure process with an Notice of Default; the Notice of Trustee Sale formalizes an auction on courthouse steps, while the sale completes the foreclosure process. All three steps comprise data points in the default process). "It would be a mistake to conclude declines in foreclosure activity indicate an end to the foreclosure crisis," said ForeclosureRadar CEO Sean O'Toole, echoing comments made by many industry observers in recent weeks amid falling foreclosure statistics within the state. But O'Toole also suggested that lenders themselves may be slowing the foreclosure roll within the state, as they look to modify more loans. While CA State Senate Bill 1137 -- which added 45 days to the borrower notice period for defaults -- clearly has impacted foreclosure sales in California, O'Toole said the significant decline in sales should really be more accurately attributed to servicers' own voluntary efforts. "There were nearly 60,000 properties scheduled for sale at the beginning of October over which the law had no affect [sic]," he said in a press statement. "The drop in foreclosure sales, therefore can only be reasonably attributed to changes introduced by the lenders themselves." Statewide cancellations -- where a home was taken out of foreclosure -- increased by 78 percent in October, meaning that nearly 20 percent of foreclosure sales were called off during October. Bank of America (BAC) unit Countrywide lead the way, with an astounding 460 percent increase in auction cancellations from the prior month; other lenders had similar drops in foreclosure sales, too, although ForeclosureRader said those were often due to postponements, rather than outright cancelleation. Statewide, the percentage of foreclosure sales that had postponed at least once increased from 36 percent of sales to 58 percent of sales, with the average length of postponement increasing from 24 days to 42 days. “While lenders now appear to be embracing the concept of foreclosure moratoriums and loan modifications, neither typically address the core issue of negative equity," O'Toole said. "Most loan modifications focus on lowering payments to affordable levels by using unsustainably low interest rates, not unlike the ‘teaser rates’ that many have blamed for the current crisis.” In other words, lenders appear to be kicking the default can a little further down the road. Lenders took back 94 percent of the properties taken to auction, with a combined loan value of $9.19 billion during the month, O'Toole said. Third party purchases declined 24 percent from the prior month, but increased 25 percent (as a percentage of all foreclosure sales), due to the decline in sales activity. For more information, visit http://www.foreclosureradar.com. Write to Kelly Curran at firstname.lastname@example.org.