Forewarned is forearmed, California

The problem with the housing recovery – and the lingering foreclosure issue – is everyone wants to do something, but not everyone is in agreement. What does the mortgage market need to step bravely into the future and resolve existing housing issues going forward?

States have launched sweeping legislative reforms tied to housing, while federal housing policy is continuing to extend its reach far away from Washington D.C.

California may in fact become an example of what happens when everyone gets what they wished for, but never receives what they actually wanted, which for most market players is price stability and clarity on the exact direction of home prices and the reasons behind dramatic inclines and declines in valuations.

Prices are going up in California, that much is known, but don’t applaud too soon.

HousingWire contributors and reporters began warning about the effects of California AG Kamala Harris’ Homeowner Bill of Rights several months ago.

The idea pushed forward by servicers and foreclosure attorneys back in October was that servicers and lenders would end up choosing judicial foreclosure as the only alternative due to unforeseen litigation risk and court costs stemming from the Bill of Rights.

It now appears the idea of unintended consequences is catching on, and it’s happening at a time when the state continues to push through with stories of home price appreciation and market recovery.

In today’s Rob Chrisman report, he cites a new Barclays publication, which says “recent loan-level data suggest that foreclosure-to-REO roll rates and short sales have dropped sharply since the start of the year” in guess where — California. The significance? Both factors impact inventory at some level. 

According to Chrisman, this is tied to the implementation of the California Homeowner Bill of Rights, which took effect in January.

This has led to careful consideration on when and how servicers carry out foreclosure sales in the state. Not only will it extend foreclosure timelines, according to Barclays and Chrisman, judicial foreclosures are likely to become more common – a forecast in line with prior HW reports (don’t miss a huge feature on this in the May issue of HousingWire magazine).

But perhaps what is even more significant is how these delays effectuate home prices. As inventory lingers on the sidelines it creates an imbalance in prices. The Homeowner Bill of Rights was pitched to Californians as a way to mitigate past dangers, but unforeseen dangers linger if unseen market influences continue to impact real estate fundamentals. 

But as with the housing bubble, only time will tell.

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