January brought an unexpected, across the board drop, in the total Notices of Default, Notices of Trustee Sale, and sales at auction in California, not only from the prior month, but year over year as well, according to ForeclosureRadar’s California Foreclosure Report released Thursday. Even after accounting for the fact that January had two fewer days than December, only properties sold at auction saw a slight increase of 3.4 percent. “Analyzing the data at the lender level, it appears these drops can be primarily attributed to the significant changes taking place among the country’s major lending institutions,” said the report. Wells Fargo (WFC), with its recent acquisition of Wachovia, saw a drop in Notice of Default filings of 46 percent, while JP Morgan (JPM), which acquired Washington Mutual (WM), saw a drop of 49 percent. Bank of America Corp. (BAC), which earlier acquired Countrywide, saw a significant 281 percent increase in filings, though still below the levels Countrywide experienced in the second quarter of 2008. “Given the significant integration issues faced by most major lenders today, it would be irresponsible to draw any conclusions about market direction from current foreclosure numbers,” the report concluded. But as for January, figures were clearly on the downfall. Notices of Default decreased 11.8 percent over Notices recorded for December, to a total of 36,138 default filings, a 10.6 percent decrease from January 2008. Accounting for the fact that January had two fewer recording days than December, the average daily decrease was about 3 percent. The average daily volume for Notices of Trustee Sale filed from December to January dropped 8.3 percent. The 22,328 Notice of Trustee Sale filings for January represent a 4.5 percent decrease from Notices of Trustee Sale recorded in January 2008. Properties taken to sale at auction also decreased, falling 6 percent from December to January; a 23.1 percent decline from the same period last year, and a 46.8 percent decrease from peak volumes seen in July 2008. The 15,314 properties sold at auction represent $6.8 million in loan value. Slightly more than 94 percent of these properties were sold back to the bank at auction. The number of properties sold to third parties at auction, however, continues to rise – up 6.6 percent from December 2008 and more than doubling from January of last year. Lender discounts at auctions statewide averaged a whopping 41.4 percent from the outstanding loan balance for January, a significant increase from the 16.1 percent average discount a year earlier. Overall, lenders discounted their opening bid on 92 percent of properties taken to sale, making prices at auction reasonable for third party buyers, said ForeclosureRadar. In Orange County, third parties purchased foreclosures with loan balances totaling $67.5 million at auction, representing 14 percent of the total properties sold in California. The average discount from the loan balance to the opening bid in Orange County was 34.1 percent. San Francisco County, with one of the lowest average discounts in the state of just 24.6 percent, still saw 9 percent of auction properties sold to third parties. Providing insight into the coming months, Marin and Sonoma Counties have the highest numbers of listed preforeclosures at 15.4 and 14.1 percent respectively. “These figures are disappointingly low given the significant advantages to both homeowners and lenders of completing a short-sale when compared to allowing the home to be sold at foreclosure auction,” said the report. “Foreclosure is currently the only functioning mechanism for clearing the negative equity that is otherwise leaving homeowners in a prison of debt,” says Sean O’Toole, founder of ForeclosureRadar. “While it is our hope that better mechanisms for clearing unsustainable mortgage debt are ultimately identified, we are delighted to see continued improvements in the efficiency of California’s foreclosure marketplace as evidenced by the increasing number of sales to third parties at auction.” Write to Kelly Curran at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
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