For immediate
release
Business editors/real estate writers
Another Drop in California Mortgage Defaults
La
Jolla, CA.——The number of California homes entering the foreclosure process
declined again during fourth quarter 2009 amid signs that the worst may be over
in hard-hit entry-level markets, while slowly spreading to more expensive
neighborhoods. There are mixed signals for 2010: It’s unclear how much of the
drop in mortgage defaults is due to shifting market conditions, and how much is
the result of changing foreclosure policies among lenders and loan servicers, a
real estate information service reported.
A
total of 84,568 Notices of Default (“NODs”) were recorded at county recorder
offices during the October-to-December period. That was down 24.3 percent from
111,689 for the prior quarter, and up 12.4 percent from 75,230 in fourth-quarter
2008, according to San Diego-based MDA DataQuick.
NODs reached an all-time high in first quarter 2009 of 135,431, a number that
was inflated by activity put off from the prior four months. In the second
quarter of last year, NODs totaled 124,562. The low of recent years was in the
third quarter of 2004 at 12,417, when housing market annual appreciation rates
were around 20 percent.
“Clearly, many lenders and servicers have concluded that the traditional
foreclosure process isn’t necessarily the best way to process market distress,
and that losses may be mitigated with so-called short sales or when loan terms
are renegotiated with homeowners,” said John Walsh, DataQuick
president.
While many of the loans that went into default during fourth quarter 2009 were
originated in early 2007, the median origination month for last quarter’s
defaulted loans was July 2006, the same month as during the prior three
quarters. The median origination month during the last quarter of 2008 was June
2006. This means the foreclosure process has moved forward through one month of
bad loans during the past 12 months.
“Mid 2006 was clearly the worst of the ‘loans gone wild’ period and it’s taking
a long time to work through them. We’re also watching foreclosure activity start
to move into more established mid-level and
high-end neighborhoods. Homeowners there were able to make their payments longer
than homeowners in entry-level neighborhoods, but because of the recession and
job losses, that’s changing. Foreclosure activity is a lagging indicator of
distress,” Walsh said.
The
state’s most affordable sub-markets, which represent 25 percent of the state’s
housing stock, accounted for 52.0 percent of all default activity a year ago. In
fourth-quarter 2009 that fell to 34.9 percent.
On
primary mortgages, California homeowners were a median five months behind on
their payments when the lender filed the NOD. The borrowers owed a median
$13,510 on a median $325,818 mortgage.
On
home equity loans and lines of credit in default, borrowers owed a median $3,939
on a median $62,965 credit line. However the amount of the credit line that was
actually in use cannot be determined from public records.
San
Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary
of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors
real estate activity nationwide and provides information to consumers,
educational institutions, public agencies, lending institutions, title companies
and industry analysts. Notices of Default are recorded at county recorders
offices and mark the first step of the formal foreclosure
process.
Although 84,568 default notices were filed last quarter, they involved 82,777
homes because some borrowers were in default on multiple loans (e.g. a primary
mortgage and a line of credit). Multiple default recordings on the same home are
trending down, DataQuick reported.
Mortgages were least likely to go into default in San Francisco, Marin and San
Mateo counties. The probability was highest in Merced, Stanislaus and Riverside
counties.
The
number of Trustees Deeds recorded, which reflects the number of house or condo
units foreclosed on, totaled 51,060 during the fourth quarter. That was up 2.1
percent from 50,013 for the prior quarter, and up 10.6 percent from 46,183 for
fourth-quarter 2008. The all-time peak was 79,511 in third-quarter
2008.
In
the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter
1996. The state’s all-time low was 637 in the second quarter of 2005, MDA
DataQuick reported.
Foreclosure resales continued to decline as a market factor, accounting for 40.7
percent of all California resale activity last quarter. It was 42.7 percent the
prior quarter, and a year ago it was 54.4 percent. It peaked at 57.8 percent in
the first quarter of 2008. Foreclosure resales varied significantly by county
last quarter, from 9.3 percent in San Francisco to 69.5 percent in Merced.
Of
the 328,310 homes foreclosed on statewide in the 18-month period ending last
September, 84.8 percent had been re-sold by the end of 2009. A year prior, the
comparable number was 66.0 percent.
There are 8.5 million houses and condos in California.
The lenders that originated the most loans that went into default last quarter
were Countrywide (5,588), Wells Fargo (3,482) and Washington Mutual (3,460).
Along with Bank of America (1,760) and World Savings (1,869), they were also the
most active lenders in the second half of 2006. Last quarter’s default rate on
loans originated in the second half of 2006 ranged from 1.5 percent for Bank of
America to 13.1 percent for World Savings.
Smaller subprime lenders had far higher default rates for that period: ResMAE
Mortgage was at 74.8 percent, Ownit Mortgage 70.6 percent, Master Financial 69.9
percent, First NLC Financial Services 69.4 percent and Fieldstone Mortgage 65.7
percent. While these and most other subprime lenders are long gone, their loans
were bundled, resold and now live on as “troubled assets”.
Indeed many, if not most, of the loans made in 2006 are owned and/or serviced by
institutions other than those that made the loans. The servicers pursuing the
highest number of defaults last quarter were ReconTrust Co, Quality Loan Service
Corp and Cal-Western Reconveyance, DataQuick reported.
(chart)
Notices of Default (Trustees
Deeds available at www.dqnews.com)
Houses and
condos
County/Region
2008Q4
2009Q4 Yr/Yr%
Los
Angeles
14,410
16,595 15.2%
Orange
4,481
5,555 24.0%
San
Diego
5,543
6,536 17.9%
Riverside
9,151
9,188 0.4%
San
Bernardino
7,437
7,290 -2.0%
Ventura
1,308
1,657 26.7%
Imperial
496
503 1.4%
Socal
42,826
47,324 10.5%
San
Francisco
302
465 54.0%
Alameda
2,363
2,806 18.7%
Contra
Costa
3,135
3,501 11.7%
Santa
Clara
2,101
2,816 34.0%
San
Mateo
651
903 38.7%
Marin
194
305 57.2%
Solano
1,418
1,652 16.5%
Sonoma
809
878 8.5%
Napa
184
268 45.7%
Bay
Area
11,157
13,594 21.8%
Santa
Cruz
217
346 59.4%
Santa
Barbara
437
589 34.8%
San Luis
Obispo
309
436 41.1%
Monterey
806
874 8.4%
Coast
1,769
2,245 26.9%
Sacramento
4,186
4,742 13.3%
San
Joaquin
2,546
2,513 -1.3%
Placer
892
1,118 25.3%
Kern
2,566
2,602 1.4%
Fresno
2,004
2,220 10.8%
Madera
425
394 -7.3%
Merced
1,006
876 -12.9%
Tulare
896
1,037 15.7%
Yolo
292
373 27.7%
El
Dorado
311
475 52.7%
Stanislaus
1,978
1,908 -3.5%
Kings
155
201 29.7%
San
Benito
142
155 9.2%
Yuba
236
213 -9.7%
Colusa
53
50 -5.7%
Sutter
200
228 14.0%
Central Valley
17,888
19,105
6.8%
Mountains*
463
816 76.2%
Northern
Calif*
1,127
1,484 31.7%
Statewide*
75,230
84,568 12.4%
*Includes other
counties
(Trustees Deeds available at
www.dqnews.com)
-30-
Countywide Trustees Deed
counts can be found at dqnews.com
Media Inquiries: Andrew
LePage (916) 456-7157 or John Karevoll (909) 867-9534