California homes entering the foreclosure process dropped again during fourth quarter 2009 showing signs that the worst may be over in hard-hit entry-level markets, while foreclosures are slowly spreading to more expensive neighborhoods.
Notices of Default (“NODs”) were down 24.3 percent from the third quarter and up 12.4 percent from the fourth-quarter 2008. NODs reached an all-time high in first-quarter 2009. The low of recent years was in the third quarter of 2004 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.
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 foreclosed homes (Trustees Deeds recorded) was up 2.1 percent from the third quarter and up 10.6 percent from the fourth-quarter 2008. The all-time peak was in third-quarter 2008. In the last real estate cycle, Trustees Deeds peaked in th third-quarter 1996. The state’s all-time low was in the second quarter of 2005.
The lenders that originated the most loans that went into default last quarter were Countrywide, Wells Fargo and Washington Mutual. Along with Bank of America and World Savings, 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, Ownit Mortgage, Master Financial, First NLC Financial Services and Fieldstone Mortgage. 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.
What’s in store for 2010? Will foreclosures drop or increase? How much of the drop in defaults is due to shifting market conditions/ How much is the result of changing foreclosure policies among lenders and loan servicers? Why are lenders not listing all their REO foreclosures for sale (phantom/shadow)? How are investors finding those “shadow/phantom” REO properties and getting their unsolicatated offers accepted? How can you find money for your deals when you have none?
If you are searching for answers to those questions, I can help you. Make sure you are on my Free New Foreclosure Investor Webinar “Find Wholesale Deals No One Else Knows About!” this Wednesday, February 3rd, 6pm Pacific. Details and Register Here. Talk to you Wednesday…
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