January 22nd, 2014 8:14 AM by Jackie A. Graves, President
Foreclosure starts in California during the fourth quarter dipped to an eight year low, returning to levels last seen before the beginning of the Great Recession and the housing crisis. DataQuick says that Notices of Default (NOD), the first step in the foreclosure process, dropped 10.8 percent from the third to the fourth quarter of 2013, from 20,314 to 18,120. The fourth quarter total was 52.6 percent below the total of 38,212 in the fourth quarter of 2012. Although 18,120 default notices were filed last quarter, they involved 17,773 homes because some borrowers were in default on multiple loans.
DataQuick said the last time so few NODs were filed in a given quarter was the fourth quarter of 2005 when 15,337 were recorded. NODs peaked in the first quarter of 2009 at 135,431.
"Some of this decline in foreclosure starts stems from the use of various foreclosure prevention efforts - short sales, loan modifications and the ability of some underwater homeowners to refinance. But most of the drop is because of the improving economy and the increase in home values. Fewer people are behind on their mortgage payments. And of those who do get into trouble, many, if not most, can sell and pay off what they owe. Also, those who are underwater and close to slipping into foreclosure are far less likely to give up their homes now that appreciation has returned to the housing market. There's a strong incentive to hang on," said John Walsh, DataQuick president.
Completed foreclosures totaled 8,205 in the fourth quarter, up 2.2 percent from the 8,030 recorded in the third quarter. The third and fourth quarters recorded the lowest and second lowest numbers of completed foreclosures respectively in the last seven years. Foreclosures in the fourth quarter were down 61.2 percent from the fourth-quarter 2012. The all-time peak was 79,511 foreclosures in third-quarter 2008.
Both NODs and foreclosures remained most concentrated in the more affordable communities. Zip codes with 2013 median sale prices below $200,000 collectively saw 2.0 homes foreclosed on in fourth-quarter 2013 for every 1,000 homes within their borders, and NODs filed on every 3.1 homes. That compares with 0.8 foreclosures and 2.0 NODs per 1,000 homes for zips with $200,000-to-$800,000 medians, and 0.2 foreclosures and 0.7 per 1,000 homes for the group of zips with $800,000-plus medians.
Lenders are still working through loans originated from 2005 to 2007. DataQuick said the median origination quarter for loans on which NODs were filed is the third quarter of 2006. This has been the case for more than four years
Homeowners were a median of 8.7 months behind in payments on senior liens for which NODs were filed during the quarter and owned a median of $20,066 or a mortgage with a median size of $302,000. NODs were filed on home equity loans and lines of credit with a median past due of $5,491 on a median credit line of $68,770. No information was available on the outstanding balances on those credit lines.On average it took lenders 9.0 months from the NOD until the foreclosure process was completed in the fourth quarter. This timeline was virtually unchanged from the prior quarter and one year earlier. The most active "beneficiaries" in the formal foreclosure process last quarter were Wells Fargo (3,287), JP Morgan Chase (1,182) and Nationstar (1,096).
Sales of homes that were foreclosed within the previous 12 months accounted for 6.7 percent of all Californiaresale activity last quarter and short sales for 12.5 percent. That was down from 7.7 percent and 13.5 percent respectively in the third quarter and 16.6 percent and 25.8 percent a year earlier. An estimated 40.0 percent of foreclosed properties bought at auction during the quarter were bought by investors or others that don't appear to be lender or government entities. That was down from an estimated 48.0 percent the previous quarter and 41.8 percent a year earlier.
The median price paid for a California home was $364,000 in the fourth quarter, up 22.1 percent from $298,000 a year earlier. The median has risen more than 20 percent on a year-over-year basis for the last five quarters. It peaked in second-quarter 2007 at $485,500 and hit bottom at $235,000 in second-quarter 2009, DataQuick reported.