California Foreclosure Prevention Act fails to slow filings
Discovery Bay, CA, August 11, 2009 - ForeclosureRadar, the only website that tracks every California foreclosure with daily auction updates; today issued its California Foreclosure Report for July 2009. For the third consecutive month, foreclosure sales jumped significantly as lenders come off the moratorium. Once again, foreclosure stats were mixed, with Notice of Default filings flat, Notice of Trustee Sale filings rising by 31.6 percent and foreclosure sales dropping 22.7 percent. The number of properties scheduled for foreclosure sale - new Notices of Trustee Sale minus those sales that have cancelled or sold - rose to a record level of 124,874, nearly double the levels reached during the foreclosure peak last year.
High-level findings for July 2009 include:
- Filings of new Notices of Default were little changed from June at 44,996 filings, a 1.5 percent decrease. Year-over-year filings rose by 11.9 percent from July 2008.
- Notice of Trustee Sale filings bounced back after dropping in June to 39,294; a 31.6 percent increase over the prior month, and a 0.7 percent increase over the prior year. The California Foreclosure Prevention Act, which adds 90 days prior to the filing of the Notice of Trustee Sale for lenders that do not have a comprehensive loan modification plan in place, had only a fleeting impact last month; with Notice of Trustee Sale filings hitting their second highest level on record in July, just two weeks after the law took affect.
- After increasing for 3 consecutive months, foreclosure auction sales dropped by 22.7 percent to a total of 17,239, with a combined loan value of $8.08 Billion dollars. Year-over-year sales dropped a substantial 40.1 percent, with July 2008 having the highest level of foreclosure sales on record at 28,795. Opening bids set by lenders were an average of 39.1 percent lower than the loan balance, with 45.0 percent of sales discounted by 50.0 percent or more.
- Sales to third party bidders were flat from June, with 2,683 foreclosures sold to investors, or in increasingly rare instances, junior lenders. As a percentage of total sales, sales to third parties continued to increase; though lenders still took back 84.4 percent of foreclosures at auction, representing 14,555 loans, with a total of $6.93 Billion dollars in loan value.
- Foreclosures scheduled for sale rose to 124,874, a 10.4 percent increase from the prior month, and a 93.3 percent increase year-over-year from July 2008. The year-over-year increase is significant given that foreclosure sales in July 2008 set a record that has not again been reached. The increase appears to be primarily due to the fact that lenders are willingly postponing foreclosure sales.
- The new "Home Affordable" loan modification plans now include a 3-month trial. It is our understanding that foreclosures are not cancelled until the completion of this trial period. As such, we believe monitoring the cancellation of scheduled foreclosures should provide some insight into the effectiveness of this program, as successful trials should result in cancelled foreclosures. We had a record number of cancellations in July at 10,789, a 24.8 percent increase over the prior month and an 86.3 percent increase year-over-year. It should be noted, however, that as a percentage of the foreclosures actively scheduled for sale, there was little change from prior months. It appears that the significant increase is primarily due to the high number of foreclosures that are scheduled for sale, but postponing rather than selling.
"Despite the failure of the California Foreclosure Prevention Act to slow Notice of Trustee Sale filings it is clear that lenders and servicers are delaying foreclosure" says Sean O'Toole, founder and CEO of ForeclosureRadar. "More homeowners are now sitting at the brink of foreclosure, just days away from the next scheduled auction date, then ever before, yet we simply aren't seeing the wave of foreclosures many predicted."
Political pressure, financial incentives and the postponement of sales awaiting the completion of loan modification trial periods are likely reasons for the delays. The vast majority of foreclosures, 72 percent, are postponing either due to lenders request, or mutual agreement between the lender and borrower. Only 10 percent are being postponed due to bankruptcy. With few exceptions the remainder have not yet been postponed and are scheduled for their first sale date.
The average California foreclosure has a total loan balance of $425,134 on a home that is now worth $236,739. While negative equity is a prerequisite for the vast majority of foreclosures in California, the degree of negative equity varies a great deal by location. Foreclosures in Santa Cruz County had loan balances just 110 percent of the current estimated value, while Foreclosures in Merced County had loan balances an average 283 percent higher than the estimated value. The Bay Area counties of Santa Cruz, San Francisco, Marin, San Mateo were among the least underwater. Inland counties including Merced, San Joaquin, Stanislaus, Solono, Sacramento, San Bernardino, and Riverside were among the most underwater.