The number of Napa County homes in foreclosure dropped during the fourth quarter of 2010, the result of shifting market conditions as well as evolving lender and mortgage servicer policies, a real estate information service reported.
At the end of the fourth quarter of 2010, the number of Napa County homes that received a Notice of Default, the first step in the foreclosure process, declined by 15.7 percent. The number of county homes lost to foreclosure declined 31.9 percent in that same period, according to DataQuick Information Systems in San Diego.
Statewide, the number of California homes going into foreclosure dropped again during the fourth quarter to its lowest level in more than three years.
A total of 69,799 were recorded at California county recorders offices during the October-to-December period. That was down 16.2 percent from 83,261 for the prior quarter, and down 17.5 percent from 84,568 in fourth quarter 2009, according to DataQuick.
Last quarter’s activity was the lowest since 53,943 default notices were recorded statewide in the second quarter of 2007. It was just over half the record 135,431 default notices recorded in the first quarter of 2009.
“We don’t know how much of the decline is due to less household financial distress, and how much is due to shifts in lender and servicer foreclosure policies,” DataQuick President John Walsh said. “The level of default activity would certainly be higher if it weren’t for alternative strategies such as short sales, or even lengthening grace periods.
“The institutions that hold these loans in their portfolios will do whatever it takes to lessen their losses, including waiting,” he said. “An additional factor is all the turbulence when it comes to the formalities of the foreclosure process.”
While most of the loans that went into default last quarter were originated during the 2005-2007 period, the median origination quarter for defaulted loans remained third-quarter 2006. That has been the case for over a year, indicating that weak underwriting standards peaked then.
Most of the loans made in 2006 are owned and/or serviced by institutions other than those that made the loans.
The most active “beneficiaries” in the formal foreclosure process last quarter were Bank of America, Wells Fargo, Mortgage Electronic Registration Systems, also called MERS, and JP Morgan Chase.
The “servicers” (or the trustees in the formal foreclosure process) that pursued the highest number of defaults last quarter were ReconTrust Co (mostly for Bank of America and MERS), Quality Loan Service Corp (Bank of America and JP Morgan Chase), Cal-Western Reconveyance (Wells Fargo) and NDEx West (Wells Fargo).
California’s priciest ZIP codes collectively saw mortgage defaults buck the market-wide trend and rise slightly quarter-to-quarter, while their defaults fell less on a year-over-year basis than in the overall market. The state’s 82 ZIP codes with median sale prices of $800,000 or more in 2010 logged a 2 percent quarter-to-quarter increase in default notices and a 9.3 percent year-over-year decline.
At the other end of the price spectrum, ZIP codes with 2010 medians of $200,000 or less saw fourth-quarter defaults drop 22.2 percent from the prior quarter and drop 19.5 percent from a year ago.
But the concentration of defaults remains much higher in lower-cost areas: Last quarter, ZIP codes with medians of $200,000 or less collectively saw 11.3 default notices filed per 1,000 homes. That compares with just 2.8 default notices filed per 1,000 homes in ZIP codes with $800,000-plus medians, and 8.0 filed per 1,000 homes for all ZIP codes statewide.
On primary mortgages, California homeowners were a median six months behind on their payments when the lender filed the Notice of Default. The borrowers owed a median $16,368 on a median $325,775 mortgage.
On home equity loans and lines of credit in default, borrowers owed a median $3,759 on a median $66,653 credit line. However, the amount of the credit line that was actually in use cannot be determined from public records.
DataQuick Information Systems monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Default notices are recorded at county recorders’ offices and mark the first step of the formal foreclosure process.
Although 69,799 default notices were filed last quarter, they involved 68,338 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit).
Mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties. The probability was highest in Madera, San Joaquin and Stanislaus counties. Those patterns are consistent with the historical norm.
More than half of the homes statewide that received a default notice in a recent 18-month period have since been foreclosed on or sold (e.g. short sales).
Of the homes that received default notices between January 2009 and June 2010, 39 percent have been foreclosed on and about 13 percent avoided foreclosure but were sold. The status of the remaining 48 percent of those default notice recipients isn’t clear, but would include those attempting short sales (selling for less than what the property is worth) or who brought their loan payments current or got loan modifications, and those whose foreclosures are still in process.
At this point one year ago, looking back at the January 2008-through-June 2009 period, a higher percentage — 46 percent — of the California homes that got default notices had been foreclosed on, and a lower percentage — 9 percent — had avoided foreclosure and been sold on the open market.
Trustees Deeds (TDs) recorded, or the actual loss of a home to foreclosure, totaled 35,431 in California during the fourth quarter. That was down 21.9 percent from 45,377 for the prior quarter, and down 30.6 percent from 51,060 for fourth-quarter 2009. Last quarter’s total was the lowest since 31,676 TDs were recorded during fourth-quarter 2007. The all-time peak was 79,511 in third-quarter 2008.