Estimate: 1,300 foreclosures every business day in California

Banks and lenders have now foreclosed on $100 billion worth of California homes over the past two years, and are foreclosing at the rate of 1,300 houses every business day, according to a new report from ForeclosureRadar.com.

The report, covering foreclosure activity in California in July, notes that new mortgage defaults are declining, but foreclosures are continuing to rise sharply.  "It is clear that far fewer homeowners are finding a way out of foreclosure," the company reports.

The pace of foreclosures in California -- 1,300 every business day -- has more than tripled from the year-ago rate of 415 per day, ForeclosureRadar estimates.

Overall, the level of foreclosures in the state increased 22.5% from June to July, ForeclosureRadar reported, while the level of defaults dropped by 4.6% in the same time period.  The vast majority of foreclosed homes are taken over by banks -- 96.6% in July, the company reported, although it noted that banks are increasingly offering discounts to investors in hopes of avoiding taking possession of foreclosed houses in the first place.

"Although the declines in Notices of Defaults seem promising, much of this can be explained by the actions of just one lender," said Sean O'Toole, founder of ForeclosureRadar. "Ninety-one percent of the decline in Notices of Default since April can be attributed to Countrywide Financial. Unfortunately, this is more likely due to the challenges of integrating two companies the size of Countrywide Financial and Bank of America, than it is a fundamental shift in foreclosure activity."

The federal housing rescue bill sets aside $4 billion for local governments to purchase foreclosed homes, but O'Toole says that amount is so small relative to the overall pool of foreclosed houses that it will have little economic impact. "$4 billion is kind of a meaningless sum," O'Toole told CNN Money. "It can't possibly make a difference. You've brought a pistol to a nuclear war."

Click below to read the entire news release from ForeclosureRadar on California foreclosures in July.

CALIFORNIA

FORECLOSURE SALES JUMP 22.5 PERCENT SInce June

Lenders take a record $12.55 Billion in loans to foreclosure auction

 

Discovery Bay, CA, August12, 2008 – ForeclosureRadar (www.foreclosureradar.com), the only website that tracks every California foreclosure with daily auction updates; today issued its California Foreclosure Report for July 2007. Sales at foreclosure auction jumped dramatically in July, increasing by more than $2 Billion in combined loan value to $12.55 Billion. This represents more than 1,300 properties being taken to auction per business day, up from 415 per day one year ago. Notices of Default declined for the third straight month. The total number of properties that are still actively scheduled for auction increased to 64,598 at the end of July, up from 59,973 at the end of June, and 53,793 at the end of May. This indicates that further increases in foreclosure sales are still likely near term, despite the declining number of defaults.

 

High-level findings include:

• Notices of Default declined by 4.6 percent, to a total of 40,219 filings representing $17.71 Billion in loans.
• Notices of Trustee Sale, which are typically recorded 105 days after the Notice of Default, and which set the auction date and time, increased 9.8% to 39,010 filings in July. Looking at this number in comparison to Notices of Default, it is clear that far fewer homeowners are finding a way out of foreclosure. At 97 percent of defaults, July’s Notices of Trustee Sale filings are nearly double the 50 percent that were more typical as recently as February.
• Sales increased to a total of 28,795 properties with a combined loan balance of $12.55 Billion. Of those, 27,817 received no bid higher than the lender’s opening bid and became bank owned (REO).
• Sales to 3^rd parties at auction continued to increase, and were up 28.7 percent from the prior month. 3^rd parties purchased loans with a combined loan balance of $481 Million, at an average discount of 39 percent to the loan balance. Despite the increase in sales to 3^rd parties, lenders continue to take back 96.6 percent of all properties that went to auction, and have now taken back a total of $100 Billion in loans since January 2007.

 

“Although the declines in Notices of Defaults seem promising, much of this can be explained by the actions of just one lender,” said Sean O'Toole, founder of ForeclosureRadar. “Ninety-one percent of the decline in Notices of Default since April can be attributed to Countrywide Financial. Unfortunately, this is more likely due to the challenges of integrating two companies the size of Countrywide Financial and Bank of America, than it is a fundamental shift in foreclosure activity.”

Average discounts offered by lenders from the outstanding loan balance at foreclosure auction reached 45 percent in Merced and San Joaquin counties. Statewide discounts increased to 33 percent on average. San Francisco continued to see the smallest discounts at 18 percent on average.

 Of the 243,444 Notices of Trustee Sale filed in the last year that have concluded the foreclosure process, 85 percent resulted in the loss of the property at trustee sale. Only 15 percent averted foreclosure; and, of those, 30 percent have since had a new foreclosure notice filed.

--Peter Viles
Photo Credit: Getty Images

Comments

[MarkW]

The question it seems that everyone wants to know is:

Where are these foreclosed homes?

They don't seem to be in the MLS. Does anyone know?

[anon]

Piggington.com suggests that another reason for the slow-down in NODs might be the new CA law requiring 30 additional days between missed payment and NOD, which took effect July 8. The suggestion is that after this law has been in effect for 30 days or so (i.e., right about now), the rate of NODs will pick back up to match the rate of NOTs. So, August data should be informative.

[Cal]

While I don't have a problem with the reasoning behind why NOD have peaked recently (Countrywide), I'm not convinced that this is temporary as Sean believes but believe it could represent a shift in strategy by BofA.

BofA asked for and wrote parts of the FHA writedown bill after all, they now have it. It could be they are planning on using it in large quantities.

We will know more in the coming months if this is a blip or a sea of change. I don't know one way or the other but think that you have to remain open to the possibility.

[TakeFive]

MarkW wrote:

"The question it seems that everyone wants to know is: Where are these foreclosed homes?"

Here's my theory:

Ever go to a business liquidation aution? Stuff gets stacked onto pallets, about 6 feet high and tagged with a lot number. Bids are then made on these lots.

Perhaps these homes will be bundled into lots. After all, the mortgages were.

[Rational Renter]

Yes, the question is why these numbers don't turn up in the MLS inventory. There is evidently a HUGE shadow inventory.

[Uncle Billy Does Not Like Change]

Cal, expand on that? What would a sea change entail?

Do you mean that instead of one-offs, they will be foreclosing on large quantities and selling them off in large quantities?

[Joseph The Real Estate Guy...]

Looks like the bottom might come till 2012!

California's Real Estate Market will never be the same....

[Rational Renter]

Regarding that shadow inventory...

This site (http://tinyurl.com/6efy4u) delves into it. Los Angeles has 62,379 listings on the MLS. Guess how many foreclosures are out there not listed? An ADDITIONAL 88,843. That is a mind-boggling number.

You know that Disneyland ride, the Hollywood Tower of Terror? Well I think we're about to experience something like that free fall.

[Cal]

UB:"Do you mean that instead of one-offs, they will be foreclosing on large quantities and selling them off in large quantities?"

No, I think they might do loan mods en masse and be done with it.

Think about it, if the situation promises to be deteriorating for a long time the sooner they write down the loan values the better off they would be. Then the FHA shoulders the rest of the risk (assuming they are trying for the FHA insurance according to the housing bill). They wouldn't necessarily do that for the whole servicing portfolio (since they don't have that kind of authority) but I could see them doing it for the large portfolio of loans Countrywide has on the books. They'd get 65-70% on the dollar (averaging bubble zone and non-bubble zone loans) and move on.

I'm just suggesting a possible alternative, CFC + BofA definitely has integration issues (those mainly being that BofA is steadily firing CFC peeps on a regular basis) that could be slowing down NOD filings... But that doesn't mean that BofA management has the same strategy that CFC had regarding loss mitigation. BofA wanted the FHA bill so I'm wondering if that could coincide with a reduction in filings. This is just conversation fodder, I don't know, just laying out alternative scenarios.

[Property in Brazil]

I think this is a great change and a great rise there in the foreclosure of homes in California. And since June they have gone very high with the clear jump of 22.5 percent. I think the foreclosure sellers are having a good time there in the middle and hope they will continue this trend for the next half of the year.

[Donald S]

To Mark W,

All thses homes are either listed a short sales in the MLS or put on auction blocks. The auctions I've seen are strickly for invetors as they could have leins, back taxes, ect. Combined with the fact you have no idea of the condition and need 100% cash at auction end, I'm not sure it's for the avaerage home owner.

[Steve Wimer]

Why list a house with the MLS if it won't sell?

[Steve]

Nirvana-for the first time in three generations LA real estate is becoming affordable. Thank you politiicians the luster of LA is over with and there is now a mass exoudus of miiddle class families who want out. You know the kind fo people who you want to stay who are honest, pay taxes and with an education. LA will be left with the poor and the rich and then hell breaks loose. Way to destroy what was paradise, in the interim I am increasing my rents in CO by 20% with all the calls from Cali.

[LeftLA]

Uncle Billy: This is already happening in parts of the country. Liquidators like Ocwen are sending out spreadsheets of REO listings asking for package bids. I know of one group in a midwestern city who purchased a large bundle of residential properties at 10 percent of market value.

And there are several large investor pools (tens or hundreds of millions of dollars in cash) who will jump in within the next year to start buying in bulk at pennies on the dollar.

[Doug i nTronto]

1300 foreclosures per day. That's 1 personal financial disaster every 66.5 seconds.

[jag]

MarkW, since banks have already taken huge losses on the foreclosed properties, I wouldn't be surprised if they are to cheap to list these properties on the MLS. However, if you really want to know where the foreclosed properties are check out the ForeclosureRadar.com website. I believe there's a membership fee.

[TC]

MLS has turned into a joke anyway:

"SHORT SALE, price nor guaranteed."

Why triple this farce?? Especially when it's 3 homes in a row on the same block in some shiney new California dream development.

Maybe i should start the MBL?? Multiple buyer listing?? We can then put the amount of money we are willing to pay for your foreclosure nightmare homes and our requirements of the home. Then the banks can dump them on us when they are tired of owning tons of empty boxes. i will try to keep the integrity though by not putting anything in the listings like:

"Amount I am willing to pay not guaranteed".

[Cassiopoea]

Somewhat off the subject, but too cool not to mention...

Redfin now has "Inventory and Pricing Trends" on their site. There are graphs for number of houses listed, listing price, sales price, number of price reductions, and even how many homes are foreclosures in an area.

http://www.redfin.com/city/17882/CA/Santa-Monica

Very interesting data.

[Dave Perry]

Why won't the banks help us out? I think this new bill will offer some relief, but the speed of the relief will depend on some other factors such as the price of oil. If oil stays low it can keeps inflation from rising. If that happend, then we will have a much better channce. I also feel that this bill will only help people that are less than 60 K upside down. From what I have been seeing most banks are not interested in losing more than 60 K, so they do prefer to foreclose and then buy the house back themself. For more related stories you can visit my blog. I am from South Florida and I have a failed investment that I am stuggling to hang on too. I do not want to ruin my credit yet.

[jason]

uncle billy, no i think cal means bofa may rework the loans in large quantities.

[John]

Cool. The news just keeps getting better every day. One of these days, regular people might actually be able to afford a home in California. Imagine that! I think, though, that the bottom is nowhere in sight. How about another 70% drop?

[E]

LMAO at Dave Perry.

A Florida SPECUVESTOR (probably house/condo flipper) who thinks that HE should get help from the government.

Just read his blog, he feels he should be compensated for the loss on his "investment".

Pathetic....makes me want to throw up....blames everybody else but himself.

[TakeFive]

TC wrote:

"Maybe i should start the MBL?? Multiple buyer listing?? We can then put the amount of money we are willing to pay..."

Sounds like you're proposing listing houses on Priceline.com. Sounds reasonable. And I bet captian Kirk is still available for the commercials.

[Laker]

LeftLA,
Have you heard about Saxon Mortgage buying REO houses in bulk?
I have a case where Central mortgage has sold many REO houses in bulk to Saxon bank. Many of those had the previous owners still living in and fighting the eviction process....

[buckborden]

Let the landscape change to what it was 15 years ago. The press continues to live under the delusion that there's something wrong with a return to sane housing prices. It's sure fun to watch from the sidelines as those who played with fire get burned. I'm definitely looking forward to the fire sale in homes, and agree that prices still need to fall 75% (and probably will). I'll just wait patiently and save even more money for my huge down payment.