Foreclosure backlog keeps building
July stats from ForeclosureRadar show that the backlog of California homes in default, but not yet repossessed, keeps growing.
At some point, many of these properties will be repossessed and put back on the market. Some may be kept by the current owners through loan modifications, but that hasn't happened much so far. Until then, they remain clogging the system as "shadow inventory," most likely to be foreclosed and sold again.
Key California data points:
-- Default notices, which are sent when a borrower has missed several payments, were up 12% in July compared with a year earlier. Notices of default are the first stage of foreclosure.
-- Auction notices, in which an auction date is set, were about even with last year's level. This is the second step in foreclosure. After a default notice is sent, and even after an auction date is set, the borrower and lender can reach a loan modification agreement or sell the property to get out of foreclosure.
-- Repossessions were down 40% from a year earlier, even though default notices were up and auction notices were flat. Lenders are delaying the final step in foreclosure. This is what's creating the growing backlog of distressed properties.
-- Foreclosures scheduled for sale -- these are the properties awaiting auction -- increased 93% from a year earlier.
The jump in foreclosures scheduled for sale reflects the widespread practice of lenders stalling the final sale of distressed properties. There are more than 124,000 of these properties in California awaiting auction.
â€œMore homeowners are now sitting at the brink of foreclosure, just days away from the next scheduled auction date, then ever before, yet we simply arenâ€™t seeing the wave of foreclosures many predicted," said ForeclosureRadar CEO Sean O'Toole.
ForeclosureRadar is an online seller of California default data.
More repossessions are coming, however, due to the degree to which so many in California are underwater on their mortgages. The average California home in foreclosure has a loan balance of $425,000 but an estimated value of $237,000, ForeclosureRadar says.
-- Peter Y. Hong