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California Foreclosure Starts Continue to Decline

October 17, 2014 - La Jolla, CA.--Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years, the result of a recovering real estate market and the dwindling pool of toxic home loans made in 2006 and 2007, Irvine-based CoreLogic DataQuick reported. 

A total of 16,833 Notices of Default (NoDs) were recorded at county recorders offices during the July-through-September period. That was down 3.9 percent from 17,524 for the prior quarter, and down 17.1 percent from 20,314 in third-quarter 2013, according to CoreLogic DataQuick data. 

Last quarter's NoD tally was the lowest since fourth-quarter 2005, when 15,337 NoDs were recorded. NoDs peaked in first-quarter 2009 at 135,431, while the low was 12,417 NoDs in third-quarter 2004. The NoD statistics go back to 1992. 

A Notice of Default is recorded at a county recorder's office and marks the first step of the formal foreclosure process. 

"This home repo pipeline isn't exactly drying up, but it sure is diminishing. Its negative effect on the overall market is only a fraction of what it was several years ago, and is really only still noticeable in some pockets of the hardest-hit markets of the Inland Empire and Central Valley," said John Karevoll, a CoreLogic DataQuick analyst. 

To some extent the level of NoD filings in recent quarters probably reflects the rate at which servicers are able to process paperwork. The 20,314 NoDs filed in third-quarter 2013 were followed by 18,120 the following quarter and then 19,215 in 2014Q1; 17,524 in 2014Q2; and 16,833 last quarter. 

Most of the loans going into default are still from the 2005-2007 period. Last quarter the median origination quarter for defaulted loans was third-quarter 2006. That has been the case for more than five years, indicating that weak underwriting standards peaked then. 

On primary mortgages, California homeowners were a median 12.5 months behind on their payments when the lender filed the Notice of Default. Borrowers owed a median $28,684 on a median $316,651 mortgage. 

On home equity loans and lines of credit in default, borrowers owed a median $6,706 on a median $67,500 credit line. The amount of the credit line that was actually in use cannot be determined from public records. 

The most active "beneficiaries" in the formal foreclosure process last quarter were Wells Fargo (2,244), Bank of America (1,372) and Nationstar (1,346). 

The trustees who pursued the highest number of defaults last quarter were Quality Loan Service Corp (mostly for Wells Fargo), Clear Recon Corp (mostly Bank of America), and NBS Default Services (mostly Wells Fargo and Nationstar). 

Although 16,833 default notices were filed last quarter, they involved 16,432 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). 

Among the state's larger counties, loans were least likely to go into default last quarter in Marin, Santa Clara and San Mateo counties. The probability was highest in Tulare, Madera and Fresno counties. 

Lenders' shift toward short sales as a foreclosure alternative has helped lower foreclosure activity in recent years. Short sales - transactions where the sale price fell short of what was owed on the property - made up an estimated 5.5 percent of the state's resale market last quarter. That was down from an estimated 6.1 percent the prior quarter and 11.3 percent a year earlier. 

Notices of Default 
houses and condos

County/Region 2013Q3 2014Q2 2014Q3 Qtr-Qtr Chng Yr/Yr Chng
Los Angeles 4,391 3,836 3,868 0.8% -11.9%
Orange 1,296 1,134 1,171 3.3% -9.6%
San Diego 1,519 1,289 1,266 -1.8% -16.7%
Riverside 1,966 1,720 1,678 -2.4% -14.6%
San Bernardino 1,852 1,543 1,427 -7.5% -22.9%
Ventura 420 395 417 5.6% -0.7%
Socal 11,444 9,917 9,827 -0.9% -14.1%
           
San Francisco 106 93 130 39.8% 22.6%
Alameda 598 516 499 -3.3% -16.6%
Contra Costa 713 528 571 8.1% -19.9%
Santa Clara 458 421 377 -10.5% -17.7%
San Mateo 176 170 168 -1.2% -4.5%
Marin 100 63 57 -9.5% -43.0%
Solano 378 277 252 -9.0% -33.3%
Sonoma 199 169 147 -13.0% -26.1%
Napa 48 42 35 -16.7% -27.1%
Bay Area 2,776 2,279 2,236 -1.9% -19.5%
           
Santa Cruz 81 73 56 -23.3% -30.9%
Santa Barbara 148 126 132 4.8% -10.8%
San Luis Obispo 101 72 91 26.4% -9.9%
Monterey 153 142 138 -2.8% -9.8%
Coast 483 413 417 1.0% -13.7%
           
Sacramento 1,117 943 844 -10.5% -24.4%
San Joaquin 565 419 367 -12.4% -35.0%
Placer 243 221 210 -5.0% -13.6%
Kern 626 553 508 -8.1% -18.8%
Fresno 639 614 512 -16.6% -19.9%
Madera 112 142 90 -36.6% -19.6%
Merced 148 127 116 -8.7% -21.6%
Tulare 320 289 236 -18.3% -26.3%
Yolo 85 72 70 -2.8% -17.6%
El Dorado 143 103 79 -23.3% -44.8%
Stanislaus 383 293 253 -13.7% -33.9%
Kings 99 92 88 -4.3% -11.1%
San Benito 16 36 28 -22.2% 75.0%
Yuba 63 46 48 4.3% -23.8%
Colusa 22 16 16 0.0% -27.3%
Sutter 74 68 42 -38.2% -43.2%
Central Valley 4,655 4,034 3,507 -13.1% -24.7%
           
Mountains* 248 241 227 -5.8% -8.5%
           
North Calif* 620 554 543 -2.0% -12.4%
           
Statewide* 20,314 17,524 16,833 -3.9% -17.1%
 includes additional counties

Source: CoreLogic DataQuick; DQNews.com
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