April 24 (Bloomberg) -- California mortgage defaults fell to their lowest level in almost five years as banks cut their backlog of distressed property with more short sales, in which homes are sold for less than the amount owed, DataQuick said.
First-time notices of default totaled 56,258 in the first quarter, down 8.5 percent from the previous three months and 18 percent from a year earlier, the San Diego-based data seller said today in a statement. Default notices are the beginning of the foreclosure process in the most populous U.S. state.
The tally was the lowest since the second of quarter of 2007, showing that a predicted foreclosure wave is being averted, partially because low interest rates are preventing adjustable mortgages from resetting with higher monthly payments, DataQuick President John Walsh said in the statement. Also, some loans thought to be headed for default are current on their payments, he said.
“Remarkably, whole batches of presumed ‘toxic’ mortgages continue to perform,” Walsh said. “There’s no doubt that housing, especially negative equity, is one of the biggest drags on a struggling economy, but it’s not necessarily playing out the way some pundits thought.”
Short sales increased to an estimated 20 percent of deals, up from 18 percent a year earlier. Areas in the state with median home values of less than $200,000 had the most defaults, at 8.9 per 1,000 homes, almost four times the number in neighborhoods with a median greater than $800,000, where the rate was 2.3 per 1,000.
Mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties, and the probability was greatest in Tulare, Sacramento and San Joaquin, DataQuick said.
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