Foreclosure Filings Drop to 6-Year Low on California Law
U.S. foreclosure filings fell 28 percent last month from a year earlier to the lowest level since April 2007, as a new California law slowed first-time defaults in the most-populous state, according to RealtyTrac.
Filings across the nation dropped 7 percent from December to 150,864, with one in 869 U.S. households receiving a notice, according to the data provider. New homeowner protections in California played an outsized role in the national decrease, as notices of defaults there slid 62 percent from a year earlier to an 87-month low, RealtyTrac said.
“The U.S. foreclosure landscape in January was profoundly altered by the effects of new legislation that took effect in California on the first of the year,” Daren Blomquist, vice president at Irvine, California-based RealtyTrac, said in the report. A slowdown in the state’s defaults “accelerated into hyper speed.”
A drop in foreclosures is helping to fuel a U.S. housing recovery that’s even more pronounced in California. Prices increased in 88 percent of U.S. metropolitan areas in the fourth quarter, with five cities in the state ranking among the 20 costliest, the National Association of Realtors said this week.
In Southern California, sales last month were the highest for a January in six years, while the median price of a property jumped almost 24 percent from a year earlier to $321,000, research firm DataQuick reported yesterday. The number of purchases between $300,000 and $800,000 in the six-county region soared almost 50 percent from January 2012, according to the San Diego-based company.
The new California law includes stricter standards for mortgage servicers such as a prohibition on “dual tracking” -- simultaneously pursuing a foreclosure while borrowers are in the process of applying for a loan modification -- and fines of as much as $7,500 per loan for filing unverified foreclosure documents, according to Blomquist.
“In the short-term, the new law will probably prop up prices by restricting inventory, but it’s artificially holding back supply that would otherwise be listed for sale,” Blomquist said in an interview. Sellers, however, may be persuaded to “move off the fence” with less competition from distressed inventory, he said.
Nationwide, tight supply and borrowing costs near record lows may drive prices higher this year and reduce the inventory of distressed homes, according to a Feb. 12 report from JPMorgan Chase & Co.
“We could see home prices improve in states like Florida by as much as 10 percent as investors compete for property and the distressed sale discount diminishes,” analysts led by John Sim in New York wrote in the report.
Florida led the U.S. with the most foreclosure filings in January, the first month since 2007 that California hasn’t held the top spot. Florida also had the nation’s highest foreclosure rate for the fifth straight month, at one in 300 households, RealtyTrac said.
First-time default notices increased in states without court supervision of the process, led by a more than sixfold gain in Arkansas, a 179 percent increase in Washington and an 87 percent rise in Nevada, said RealtyTrac, which sells default data from counties representing 90 percent of the U.S. population.
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