California leads Country in Foreclosures and Reform

California could be leadind the country in foreclosure mitgiation effots. A new Golden State law forces lenders to give homeowners at least 30 days notice before starting any foreclosure proceeding. State Democrats are pressing the governor to pass legislation that would force lenders to modify loan terms before repossesing a home, ala Attorney General Jerry Brown’s (along with other states) big settlement with Bank of America.

Meanwhile foreclosures did decline for the first time in three years in the third quarter according to real estate research firm DataQuick. Mortgage servicers recorded 94,240 “notices of default” on homes during the July-through-September period. That was down 22% from a this year’s second quarter.

DataQuick included some other interesting stats in its report. Most of the loans that went into default last quarter were originated between October 2005 and February 2007. On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $11,184 on a median $345,000 mortgage.

There’s more: Of the homeowners in default, an estimated 20% emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 46%.

People aren’t getting “piggyback” loans anymore. Multiple-loan financing peaked in the fourth quarter of 2006 at 61% of all financed home purchases. Last quarter it was 6.5 percent.

Trustees Deeds recorded, or the actual loss of homes to foreclosure, totaled a record 79,511 during the third quarter. That’s the highest since DataQuick began tracking Trustees Deeds in 1988. In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The all-time low was 637 in the second quarter of 2005.

Because a foreclosure typically takes about four to six months, or longer, the recent procedural changes for default filings probably won’t affect Trustees Deed counts much before the end of this year.

There are 8.4 million houses and condos in the state, DataQuick reported.

Foreclosure resales have emerged as a major market factor, accounting for 47.6 percent of all California resale activity last quarter. A year ago it was 9.5 percent. Foreclosure resales – homes that had been foreclosed on at some point in the prior 12 months – vary significantly by area, from 7.3 percent of resales in San Francisco County to 77.9 percent in Merced County.