Notices of Default in California Decline Sharply

The number of Californians entering foreclosure dropped steeply in the second quarter to the lowest level since 2007, a sign the foreclosure crisis in California is easing as the housing market stabilizes and regulators increase scrutiny of lenders. (Learn more this Wednesday, free, details here.)

Notices of default filed against California homes dropped 17% from the previous quarter and 19.2% from the same period last year, according to San Diego research firm DataQuick (full report here). A total of 56,633 homes received a notice of default, which is the first formal step in the foreclosure process.

“Homeowner distress spreads fastest when home price declines are steepest. And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us,” said John Walsh, Data Quick President.

Note: Article written by Alejandro Lazo of the LA Times

The number of homes taken back by banks also fell in the second quarter. A total of 42,465 homes were repossessed during those three months, a 10.9% decline from a year earlier and a 1.4% drop from the first quarter. On average, California homes took 10 months to wind their way through foreclosure, up from 9.1 months in the previous quarter and the year-earlier period.

Foreclosures have slowed nationally partly because homeowners are challenging them in court and the nation’s biggest banks are negotiating a settlement with regulators over faulty repossession practices. Some experts believe that if a settlement is reached, foreclosures could surge again once banks overhaul their practices and compensate borrowers. But unlike states where the foreclosure system is overseen by the court system, California has seen a steady decline in default notice filings for more than two years with the housing market recovering faster than other hard-hit regions.

The second quarter marked the lowest level of default notices received by California homeowners since the second quarter of 2007. Last quarter’s numbers were also well below the record 133,431 default notices filed in the first quarter of 2009, when home prices were dropping sharply.

Homeowners in more affluent, coastal counties were less likely to enter foreclosure than those in other parts of the state. Mortgages on properties in San Francisco, Marin and San Mateo counties were the least likely to go into default, while those in Kings, Sutter and Yuba counties were the most likely, DataQuick reported.

In one sign that the most beaten-down areas of the state might be getting some relief, the default-notice decline was greatest in the state’s least expensive communities, where foreclosures had been the most prevalent, DataQuick said.

Most loans receiving default notices last quarter were made in 2005 through 2007, the tail end of the bubble, indicating that the most distressed homeowners in the state bought their properties during the run-up in home prices and during the height of the shoddy lending practices that pervaded the mortgage industry.

There has never been a better time to jump into foreclosure investing. Sellers and Banks are super motivated and the wholesale deals have been flying. See for yourself with a few our recent student deals here. You need to get your buying business off the ground now, as it doesn’t get better than this.