Home foreclosure on the rise throughout California

Posted on May 22nd, 2008 by saman

ForeclosureRadar.com, a company that provides information on foreclosures, reported that 22,838 homes were foreclosed upon in California last month. Sean O’Toole is the president of Discovery Bay, the company that runs ForeclosureRadar.com. He points out that with 22 business days in April, that means an average of 1,038 sales of foreclosed properties through auction each business day that month.

There were 500 April foreclosures merely in Santa Clara County. That was up 47% from the previous month, and up a whopping 585% over April of the preceding year. According to ForeclosureRadar, this still placed the county just 40th in foreclosures per capita in the state last month. The total worth of loans last month in buildings that were foreclosed upon in the county was $292.4 million.

The process of foreclosure begins when a “notice of default” is filed with a county records office by a loan servicing company, usually a few months after the owner of a property ceases to make mortgage payments. If the owner has not sold the property or been up to date with his payments after approximately four months, the property is sold at auction.

For at least the past year, these auction sales have predominantly ended with properties being repossessed by the foreclosing mortgage lenders repossessing the properties when no bids were received.

According to O’Toole, 98 percent of California’s foreclosed properties failed to attract buyers in April – despite frequent discount offerings at courthouse auctions – and thus ownership was taken by the lenders. Now known as “REOs,” or “real estate owned,” the properties belonged to banks or other financial institutions. The properties were then listed by banks hoping to sell them through real estate agents.

The bidding on homes that had been foreclosed upon in Santa Clara County began at an average discount of 15 percent; if the previous mortgage balance was $400,000, bidding would begin at $340,000.

The increasing amount of “notices of default” shows that the foreclosing crisis is worsening, says O’Toole. 44,101 of these notices were filed in the state in April; this was 14 percent higher than January 2008. Lenders should approve “short sales” quicker, he said, instead of putting homeowners through the difficult foreclosing process.

In these short sales, a lender permits the lender to sell their property for less than the balance on the mortgage, in order to elude foreclosure; it is a notoriously slow process.

O’Toole says that they are hearing every day from realtors who have a willing buyer at market price, but the lender will still not approve the purchase. O’Toole points out that it is in the interest of the lenders to approve, since prices continue to trend downward.

The expediting of short-sale approvals is no sure thing, however. Dustin Hobbs, a California Mortgage Bankers Association spokesman, says that the “best-case scenario” is to save the borrower, not to merely clear inventory.