Foreclosure and default notices in the Bay Area and California have fallen to their lowest levels since before the housing downturn, according to a report released Wednesday.
The report from San Diego’s DataQuick highlights how the foreclosure crisis appears to be subsiding after running rampant for five years.
“For more than a year, the general trend has been down” for legal filings that indicate mortgage distress, said DataQuick analyst Andrew LePage.
There are several reasons that foreclosure activity is trending down. As home values have risen over the past year, fewer homeowners are underwater, which means they can more easily refinance or sell their homes if they have trouble keeping up with their mortgage.
Financial hardship is also diminishing. “The other big factors are the pickup in the economy and the improvements in job growth that keep people from getting in trouble in the first place,” LePage said.
On top of that, various new laws and legal settlements between banks and the government encourage lenders to pursue alternatives to foreclosure, such as loan modifications and short sales (selling for less than is owed on the mortgage).
While LePage noted that the effects of the law and settlements are hard to measure, the net impact is fewer foreclosures.
Most subprimes gone
Moreover, the bulk of risky subprime loans have already gone through foreclosure. Mortgages issued from 2008 “were safer and saner,” LePage said, meaning they are unlikely to have the sharp payment spikes of teaser-rate subprimes.
For the fourth quarter, DataQuick reported that 5,399 households in the Bay Area received default notices, the first step in the foreclosure process. That was down 46.1 percent from the same quarter of 2011. About half of default notices become foreclosures.
Although lenders can file notices of default once borrowers are three months behind, DataQuick said that Californians receiving the notices were a median of eight months in arrears on their primary mortgages.
Statewide, notices of default were down 37.9 percent in the quarter, to 38,212.
Trustee deeds, the final step of foreclosure, were issued for 2,765 Bay Area homes in the fourth quarter. That was down 42.8 percent from the same quarter of 2011.
Statewide, trustee deeds were down 32.4 percent, to 21,127 in the fourth quarter.
Looking at the full year also showed declines. The Bay Area had 30,046 default notices in 2012, down 30.7 percent from 2011. The nine-county region had 1,907 trustee deeds in 2012, a 41.2 percent decline from 2011.
While the numbers are the lowest in six years, many homeowners still struggle to keep their houses.
Oakland’s Peggy Hart, 61, for instance, said income from her day care business took a big hit a few years ago. Three years ago, when she first applied for a loan modification, bank representatives told her to stop paying her mortgage and she complied, she said. Wells Fargo gave her a loan modification early on, but the payments were still too high and she was unable to keep up, she said.
Changes are tough
Now her business and her income have rebounded, but her efforts to get a loan modification have been frustrating and unsuccessful, she said.
“I’m able to pay, I want to pay my mortgage,” she said. “I told (Wells) on the phone, ‘Please let this happen for me.’ “
Hart lives with her two sons, granddaughter and a baby great-grandson in the house, where they also run the day care. She owes about $200,000 on the house, which various real estate sites estimate is worth at least $390,000.
“Wells Fargo continues to work with borrowers on mortgage modifications and other options that may help them remain in their homes and avoid foreclosure when possible,” the bank said in a statement. “We have been working with Ms. Hart for over three years to identify an option that would allow her to retain this home. We were able to provide her with some temporary assistance in September 2009 while we continued to look at home retention options.”
Both foreclosures and notices of default remain more common in lower-cost areas, DataQuick said.
Over the past five years, 1.1 million of California’s 8.7 million houses and condos received a foreclosure notice, it said. Of those, 780,000 were actually lost to foreclosure. The others were either sold or the payments were made current.
At the courthouse auction where the final step of foreclosure takes place, about 42 percent of properties in the fourth quarter were purchased by investors, DataQuick said. That was up from 31.2 percent a year earlier.
Fewer foreclosures
Fewer people in the Bay Area and California lost homes to foreclosure in the fourth quarter compared with a year earlier; and fewer received notices that they were behind in payments. For the full year, both notices of default (the first step in the foreclosure process) and trustee deeds (the final step of foreclosure) were down compared with 2011.
Notices of Default
Houses and condos, fourth quarter
Trustee deeds recorded
Houses and condos, fourth quarter
Sources: DataQuick, DQNews.com
Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com
Article source: http://www.sfgate.com/realestate/article/Foreclosures-drop-in-Bay-Area-California-4218858.php