More borrowers negotiating loan mods, short sales
By Inman News, Thursday, August 12, 2010.Inventories of bank-owned properties in California registered double-digit declines in July compared to a year ago, according to the latest numbers from data aggregator ForeclosureRadar.
Lenders took back 11,934 homes in July, an 18 percent decline from a year ago. That left them with an estimated 81,536 homes in their "real estate owned," or REO, inventories in July -- 19 percent less than a year ago.
About three times that many homes are still working their way through the foreclosure process in California. But Sean O'Toole, ForeclosureRadar's founder and CEO, said he sees "no evidence of a foreclosure wave anytime soon."
Lenders and government intervention continue to delay foreclosures, O'Toole said. Although that doesn't provide a long-term solution for homeowners who owe more than their homes are worth, it does push back the day of reckoning.
"We continue to hear a lot of concern about a double dip for housing, combined with increasing concern that another wave of foreclosures is coming as well," O'Toole said. "While there is clearly a huge 'shadow inventory' of homes that are delinquent in their mortgage payments, those homes still have to go through the entire foreclosure process before hitting the market as REO listings."
In California, the foreclosure process takes a minimum of 120 days, and the average is currently about 226 days, up 20 percent from a year ago, O'Toole said. After repossessing a home, it takes lenders another 269 days on average to resell it, compared with 238 days a year ago, he said.
Foreclosure cancellations were up 75 percent in July from a year ago, to 18,942, as more borrowers were able to negotiate loan modifications or short sales. Lenders are also demonstrating an increasing willingness to sell properties on the courthouse steps instead of repossessing them.
While O'Toole said he's not ruling out a double dip for housing, "at least in California it certainly won't be caused by an excess supply of foreclosures anytime soon."
California and other "sand states" that experienced rapid price appreciation during the boom -- including Florida, Arizona and Nevada -- could lead a housing recovery, because they saw foreclosures surge before Rust Belt states like Michigan, Illinois and Ohio that are now being hit hard by both unemployment and foreclosures.
The latest national numbers from RealtyTrac, released today, showed bank repossessions at near record levels in July, even as the number of homes entering the foreclosure process declines.
ForeclosureRadar estimates that in California, 25,148 homes were subjected to a notice of default in July -- down 47 percent from a year ago.
That left the inventory of what O'Toole calls "preforeclosure homes" -- properties that have been hit with a notice of default filing, but not yet scheduled for auction -- at 125,223, down 29 percent from a year ago.
Auction notices were served on 28,310 homes, a 30 percent decline from a year ago. That brought the total number of homes scheduled for auction in California at the end of July to 125,559 -- roughly the same number as a year ago.
Even after a home has been scheduled for auction, the sale can still be canceled if the owner is able to negotiate a loan modification or short sale.
If a home does make it all the way to auction, the bank will place the opening bid. If a third party puts in a higher bid, the bank will sell them the house. If not, the house goes back to the bank and is added to its REO inventory.
Although banks were still taking back three out of four properties that went to auction in July, auction sales to third parties were up 29 percent from a year ago, to 3,483. Banks elected to repossess 11,934 homes, down 18 percent from a year ago.
When the bank took back properties, its opening bid was 26 percent less than the outstanding loan amount, on average, but 21 percent higher than estimated market value.
When properties were auctioned to third-party investors, the bid amount was typically 39 percent less than the loan amount, and 22 percent below market value.
Investors who plan to resell those properties will often have to deal with a home's current occupant, past-due property taxes, outstanding liens, repairs, and resale expenses including commissions to real estate brokers.
Competition between bidders was fiercest in Orange County, with discounts from market value of only 15 percent. The best deals were in California's Central Valley, where investors averaged discounts of 30 percent in Fresno County and 29 percent in Kern County.
But lenders repossessed eight out of 10 homes that went to auction in Fresno and Kern counties in July rather than sell them on the courthouse steps, completing only 190 third-party sales -- 95 in each county.
Sales to third parties were still up 116 percent in Fresno County compared to a year ago, while bank repossessions were essentially flat at 396 homes. In Kern County, third-party sales were up 36 percent while bank repossessions declined 4 percent, to 500 homes.
Other hot spots for auction sales in July included Los Angeles County, where 643 homes were sold to investors and other third parties, a 50 percent increase from a year ago. Bank repossessions were down 28 percent, to 1,847.
Riverside County also saw double-digit growth in July, with third-party sales up 28 percent from a year ago to 428 homes. As was the case in Riverside County, bank repossessions were down from a year ago, falling 27 percent to 1,434.
Source: Inman News
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