Dawn Breaking on the Night of Foreclosures

June 13th, 2008

There is the faint hope rising in the east that dawn is breaking on the night of foreclosures. California continues to grapple in the dark but a recently released report states that in May less number of pre-foreclosure notices were issued by the lenders as compared to April. The default notices were 43,011 in May, marking 2.5% less from April. A default notice is the first step to the foreclosure process. In Santa Clara County it dropped by 8.5% with 1,291 house owners having receive notices in the previous month. Although default numbers decreased across the state the average units of default posted each day increased by 2.4% counting to 2,009 filings each day.

The data-collecting firm ForeclosureRadar however warned that this should not lead to too much optimism. Perhaps the falls in numbers are harbingers of good days ahead or maybe it is because there was less number of working days in May 2008. It seems however that the foreclosure numbers have reached their peak and soon it will find its level.

The executive director of California Mortgage Bankers Association, Susan DeMars repeated fears that it is too early to read anything positive in the fall of default numbers and whether this will lead to foreclosures tapering off. One reason could be because the lenders are working hard with the borrowers to keep foreclosures at bay. She added, “The industry is committed to reaching out and working with as many borrowers as possible who feel they are in trouble with their mortgages.” But at this stage it is not possible to determine specifically whether the May figures are what they are because of these efforts.

In May lenders repossessed houses worth more than $10 billion. This is a record for a single month. In April the amount was nearly $9.45 billion. The majority of the houses that were foreclosed upon (97%) failed to attract any buyer during the auction. As such the bank had to repossess these. In April 98% of the houses up for auction had to be taken back by the lenders. So in May there was a slight increase in the number of buyers – an increase vital to the health of the real estate economy.

The banks have increased discounts for repossessed houses. Across the state, in May the discount made the house to be valued at 28% less than the loan balance. In April the number had been 25%.

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