Foreclosures Edge Higher in California

SAN DIEGO (DQNews) -- The number of foreclosure proceedings initiated by lenders in California between July and September edged higher on a quarter-to-quarter basis for the first time since early last year. But the number of home owners who went all the way through that process to foreclosure dipped from the previous quarter and a year ago, a real estate information service reported.

A total of 83,261 Notices of Default ("NODs") were recorded at county recorder offices during the July-through-September period. That was up 18.9% from 70,051 in the prior quarter, and down 25.5% from 111,689 in third-quarter 2009, according to MDA DataQuick. The San Diego firm tracks real estate trends nationally via public property records.

The peak was in first-quarter 2009, when 135,431 notices of default were filed. Last quarter's NOD tally was 81.2% higher than the statewide quarterly average of 45,940 NODs filed over the past 15 years.

The effects of the current turbulence in the nation's foreclosure processes aren't yet apparent.

"Over the past year, with some minor ups and downs, financial institutions and their servicers have been processing a fairly steady number of defaults each quarter. That probably has more to do with their capacity to process defaults, than with higher or lower levels of incoming distress," said John Walsh, DataQuick president.

"Policies can vary on how to use the formal foreclosure process in taking homes back and reselling them. It would be nice to think that servicers are carefully following all the rules and regulations, but in the real world there are differences of interpretation, as we've seen in the news recently. It'll be interesting to see how this plays out in fourth-quarter trends," he said.

The spreading of mortgage defaults from lower-cost sub-markets up into more expensive neighborhoods has receded a bit. The most affordable zip codes in the state, representing 25% of the total housing stock, accounted for 41.2% of all default activity last quarter, up from 40.0% the prior quarter and down from 42.9% a year ago. Those lower-cost markets accounted for 53.3% of all default notices filed in fourth-quarter 2007.

California's high-end markets collectively saw mortgage defaults buck the market-wide trend and drop slightly quarter-to-quarter, and they fell a bit more on a year-over-year basis compared with the overall market. The state's 83 zip codes with median sale prices above $800,000 this year logged a 1.0% quarter-to-quarter decrease in default notices and a 28.3% annual decrease.