Foreclosures Drop Dramatically in San Diego County

From SignOn San Diego, Union-Tribune, June 17, 2010

Foreclosure filings and notices of default fell dramatically last month in San Diego County, but analysts did not see this as evidence of less distress in the housing market.


Default notices totaled 1,623, down 22.9 percent from April and 46.9 percent from a year ago, MDA DataQuick reported Thursday. Foreclosures numbered 1,021, down 15.8 percent from April, but up 3.7 percent year-over-year, because of a moratorium on foreclosures in place at the time.

Analysts said the declines might represent further signs that lenders are shifting from taking legal action against homeowners who can’t pay their mortgages.

“We’ve been talking for a year now how a growing amount of distress will be handled outside the formal foreclosure process,” said DataQuick analyst Andrew LePage, “mainly through short sales (homes sold for less than the mortgage balance) and to some extent loan modifications and other methods.”

He said the short-term trend has been uneven, sometimes up, sometimes down month to month.

“If you look at quarters, the general trend has been less going into the formal foreclosure process,” LePage said. “We know short-sales are up significantly, as are loan modifications, and some would argue there have not been nearly enough loan modifications, but there are more than there were a couple years back.”

Sean O’Toole, founder and CEO of ForeclosureRadar.com in Discovery Bay, said lenders seem to be timing their actions to coincide with changing economic conditions. Earlier this year, he noted, foreclosures and defaults increased as the stock market improved and home sales and prices stabilized. But in recent weeks, as those markets have faltered, distress actions have fallen back.

“I don’t believe in conspiracies, but at some point it becomes a sensible strategy to manage the books,” O’Toole said.

He and other economists doubt that short sales and loan modifications will solve most homeowners’ problems, which are exacerbated by the sluggish economy and lower home values that make refinancing all but impossible.

“We’ve got an awful lot in the pipeline and at this pace, it’s going to take years to work through this,” he said. “It’s a question of do you rip off the Band-Aid fast and have a sharp sting or rip it off really, really slowly.”

The good news is that various reports show delinquencies rising at a slower pace — an indication that distress is easing and various housing submarkets are stabilizing. The Mortgage Bankers Association put California’s first-quarter delinquencies at 10.9 percent of all homes with mortgages last month, down from 11.3 percent in the fourth quarter.

But that still leaves some 1 million homeowners in California who are not making their payments, O’Toole said.

“If you were to foreclose on those folks en masse, it would certainly create panic and fear,” he said.

There are no delinquency estimates at the local or city level.

Did you miss these?

SoCal home prices rise at fastest pace in 5 years

County home prices at highest since August 2008