Foreclosure Activity in California is Up Again as Stalemate Continues

With hundreds of thousands of California homeowners in foreclosure, a stalemate continues as only a small percentage reach the end of the process through cancellation or sale, and the time to foreclose stretches.

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Once again the raw numbers fail to tell the full story due to the difference in the number of business days in January versus December, according to ""ForeclosureRadar"":http://www.foreclosureradar.com, a locally based company that tracks every California foreclosure. The real truth lies in the fact that on a daily average basis, foreclosure activity in the Golden State increased last month on all fronts, the company said.

After significant declines in December, foreclosure filings were slightly lower overall in January. But with only 19 days that notices could be recorded last month, compared to 22 in December, foreclosure notice filings actually increased on a daily average basis with notices of default jumping 9.5 percent and notices of trustee sale up 10.3 percent.

Foreclosure outcomes also dramatically reversed course from the prior month, ForeclosureRadar said. Looking at the daily averages, the number of foreclosures that went back to the bank rose 29.4 percent, those sold to a third party rose by 62.7 percent, and cancellations were up 20.8 percent.

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While these increases were significant, a smaller percentage of foreclosures scheduled for sale completed the process, signaling prolonged delays in resolution. Last month, 21 percent of scheduled sales were fulfilled, compared to 31 percent a year earlier.

The total number of properties in the foreclosure process remains near record levels in California, despite declines in default filings. ForeclosureRadar says this is largely due to the increase in the time it is taking banks to foreclose.

Based on the company's market data, the time from notice of default to trustee sale has increased from 146 days in August 2008, to 229 days in January 2010, as lenders have increasingly delayed foreclosures while working through loan modifications and other foreclosure alternatives.

""With delinquent payments rising, foreclosures slowing, and foreclosure alternatives failing,"" said Sean O'Toole, founder and CEO of ForeclosureRadar, ""it appears the foreclosure crisis will be with us for many years to come.""

While foreclosure sales to third parties increased in January, the average purchase discount narrowed, dropping from 18.6 percent below market value in December to 17.5 percent in January. ForeclosureRadar says banks are not discounting opening bids at auction as aggressively as in the past and investors are reporting increased competition at the auctions, resulting in higher bid amounts.

ForeclosureRadar also looked at the average time it takes for properties sold at auction, either back to the bank or to third parties, to in turn be resold. At an average 149 days to resell, the company says auction investors are clearly outperforming banks' institutional asset managers who have averaged 224 days to offload repossessed properties.