California Law Impacting Foreclosures

""ForeclosureRadar"":http://www.foreclosureradar.com, a company based in Discovery Bay, California that tracks every foreclosure in the Golden State, says it expected the new California Foreclosure Prevention Act to have little impact. But the company reported Tuesday that in fact, the day the law went into effect, it saw a significant decline in filings of Notice of Trustee Sale, which set the date and time of a foreclosure auction sale.
The law adds an additional 90 days to the waiting period between default notice and the filing of a Notice of Trustee Sale. However, lenders can avoid this requirement by putting in place a comprehensive loan modification program, and nearly all major lenders operating in the state had done so and were exempt as of June 16. But ForeclosureRadar reported that it actually documented a drop of nearly 50 percent in Notice of Trustee Sale filings among lenders who were exempt - an outcome for which the company says it is struggling to find an explanation.
Sean O’Toole, founder and CEO of ForeclosureRadar, said, ""A number of lenders appear to have self-imposed California’s latest foreclosure moratorium on themselves, despite having received an exemption from it. Given the number of exempt lenders it was quite surprising to see Notice of Trustee Sale filings drop by nearly 50 percent the day the new law went into effect.""
Among the larger lenders who were exempt, ForeclosureRadar reported that Bank of America’s notice of sale filings declined by 48 percent from May to June, and Litton Loan Servicing’s dropped by 41 percent. At the same time, the company says a handful of lenders dramatically increased their filings in June, including CitiMortgage by 69 percent and Downey Savings by 45 percent.
ForeclosureRadar said California’s Notice of Trustee Sale filings began climbing during the later part of the month, so the company still contends it is unlikely the law will have a long-term impact on the state’s foreclosure activity.
Overall, ForeclosureRadar reported that Notices of Trustee Sale dropped by 28.7 percent in June and are down 14.8 percent compared to a year ago. However, the company’s ""California Foreclosure Report"":http://www.foreclosureradar.com/ca-foreclosure-report.php released Tuesday, showed all other foreclosure trends were up significantly in the state, with sales at auction rising for the third month in a row and default notices at near-peak levels.
Foreclosure sales jumped 24.7 percent in June -after a 31.9 percent rise in May, and a 35 percent April increase. However, the June figure is 8.2 percent lower than the prior year. A total of 22,291 California foreclosures were taken to sale at auction last month, according to ForeclosureRadar, representing loan value of $9.57 billion dollars.
The company said opening bids set by lenders were, on average, 39.3 percent lower than the loan balance. Forty-six percent of sales were discounted by 50 percent or more.
Sales to third-party bidders in June increased by 18.3 percent from May, to 2,687 foreclosures. ForeclosureRadar said the majority of foreclosures still continue to be taken back by the lender - 87.9 percent, or 19,604 sales, with a total loan value of $8.44 billion, were returned to the lender in June.
Notices of Default, the initial step in the foreclosure process, rose by 11.8 percent to the second highest level on record at 45,691 filings, after a 4.2 percent drop the prior month. Default notices were up 10 percent compared to June 2008.
A new statistic ForeclosureRadar says it is watching closely is the number of properties actively scheduled for sale - meaning that a Notice of Trustee Sale has been filed to set the auction date and time, but the foreclosure has not yet been sold or cancelled. Under California’s foreclosure code, a foreclosure sale can be postponed repeatedly for one year before a new Notice of Trustee Sale has to be filed. While postponements are quite common, they have reached record levels in recent months, ForeclosureRadar reported.