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California Mortgage Defaults Hit Three-Year Low: Report

The number of California homeowners entering foreclosure dropped to its lowest level in three years during the second quarter of 2010, according to the San Diego-based real estate research firm ""MDA DataQuick"":http://www.dataquick.com.
[IMAGE] Lenders filed a total of 70,051 notices of default (NODs) with county recorder offices during the April-to-June period, ""DataQuick reports"":http://www.dqnews.com/Articles/2010/News/California/CA-Foreclosures/RRFor100721.aspx. NODs represent the first step in the foreclosure process in California.

Second-quarter NODs were down 13.6 percent from the prior quarter and 43.8 percent from the same period in 2009. DataQuick says last quarter's total was the lowest it's recorded since the second quarter of 2007, when 53,943 NODs were filed. The peak was hit in the first quarter of 2009 when 135,431 homeowners received default notices.

While mortgage defaults spread from lower-cost sub-markets up into more expensive neighborhoods over the last year, DataQuick says that trend appears to be leveling off.

The company found that ZIP codes where median sale prices are above $800,000 collectively saw mortgage defaults drop 11.3 percent from the prior quarter. At the other end of the price spectrum, ZIPs with sub-$300,000 medians saw defaults fall 13.4 percent.

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According to John Walsh, DataQuick's president, motivated sellers and accommodating lenders have played a big role in bringing the default filings down, especially when it comes to short sales.

""We also need to remember that prices have come up off bottom over the past year. If they continue to rise, fewer homeowners will find themselves underwater, which is a significant factor in letting a home go,"" Walsh said.

DataQuick's analysis shows that the median origination month for last quarter's defaulted loans was August 2006. The lenders that originated the most loans that went into default in Q2 were World Savings (2,982), Washington Mutual (2,547), Countrywide (2,532), Wells Fargo (2,177), and Bank of America (1,049).

Mortgages were least likely to go into default in San Francisco, Marin, and San Mateo counties, following the historic norm. The probability was highest in Madera, Sutter, and Merced counties.

While foreclosure starts in California dropped in Q2, the number of foreclosures completed rose.

The number of trustees deeds (TDs) recorded, which reflect the number of houses or condo units lost at the end of the foreclosure process, totaled 47,669 during the second quarter, according to DataQuick. That was up 11.2 percent from the prior quarter, and up 4.4 percent from the same period last year.

The company reported that on average, homes foreclosed on last quarter took 9.1 months to wind their way through the formal foreclosure process, beginning with an NOD. That's up from 7.5 months the prior quarter and 6.4 months a year ago. The increase could reflect, among other things, lender backlogs and extra time needed to pursue possible loan modifications and short sales.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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