NOD Quarterly 2

Foreclosure resales accounted for 40.7% of all California resales recorded in the fourth quarter of 2009, down from 42.7% in the third quarter of 2009, and 54.4% one year ago.

Lenders are experiencing a backlog in processing delinquencies and notices. 84,568 notices of default (NODs) were recorded last quarter, compared with 111,689 in the previous quarter and 75,230 one year ago. The median origination month for an NOD loan in the last quarter was still July of 2006, the same month as during the previous three quarters. One year ago, the median origination month of a NOD loan was June of 2006.

Foreclosure notices continue to hit expensive housing as well as to hinder recovery in the more affordable inland housing communities. Last quarter, the low-tier housing communities made up 34.9% of NOD recordings in the state, down 45% from the second quarter and 52% one year ago.

first tuesday take: Don’t let this fourth quarter 2009 decline in foreclosures (as compared to the third quarter) fool you — it is due to end-of-year cyclical changes in foreclosure policies among lenders and loan servicers, and does not represent any shift in market conditions or a return to real estate fundamentals. The fact remains that lenders are still dragging their feet. As a result, the shadow inventory of some 600,000 homes on the brink of foreclosure continues to grow.

The tea leafs in this report show owners of high-tier homes in the more highly-educated sections of the state are either running out of savings, or aren’t willing to be burdened with negative equity for a decade or more just to avoid a ding on their credit score.  As for the credit score, a little prior planning before the NOD hits can ensure the homeowner’s credit needs are met for two years until they purchase another home – if the trauma of getting wiped out does not mentally condemn them to becoming life-long tenants. So much for the “American Dream” of homeownership.

Re: Another Drop in California Mortgage Defaults from Dataquick News