Notice of Defaults (NODs) recorded in August 2010 throughout California totaled 31,120. That is:
- a 17% increase from July 2010 (26,671); and
- a 16% decrease from August 2009 (37,061).
Notice of Trustee’s Sales (NOTS) recorded in August 2010 totaled 30,726, marking:
- a 3% increase from July 2010 (29,920); and
- a 10% decrease from August 2009 (34,224).
first tuesday take: The total number of NODs for July and August (57,791) remains alarmingly high compared to the manageable numbers posted in the stable period of the late 1990s, a time we can look forward to no earlier than 2014. [For more information regarding quarterly NODs and NOTS, see the July 2010 first tuesday market chart, NODs and Trustee’s Deeds: Grim signs of real estate’s present condition.]
NOD recording volume is at the moment trending higher, but lower than the abysmal number of NODs recorded in 2009 (around 120,000 quarterly). However, loan delinquencies indicate the trend for recorded NODs will turn further upward and do so significantly. In reality, NODs must increase for the next 12 months or more to clear out the delinquencies that are continuing to rise.
The government has launched yet another foreclosure prevention program to address underwater homeowners, called a “Short-Refi,” the “short” standing for loan balance reduction — generally called a “cramdown” or “strip-away”. It is based solely on voluntary lender reduction of principal balances for homeowners who are current on their payments. The intended goal was to keep owners in their homes and houses out of the real estate owned REO inventory.
In practice, no lender reduces a loan balance if the owner is faithfully making payments. Decidedly, the refi program leaves the delinquent masses of California homeowners with little promise outside of foreclosure. [For more information regarding the Short Refi program, see the September 2010 first tuesday article, FHA ‘Short-Refi’ Program debt relief for underwater homeowners.]
Defaulting homeowners will find diminishing voluntary respite from lenders until bankruptcy judges are given back their authority to reduce principal loan balances. The availability of judicially-ordered cramdowns will encourage lenders to immediately cure their negative equity problems themselves. Until then, lenders will continue delaying foreclosure and leaving thousands of Californians burdened by underwater properties and insolvent.
Agents and brokers need to continue advising homeowners about their most financially prudent housing option: whether it be a refinance if the homeowner has an equity or a strategic default in a negative equity situation. [For more information regarding strategic default and refinancing, see the July 2010 first tuesday article, Owners add cash instead of cashing out and the September 2010 first tuesday article, The LTV tipping point: when negative equity owners are most likely to strategically default.]
Re: “California Foreclosures” from Foreclosure Radar