Mr Mortgage has the numbers and they are ugly.
For those that are video challenged here's the text version
1. Notices of Default (NOD), the first step in the CA foreclosure process when borrowers go down 90-days in payments, were down 2.5% to 43,011 new filings. However, the average daily filings were actually up 2.4% to 2,009 per day. Last month the total was 44,100 or 1961 per day. These are from people who began missing payments in Jan and Feb. If you remember, in Jan and Feb, there was a mini refi-boom, as rates fell sharply. If not for that, the NOD count could have been much worse. Since then, rates are up sharply and mortgage application volume has been consistently falling. This means more people maybe missing payments due to the lack of financing options, which will lead to an increase in NOD’s over the next few months from these already historic levels.
The vast majority of NOD’s are first mortgages because second mortgage holders quit filing NOD’s months ago, due to values falling to levels that make it futile. If you are a second mortage holder and there is no value in the property, there is no reason to foreclose because the first mortgage holder gets it all. For this reason, second mortgage loan defaults are soaring and the loans are essentially worthless. People know that lenders have to use more tradional means of collection and are not paying their second mortgage payment. A second mortgage lender is usually completely wiped out when a home goes into foreclosure. This problem will not go away.
Roughly 75% of NOD’s make it all the way through the foreclosure auction stage and end up on banks balance sheets. About 25% of NOD’s are cured by various means by the time auction hits. If you combine last months NOD’s of 44,100 and this month’s you get a total of 87,111 meaning banks will take back 65k homes 4-5 monnth out, because that’s how long it takes to get through the auction phase. This means October and November will have record REO coming back to the banks. 65k homes going back to banks is more than the total homes sold in CA in the past two months and will likely be much more than sold in Oct and Nov, which are historically poor sales months.
2. Notice of Trustee Sale (NTS ) were at a record 34, 564 new filings. This is a 15.6% increase over last month’s 28,992. This is huge. This means much fewer people are curing their NOD’s than in the past. These are from Notice of Default’s 3-4 months prior, as by law the NTS can be filed 90-days after the NOD. However, the average time it took a lender last month to file the NTS was 105-days due to the volume. Lenders can take a home to auction 21-days following the NTS. Jan NOD’s were 38,500 so the percentage that made it from NOD to NTS was 89.77%. This is a new record.
3. Total homes that went to auction increased 11.8% to a total of 25,523 properties. This was also a record. Of those, 24,831 or 97% received no bid higher than the lenders opening bid and became lender owned.
One thing to note, 3% of the 25,523 properties were bought by 3rd parties vs. 2.3% last month.
4. Discounts at auction were at a record.86% of all homes were discounted at an average of 28%. The largest subprime areas such as Sacramento, San Joaquin, Stanislaus and Merced saw larger discounts from 31-37%.