by Calculated Risk on 7/22/2008 02:47:00 PM

Click on graph for larger image in new window.

This graph shows the number of Notice of Defaults (NODs) filed in California by year since 1992. The 2008 estimate is twice the first half rate.

From DataQuick: Another Increase in California Foreclosure Activity

Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported.

Mortgage servicers recorded 121,341 "notices of default" during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year's first quarter, and up 124.9 percent from 53,943 in second-quarter 2007, according to DataQuick Information Systems.

Last quarter's number of defaults was the highest in DataQuick's statistics, which go back to 1992.
...
"The small increase in defaults from the first to the second quarter may indicate that we're nearing a plateau. We won't know until the end of the year, but it may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork," said [John Walsh, DataQuick president].
...
Of the homeowners in default, an estimated 22 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work- outs' difficult.
...
Foreclosure resales have emerged as a significant market factor, accounting for 40.0 percent of all California resale activity last quarter. A year ago it was 5.4 percent.

There are several key points:

This is a new record for NODs.

A very large percentage of NODs go through foreclosure. Only 22% "emerge from the foreclosure process". That is a historic low.

40% of all sales activity in California are foreclosure resales.

Instead of filing NODs, some lenders appear to be delaying while trying for a workout. "[I]t may be that some lenders are starting to prioritize workouts with homeowners instead of grinding things through the foreclosure process. Of course, they may just be swamped and can't handle processing any more paperwork." I've heard both reasons from other sources.