News Column

Foreclosures, Mortgage Defaults Plummet in California

July 24, 2013

Carolyn Said

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J With home values rising and new regulations in place, fewer homeowners in California and the Bay Area are struggling with their mortgages, according to a real estate report released Tuesday.

In the second quarter, both foreclosures and default notices were less than half their rate at the same time last year, San Diego's DataQuick said.

"A foreclosure only makes sense when the home is worth less than what is owed on it," said John Walsh, DataQuick president, in a statement. "As home values rise, fewer homeowners owe more on their homes than the homes are worth."

From April through June, 3,772 Bay Area homeowners received notices of default -- less than half the 8,572 who received the late notices at the same time in 2012, DataQuick said. Statewide, the 25,747 default notices also were less than half of the 54,615 a year earlier.

Foreclosures fell by an even bigger margin. In the Bay Area, 1,255 homes were taken back by lenders in the second quarter, a 59.3 percent decline from 3,083 a year earlier, DataQuick said.

Every county in the region saw similarly steep declines in foreclosures, with the biggest percentage drop in Santa Clara County, where they fell 67.9 percent to 126 bank repossessions in the second quarter.

In four counties, foreclosures fell to just a few dozen for the three-month span. San Francisco had 45 foreclosures, Marin had 29 foreclosures, Napa had 27 foreclosures and San Mateo had 62 foreclosures.

Overall, California had 9,840 foreclosures in the second quarter, down 55 percent from a year earlier.

California's Homeowner Bill of Rights, which took effect on Jan. 1, slows down the foreclosure process and requires lenders to make more attempts to stave off foreclosures by modifying mortgages to be more affordable. Notices of default fell sharply in the first quarter as the law took effect. They ticked up slightly from that low in the second quarter, but remain extremely low compared to the past few years.

Statewide, default notices peaked at 135,431 in the first quarter of 2009.

DataQuick said much of the distress remains concentrated in more-affordable areas. That could be seen in the Bay Area, where Solano County had one of the highest probability of defaulting loans. By contrast, San Francisco, Santa Clara and San Mateo counties were the least likely statewide to have loans go into default, DataQuick said.

The defaulting loans tend to be from 2005 to 2007, when subprime mortgages were still being issued.

Carolyn Said is a San Francisco Chronicle staff writer. E-mail: csaid@sfchronicle.com Twitter: @csaid

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