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California Foreclosures Drop in First Quarter

Through federal assistance programs and increased focus on distressed borrowers, the foreclosure rates in California decreased during the first quarter of this year.

The rate of California foreclosures has dropped 4.2 percent, according to data that was recently released. Compared with the number of homes that were reclaimed in the final quarter of last year, the first quarter of this year has seen a 16.1 percent drop. In relation to the same three month period from last year, the rate of foreclosures has dropped by 1.7 percent. These numbers are from the Los Angeles Times and San Diego research firm MDA DataQuick.

Many Californians were expecting a larger wave of foreclosures to sweep across the state. According to the article, the federal government and big lenders have increased their efforts to work with home owners to stop foreclosure before the banks reclaim the houses.

Any quick rise in foreclosures could stifle recovering economic indicators. The data out there in California right now, though, is positive. One indicator of any coming surge of new foreclosures would likely be indicated by a jump in default notices, which are the first step in the foreclosure process. But rather than rising, default notices in California have actually dropped by 40.2 percent from the first quarter of 2009, when they were at record levels.

The Los Angeles Times spoke to John Walsh, the president of DataQuick, which provided the recently announced numbers of foreclosures in the state of California. Walsh told the newspaper that it was difficult to tell what portion of the drop in foreclosures could be attributed to changing or improving conditions in the housing market.

“Several factors are at play here and it’s hard to know how they play into each other right now,” he told the Times. “A year and a half ago the subprime loan mess was the black hole. Now, playing catch-up is the financial distress households are experiencing because of the recession.”

Even as the long-term numbers show improvement, there was still a 21 percent increase in the number of homes that were repossessed in the month of March 2010 compared to February 2010. This rise in repossessions, though, could indicate that banks are working hard to clear out a backlog of distressed properties. Also, filing bankruptcy is designed to stop foreclosure, and may help some California people save their homes.

Decreasing numbers of properties available for sale through banks can in fact help the California housing market recover, according to the article, even while the numbers are high in a historical context. And despite the positive indicators, some experts feel that it could be only a temporary improvement if there is not more relief effort for troubled borrowers coming from the federal government.

To look at the numbers themselves, in California in the first quarter of 2010, 81,054 homes received a notice of defaults, as compared with 84,568 in the fourth quarter of 2009. The record high that occurred in the first quarter of 2009 was 135,431 houses that receiving a notice of default.