Foreclosure starts down in California, REOs up

California is among the states that saw a drop in foreclosure starts in the July-September quarter of 2013. Nationwide, foreclosures are at a seven year low, declining 13% from the previous quarter and 39% from a year ago – and down a total of 59% in California.

The drop in foreclosure stats is believed to be due to a gradually improving housing market, rising home prices, improving employment numbers, and fewer troubled loans. There was a slight increase in completed foreclosures from Q2 to Q3, rising 7% but down 24% from the same time last year. In California, REOs increased 19% in Q3 – but not bad compared to New York’s 65% increase.

At the peak in 2010, there were roughly 1.05 million foreclosures, and the numbers have been declining ever since.

Foreclosure activity in California dropped dramatically

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Big news for California real estate numbers: Foreclosure activity in the state has hit an all-time low since the last housing boom.

During the first quarter of this year, only 18,567 mortgage default notices were filed – that’s 51.4% down from Q4 of 2012, and 67% down from the same time last year. The drop is being attributed to recent regulations placed on foreclosure activity – particular the Homeowner Bill of Rights that took effect on January 1.

DataQuick expects that foreclosure activity will pick up slightly once lenders adjust to these new policies.

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Foreclosure inventory will remain low in 2013

Foreclosure Inventory via Wall Street Journal

With gains in housing prices the past year also comes an increase in home equity – very good news for current homeowners. But while those shopping for good deals (especially first-time home buyers and move-up buyers) are getting incredibly low interest rates, foreclosures and other REO inventory is shrinking drastically.

According to CoreLogic, foreclosure inventory is down 20% in November from a year ago. REOs fell from 19.6% to 11.5% between January and November 2012. This drop is due to a lower number of delinquencies and a more laborious foreclosure process that resulted from the original housing crisis issues.

Along with fewer foreclosures and REOs comes major competition to purchase deals by investors, first-time homebuyers, and the move-up buyers, hence the rise in prices. Economists are predicting that 2013 will see further declines in both REO and foreclosure inventory, but won’t be as steep a decline as we saw in 2012.

Los Angeles City Attorney files lawsuit for "bank blight"

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Los Angeles City Attorney Carmen Trutanich has filed a lawsuit against US Bank for being behind they city's "bank blight," and calling them "slum lords."

The bank has foreclosed on over 1,500 homes in Los Angeles in the past year. Trutanich says it is responsible for allowing at least 150 of those homes to fall into disrepair, and thus inviting blight, crime, and lowering neighborhood property values.

Neighborhoods that have been hit hardest have the most problems - including stories of foreclosed properties perpetuate gang activity, squatting, dead animals, graffiti and even prostitution because the banks have failed to maintain the properties.

California is leading the nation in foreclosed homes, and many are worried that a back log of foreclosures in the state will perpetuate the problem (as of March 31, there were 362,000 homes in foreclosure or under water).

This isn't the first time the City of Los Angeles has filed a lawsuit like this, and it may not be the last - Trutanich was quoted by Reuters saying "that is one of the arrows in the quiver," but didn't provide additional details or names.

The city recently adopted charging banks fees on foreclosed homes to help pay for inspectors that will monitor the conditions of foreclosed homes in Los Angeles. The city also adopted a Neighborhood Stabilization Program this year to help pay for the rehabilitation of foreclosed properties in communities that have been impacted the hardest.