East Bay Foreclosures Slow, Or Do They?

Are they or aren’t they? Are foreclosures slowing, or not? It’s always interesting trying to figure out exactly what is going on in the market place. There are facts, like the recent report that shows lenders sent out fewer notices of foreclosure in April than they did a year ago. And then there is other information behind the scenes, like knowing that many borrowers who are attempting loan modifications end up either not getting them, or dropping out of the process.

Will we be seeing more or less foreclosures on the market in the months to come? Well, here are some facts:

In the Bay Area, which RealtyTrac.com defines as Alameda, Contra Costa, Marin, San Francisco and San Mateo counties, some 2,824 homeowners received a notice of default in April, down 37.2 percent from a year ago while 1,458 homes became bank-owned properties, up 29.9 percent from a year ago.

However, that’s not the whole story. From the Contra Costa Times : “Many borrowers who applied for the government’s mortgage assistance plan are dropping out. According to a Treasury report issued Monday, 23% of the people who started the loan modification process dropped out in April, a 79% increase from March.”

And from the Contra Costa Times story on April’s foreclosures:

Many people put into loan modification programs end up defaulting, said David Shubb, head of default services for Windermere Welcome Home, a Bay Area real estate brokerage based in San Ramon. The loan modification process just delays the process of homes being taken back by banks, he added.

The year-to-year drop in notices of foreclosure is not likely to carry forward in the coming months, he said. “You’ve got far too many loans that are in trouble. Unless the economy drastically changes, and all of a sudden there are a lot of jobs,” there will be increases in both notices of default and bank-owned properties in the coming months, he said.

Notice-of-default activity “may have slowed down but it’s not going away,” Schenone said. As far as successful loan modifications, they are few and far between, she said. “(Our clients) are not very successful dealing with banks trying to get a loan modification. It’s a big challenge.” Of those who do obtain a temporary loan modification, Schenone estimates that only one in 10 end up obtaining a permanent loan modification.

I think we will continue to see an increase in bank owned properties on the market in coming months as borrowers drop out of loan modification programs (either giving up or not being able to meet their obligations), and banks try to unload the properties. That may be good news for some neighborhoods in Pleasanton, Dublin, San Ramon and the rest of the Tri-Valley, where we are seeing restricted inventory. And in most market segments, there appears to be enough demand to absorb any increases in inventory, at least locally. It should make for an interesting market as we head into the Summer selling season.