California Mortgage Defaults Trend Down Again

The number of default notices filed against California homeowners fell in the third quarter of 2009 compared with the prior three-month period, the result of lenders' evolving foreclosure policies and an uptick in the number of mortgages being renegotiated, according to San Diego-based MDA DataQuick, which monitors real estate activity nationwide. A total of 111,689 default notices were sent out during the July-through-September period. That was down 10.3% from 124,562 for the second quarter, and up 18.5% from 94,240 in third quarter 2008. "It may well be that lenders have intentionally slowed down the pace of formal foreclosure proceedings. If so, it's not out of the goodness of their hearts. Trying to keep motivated, employed homeowners in their homes might be the most cost-efficient way to stem losses," said John Walsh, DataQuick president. The lenders that originated the most loans that went into default in the third quarter were Countrywide (7,583), Washington Mutual (5,146) and Wells Fargo (4,425). Along with Bank of America (1,979) and World Savings (4,237), they were also the most active lenders in the second half of 2006. The quarter's default rate on loans originated in the second half of 2006 ranged from 1.7% or Bank of America to 11.9% for World Savings. Smaller subprime lenders had far higher default rates for the period: ResMAE Mortgage was at 73.9%, OwnIt Mortgage 69.5%, BNC Mortgage 61.4%, Argent Mortgage 59.9% and First Franklin 59.4%. While these and most other subprime lenders are long gone, their loans were bundled, resold and now live on as "troubled assets," Mr. Walsh said. "There's a batch of truly nasty loans that were made in mid 2006. There's another batch made in late 2006. These are worse than the mortgages before and after, and it's taking a long time to process them."