Though mortgage delinquencies continue to rise across the Sacramento region, banks appear to be taking a new financial strategy.
They're slower to send default notices to struggling borrowers.
Although foreclosures rose slightly, analysts were most struck by a glaring disconnect between rising delinquencies and declining defaults in the third quarter. They said it may be a combination of more loan modifications in progress, greater acceptance of short sales - in which lenders take less than owed - and lenders simply being overwhelmed by the scale of loan problems.
"It's pretty clear that lenders and servicers are more interested than we've seen yet in this cycle in alternatives to foreclosure," said MDA DataQuick analyst Andrew LePage. "At the end of the day, how many will come through as foreclosures? Nobody knows."
Whatever the reasons, default notices on Sacramento-area home loans - the warnings sent to borrowers when they fall three or more months behind on house payments - fell nearly 9 percent in July, August and September, compared with the previous quarter, DataQuick reported. Statewide, they fell 10.3 percent.
It was a second straight quarter in the capital region and statewide that first-warning notices of potential foreclosures declined. And it happened even as statistics from First American CoreLogic show delinquencies kept rising - to 10.5 percent of all unpaid mortgages in August in El Dorado, Placer, Sacramento and Yolo counties. Statewide, 9.84 percent of outstanding mortgages are 90 days or more late on payments.
DataQuick said lenders and servicers mailed 9,751 third-quarter default notices in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That was down from 10,682 in April, May and June. Statewide, lenders issued 111,689 default notices, down from 124,562 the previous quarter.
Meanwhile, banks foreclosed on 5,004 homes in the eight-county capital region in the third quarter, DataQuick said. That was up 12 percent from April, May and June, but down significantly - 35.5 percent - from the same time last year.
At least 46,907 households have surrendered their keys to lenders now since the start of 2007 in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties. That's about one in 10 of California's 460,757 foreclosures during the same time, according to DataQuick statistics.
Statewide, 50,013 third-quarter foreclosures were up 9.5 percent from the second quarter, DataQuick reported. But that, too, fell far short of a statewide peak for this housing bust: 79,511 foreclosures in last year's third quarter.
Market watchers cited the continued decline in loan defaults as more proof of disruption in a normal cycle of late payments leading rapidly to default and foreclosure.
"We're not seeing the normal flow that has been the norm for a couple years," said LePage. "There's been intervention by government, self-imposed (foreclosure) moratoriums, and servicers and lenders are being overwhelmed."
DataQuick President John Walsh said Tuesday that lenders aren't giving Californians breaks "out of the goodness of their hearts." He said banks have concluded that "flooding the market with cheap foreclosures in this economic environment may not be in their best financial interest."
JPMorgan Chase Bank spokesman Gary Kishner attributed fewer defaults to more work with borrowers.
"We put a full-court press on modifications and working with customers to help keep them in their homes," he said. "Government numbers have shown we beat many of our competitors in that aspect."
Chase owns a massive portfolio of loans made by Washington Mutual before it failed last year. Washington Mutual, alongside Countrywide (now part of Bank of America) and World Savings (now part of Wells Fargo) were among the state's most active lenders in the second half of 2006. That's when many loans in default in the third quarter were made.
Bank of America declined to comment Tuesday. Wells Fargo said it was unable to respond.
DataQuick also delved Tuesday into whether a massive inventory of unsold bank repos threatens to undermine a fragile price stability in the market. The conclusion: at the moment, likely not.
The research firm, which tracks county property records, said banks have resold 87 percent of the 31,854 capital-area homes they repossessed from February 2008 through July 2009. The rest could be for sale, vacant or being rented, the firm said.
Statewide, DataQuick said, banks have resold 82 percent of homes taken back from February 2008 through July 2009.
Third-quarter foreclosures and defaults in area counties:
Amador: 73 foreclosures, 115 defaults; El Dorado: 243 foreclosures, 629 defaults; Nevada: 108 foreclosures, 337 defaults; Placer: 610 foreclosures, 1,414 defaults; Sacramento: 3,384 foreclosures, 6,098 defaults; Sutter: 152 foreclosures, 403 defaults; Yolo: 238 foreclosures, 443 defaults; Yuba: 196 foreclosures, 312 defaults.
--Call The Sacramento Bee's Jim Wasserman, (916) 321-1102 or email him at [email protected]. Read his blog on real estate, Home Front, at www.sacbee.com/blogs.