Foreclosure notices fell nearly 90% in California with the implementation of state bill 1137 on September 8th. I found a great chart that shows the huge decline in Notice of Defaults and Trustee Sales here in the state of Ca. Here’s the staggering fact! We went from 3k to 4k notices PER Day to just a few hundred PER day…

This is only temporary…

NOD is the first stage of foreclosure after a borrower misses three to four mortgage payments. Notice of Trustee Sale is the second stage of foreclosure that gives the borrower notice their home will be sold at Trustee sale shortly thereafter. Timeline for NTS comes about 120-150 days following the NOD or about 8-10 months after the borrower misses their first payment, depending on the efficiency of the lender. From NTS the home is sold at Trustee Sale in about 14-days or so.

As you can see from the chart below, the week following Sept 6th when the new law was enacted NOD and NTS activity falls off of a cliff, down 90% from the week prior. (data in partnership with Foreclosure Radar)

Notice the day before the law went into effect, the banks sent out two times the number of notices…hmmm. We see data anomalies like this all of the time, especially around end-of-quarter…BANKS!!!

This new law requires the foreclosing entity to perform significant due-diligence ahead of sending out foreclosure notices in the future. What this does, however, is simply postpone the problem a month or so if your looking at this from the lenders point of view.

Now, if you’re a homeowner that’s facing foreclosure….look at it as that extra time you need to figure out how you are going to avoid immanent foreclosure. If loan modification is not an option, it’s time to learn about Short Sales. Banks doing business here in California are being forced to find alternatives to foreclosure.

That is a very good thing for all of us.
Short Sales are becoming more accepted, major lenders have Streamlined the process…can you believe it! Our last Short Sale with Countrywide was a total of 3 weeks from taking the listing to getting approval from their new Short Sale department. Amazing, the lender that used to turn down offers, now has added employees to staff this “Special devision”.

Ok, back to the chart:

This will have a positive effect on the September monthly foreclosure numbers when they are reported the second week of October by Realty Trac and other data providers. Remember, CA makes up roughly 40% of all US foreclosure activity. However, it will make for a dramatic rise in the November numbers once they get caught up and in compliance.
Banks and servicers are doing all they can to quickly comply with the law and resume sending NOD’s and NTS’. These notices are required by law before their take back their collateral so rest assured, they did not want to stop sending these out and being on record. When they begin to stream out again we will know in real time.