California's foreclosure activity dropped dramatically in December 2009, especially when analyzed on a daily average basis, according to a new report from ForeclosureRadar. Notices of default, for example, dropped 17.5% in aggregate, but 32.5% on a daily average basis due to the fact that December had 22 days on which documents were recorded, versus 18 in November.
Unlike November, when foreclosure filings were flat on a daily average basis, with declines being due to the holiday shortened month, the decline in December foreclosure filings is actually understated, because of the increased number of recording days, ForeclosureRadar says.
In addition to the 32.5% drop in default-notice filings, notice of trustee sale filings declined 23% from November. Similar drops in December have not been recorded in recent years, leading the company to conclude that December 2009's drop was not "simply a regular seasonal decline."
When taking into account the difference in sale days from November to December, the percentage declines
are far more dramatic than they first appear, with foreclosed properties returning back to banks 28% less often than they had in November. Third-party sales declined 41.8% month over month.
The reason for the drop in sales to third parties appears to be a significant decline in foreclosure discounting by lenders, ForeclosureRadar adds. For most of 2009, lenders discounted the opening bid from the amount they were owed by nearly 40%. In December, that dropped to 33.7%. The percentage of sales that were discounted also declined, from nearly 90% one year ago to just 75% in December.
On an average daily basis, foreclosure cancellations increased 3.5%, which the firm says is a smaller-than-expected increase, given the drive for servicers to execute more loan modifications.
Based on the timing of the cancellations, ForeclosureRadar believes 21% were cancelled due the statutory requirement that a foreclosure sale be held within one year, thus forcing cancellation; 61.9% were likely due to some form of loan workout, whether it be through a modification, short sale or refinance; and 17.1% most likely due to a filing error.