Explaining Southern California's economy

Report: California homes entering foreclosure drop 67 percent to lowest level in 7 years

Richmond, CA Hit Hard By Foreclosures

Justin Sullivan/Getty Images

A worker removes furniture from a foreclosed home before the start of a bus tour of foreclosed and blighted properties on July 13, 2012 in Richmond, California. Members of the group Alliance of Californians for Community Empowerment (ACCE) joined city officials and Richmond mayor Gayle McLaughlin on a bus tour to view foreclosed properties in neighborhoods in Richmond that have been hit the hardest by foreclosures. Richmond currently has over 1,000 homes in foreclosure.

There may be fewer foreclosures on the Golden State's horizon.

The amount of California houses and condos starting the foreclosure process dropped to its lowest level in more than seven years, according to San Diego-based firm DataQuick on Tuesday.

Notices of mortgage defaults declined 67 percent to 18,576 in California, during the first quarter, compared to a year ago, DataQuick said. At its peak, the notices were more than 135,000 in 2009.

In Southern California, the number of notices of default in the first quarter was 10,622, down 66 percent, compared to a year ago, DataQuick said. 

The firm attributed the sharp decline to new state foreclosure laws, called the Homeowner's Bill of Rights, which launched this year. In California, the law prohibits banks from moving forward in the foreclosure process, if the homeowner is trying to modify their home loan. The foreclosure process is paused until the loan modification application is reviewed, the state said.

There has also been a steady decline in foreclosure starts due to factors like rising home prices and a better job market.

"Rising home prices will be the key to the final mop-up of the foreclosure mess," said John Walsh, DataQuick's CEO in a statement. "As values rise, fewer people owe more than their homes are worth, and more people can refinance into a more favorable loan. It also means more who fall on hard times can sell their homes for enough to pay off the loan."

The median price on a California home rose 23 percent in the first quarter to $297,000, DataQuick said.

 

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