Explaining Southern California's economy

Why California saw fewer foreclosures than other states in 2012

Foreclosure

Kevork Djansezian/Getty Images

For sale signs are posted on a foreclosed house in Glendale. In 2012, foreclosures fell off in many California cities, but seven still finished in the top 20.

The housing crisis was also a foreclosure crisis, and many homeowners in California lost their homes. But the situation in the state improved in 2012.

One reason for this is that California is a so-called non-judicial state; i.e., it does not require that foreclosures be overseen by the courts. That allows foreclosures to be completed more quickly. And that is why  judicial states -- those that require court oversight of foreclosures, such as Florida -- surpassed California and other non-judicial states in the number of foreclosures.

That prompted Irvine-based real estate analysis firm RealtyTrac to report on Wednesday that 2012 was the “year of the judicial foreclosure.”

I wrote about this last year:

The process is streamlined [in California], to avoid a lawsuit. 

Ironically, this is supposed to make things easier on the homeowner, but the robosigning scandal that put the brakes on foreclosures by banks was largely confined to states where the foreclosure process is judicial. Borrowers who could seek legal recourse were a bigger problem than borrowers who couldn't, at least not as easily.

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Foreclosures continue to decline in California in May

Stop Foreclosures!

Corey Bridwell/KPCC

Occupy LA supporters hold up a "Stop Foreclosures!" sign outside of the BNY Mellon Bank. The pace of foreclosures has actually been falling in California for the first half of 2012.

California is continuing a trend from the first quarter of 2012, as foreclosure rates fall year-over-year in cities throughout the state. For example, in the first quarter, foreclosure filings fell 24 percent in Los Angeles, according to RealtyTrac, a company that specializes in foreclosure data. In May, that figure was replicated: a 24-percent drop for the month, on more than 10,000 notices of foreclosure that were sent out in the city.

Why has the state's foreclosure rate been falling when the pace of foreclosures nationally picks up?

The state hasn't seen the same foreclosure backlog as much of the rest of the country. This is because California is considered a "non-judicial" foreclosure state. The process is streamlined here, to avoid a lawsuit. 

Ironically, this is supposed to make things easier on the homeowner, but the robosigning scandal that put the brakes on foreclosures by banks was largely confined to states where the foreclosure process is judicial. Borrowers who could seek legal recourse were a bigger problem than borrowers who couldn't, at least not as easily.

Read More...