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Wednesday, Apr 21, 2010 3:04 PM UTC

Firm: California sees decline in mortgage defaults

A four percent decline in defaults from last year have analysts hoping worst is over for California homeowners

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Topics: Mortgage Crisis,

Mortgage default notices for California homeowners fell 4 percent in the first quarter of the year, another sign that foreclosures could be easing in lower-cost areas, a research firm said Tuesday.

County officials recorded 81,054 notices of default — the first step in the formal foreclosure process — during the January-to-March period, according to San Diego-based MDA DataQuick.

The number is down from 84,568 default notices in the fourth quarter of 2009 and 135,431 in the first quarter of 2009, when the filings peaked.

The number of default notices among homes worth at least $500,000 rose 1.5 percent in the first quarter of this year but remained low relative to the overall market, the firm said.

“There are increasingly signs that the problems are migrating up the price ladder, and maybe we’ve seen the worst in the lower-cost neighborhoods,” said MDA DataQuick analyst Andrew LePage.

“They may be off their peaks in terms of foreclosure activity, but the levels are still high historically, and they’re still having a real impact on people in those areas,” he added.

The 4 percent decline in default notices in the first quarter followed a 24 percent drop during the previous quarter.

Though fewer homes are entering the formal foreclosure process, financial distress among California homeowners remained high. However, more lenders are modifying home loans or allowing short sales in which lenders agree to accept less than what a homeowner owes on the mortgage, LePage said.

Mortgages were least likely to go into default in Marin, San Francisco and San Mateo counties, and most likely to go into default in Merced, Stanislaus and San Joaquin counties.

“It looks like in the short run at least, we won’t see a spike in the number of homes lost to foreclosure,” LePage said.

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