Report: Investors Buying Foreclosures on West Coast
By: Esther Cho
For West coast states, the foreclosure wave is reported to be dying down as third parties, who are typically investors, snatch up foreclosed homes, according to the February 2012 ForeclosureRadar report, which only includes Arizona, California, Nevada, Oregon, and Washington.
While third party sales were down month-over-month, as a percentage of all sales, third parties purchased 37.6 percent of foreclosures, up from 20.3 percent a year earlier, and 2.2 percent in February 2008, according to the report.
From February 2011 to February 2012, foreclosure sales to third parties increased 84.62 percent in Oregon, 61.33 percent in Nevada, 39.72 percent in California, 23.31 percent in Arizona, and 7.35 percent for Washington.
Foreclosure filings dropped in California, Nevada, and Washington on a month-over-month basis, while Arizona saw a 6 percent increase and Oregon jumped 39.4 percent.
“Government intervention into the foreclosure crisis has clearly succeeded in slowing foreclosures. Unfortunately, it has also largely failed to deal with the real problem-negative equity. While principal balance reductions and short sales are friendlier than foreclosures for eliminating negative equity, foreclosures are an extremely effective, if perhaps crude, cure as well.” Stated Sean O’Toole, founder and CEO of ForeclosureRadar.
Even though Nevada’s foreclosure starts dropped 14.5 percent on a month-over-month basis, the foreclosure timelines increased 21.6 percent, going up from 301 days to 366 days. Time to foreclosure is the average number of days between the filing of the Notice of Default (NOD) and the day a property in foreclosure goes to sale at an auction.
“While I believe banks should be strongly encouraged to work with homeowners who fall behind, there will be uncooperative homeowners,” said O’Toole. “Passing laws to essentially eliminate foreclosures, as they appear to have accomplished in Nevada, and are now contemplating with similar draconian measures in California, is likely to do more harm then good.”
Nevada passed a law that took effect on October 1 which forbids trustees that are a subsidiary of a foreclosing bank to handle the foreclosure.
Mike Daniel, ForeclosureRadar marketing director, explained that the law led to stricter requirements on filing new Notices of Default.
“Essentially, banks in this situation have had to restructure their practices in Nevada, and in turn brought NODs to almost a stand still,” said Daniel. “We feel this law specifically targeted ReconTrust, the in-house trustee for Bank of America and Countrywide, which handles a lion’s share of the loans in the state. Without their ability to keep things moving along, the process comes to a halt.”
The time it takes to foreclose also increased on a month-over-month basis in Oregon also by 7.1 percent, with an average of 167 days to foreclosure. California increased by 6.5 percent in February and averaged 264 days to foreclosure. Other West coast states saw a decrease.
Foreclosure sales also dropped on a month-over-month basis in all states, with Nevada seeing the largest drop at 40 percent and Oregon following behind at 32.3 percent.
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