Reader avgjoe took exception to the whole idea of foreclosures in this environment. Yesterday he said,
“There are still people around me getn a free ride after 5 years. The banks have limited inventory by not foreclosing on people hoping for a bigger payday. Lets get the truth to the readers.”
Everyone pointed to the CA Homeowners Bill of Rights as the cause for the drop in foreclosures. The new law made the foreclosure process more stringent on lenders, and it contained the provision of granting attorney fees to any homeowner who felt the need to sue, whether they won or not:
Whether it was actually the CA HBOR that caused the foreclosure process to screach to a halt, or just a handy excuse, we will probably never know. But lenders must be doing everything they can to keep people in their houses – the unemployment rate hasn’t changed much, and incomes aren’t rising.
How else can you explain why foreclosures have dropped off the table?
The drop in short-sales looks like the smoking gun.
According to Zillow, 21% of San Diego homeowners who have a mortgage are underwater, and are over-encumbered by an average of 36.8%, or $124,526:
The 21% equals 97,422 homeowners in San Diego County who are underwater, and only 892 of them, or 0.1%, completed a short sale in 3Q13 with the end of debt-tax forgiveness barreling down on us??
I’m with avgjoe in thinking that the lenders have conveniently adapted a policy of non-foreclosure, and are hiding behind the CA HBOR. They are putting no pressure on deadbeats to pay, otherwise the short-sale counts would be much higher. Those who are the furthest underwater have the least reason to pay, and banks have the most to lose – no surprise that the banks want to limit their losses.
The CA HBOR was announced in summer of 2012, and has been a law for almost a year. The banks have had plenty time to adapt to the new law, and yet the foreclosure notices keep dropping – did most defaulters just go back to making their payments?
The banks own this country, and manipulating the system has become acceptable. Isn’t it a possibility that the market rebound has been so good that banks just decided to not adding more distressed inventory, and keep the good times rolling – at least for now?