‘Government Intervention’ Drives Down Distressed Sales in California

‘Government Intervention’ Drives Down Distressed Sales in California

07/19/2013 BY: ESTHER CHO

Distressed property sales have declined drastically in California over the last year, according to a recent report from PropertyRadar.

In June, sales for distressed homes and condominiums plunged 46.5 percent year-over-year in June. On the other hand, non-distressed property sales shot up by 31.3 percent during the same time period.

Government intervention is the main driving force behind the declines in distressed property sales, according to the report authored by Madeline Schnapp, director of economics research at the firm.

For example, PropertyRadar reported California foreclosure sales totaled 2,159 in June, representing a 14.1 percent decrease from May and a 63.6 percent decline

from a year ago. The total for June is also the lowest level for foreclosure sales since January 2007.

The recent drop, according to the firm, is partly a result of guidance from the Office of the Comptroller of the Currency (OCC), which established minimum standards for handling borrower files subject to a foreclosure sale within 60 days.

“As a result of the letter, several of the largest banks – Bank of America, Citi, JP Morgan and Wells Fargo Bank – either slowed or stopped their foreclosure sales in May,” the report stated.

However, the firm says it appears the large have resumed foreclosure sales in the state, which means foreclosure sales are likely to pick back up again in July.

Even though distressed sales are way down, PropertyRadar noted they still account for 30 percent of total sales, which is three times historic averages. Though, a year ago, distressed sales accounted for 50.5 percent of sales.

Meanwhile, Notices of Default (NODs), which mark the first step in the foreclosure process in the state, fell 15.1 percent from May and 60.3 percent from a year ago to 8,317.

The report also revealed that out of 6.9 million homeowners with a mortgage in the state, 2 million are underwater.

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