California Foreclosures Get Cancelled - A New Era?

California Foreclosures Get Cancelled - A New Era?

As some of you may know, California passed the Homeowner Bill of Rights legislation which, amongst other things, restricts California's lender's dual tracking of foreclosures. 

Dual Tracking is a process in which a lender may be considering and negotiating a short sale or loan modification with a borrower and at the same time proceeding along with the normal foreclosure process. 

While some have mixed feeling about the process, it all comes to an end on January 1, 2013 and lenders will have to choose one or the other.

Due to this new law, cancellations of foreclosures in California by lenders rose 62.1% in October 2012 compared to September 2012.

This is the highest spike in foreclosure cancellations since the company ForeclosureRadar has been tracking it in September 2006.

Well, what does this mean.  For this humble REALTOR, it can mean a very exciting next year of home owners, buyers and sellers being able to afford to purchase homes again at a regular click which driving prices up again due to possible lack of supply that still exists in the market. 

A few things to consider that may help or hurt my assumptions:

1.  Homebuyers who were going to be kicked out of their homes via foreclosure may have a better chance of either modifying their loans or having a successful short sale, which will keep owners in their homes longer.

2.  An owner having a better chance of negotiating a loan modification or short sale will help keep their credit more intact for later home purchases, in lieu of a nasty foreclosure on their record affecting their ability to buy and borrow again in the near future.

3.  With less foreclosures, leading to less REO properties coming on the market, the home market may begin to stabilize a bit and proceed on a normal upswing with the wean out of the investors typically seeking REO properties for all cash pushing out the owner occupier home purchaser.

4.  One harmful result could be the lack of liquidity within the banks that decide it is much easier now under the new legislation to modify the loan, thereby keeping it on their books.  This has the result for some banks of reducing their ability to lend as they will continue to have troubled and modified loans weighing down their balance sheets and lending potential.

The most dramatic thing to realize here is this huge shift downward of foreclosures in California may be our coming into a new era!

California Foreclosures Get Cancelled - A New Era?