The end of the
2012 calendar year is now in sights. Analysts and real estateprofessionals can’t help but eye the future and speculate on what 2013 might
bring. Many believe 2013 will be a continuation story of much of 2012 –
- supply shortages amidst a demand-heavy market will help drive up median home values
- cash investors will continue to gain an even bigger market presence by snatching up bargain deals afforded by pre-foreclosure and REO sales
- rental market demand will continue its upward climb, as tight lending practices are expected to remain constant and homeowner consumer confidence remains below traditional norms
But with six
weeks still to go in 2012, much can happen in a real estate market as fragile
as it currently is, on both national and state levels. The California
real estate markets seem especially susceptible to statistical changes due to
the political reforms enacted in our state legislature. The California
Homeowner Bill of Rights, for example, was passed earlier in the year, and is
due to take effect January 1, 2013. The impact of this government
intervention is, however, already seeming to rear its head.
ForeclosureRadar
recently reported a 60 percent jump in foreclosure cancellations in California
from September to October, the biggest spike since it began tracking
cancellations in 2006. “While this is not the first time cancellations have
spiked, this is the largest one-month increase since we started tracking
foreclosures in September 2006,” the company says in its report. Many are
attributing this trend to the Homeowner Bill of Rights; more specifically, the
provision which restricts the loss mitigation practice of dual-tracking.
Dual-tracking is a practice
wherein a Mortgage Lender / Mortgage Servicer is simultaneously processing a loan
through the foreclosure process while said loan is being considered for
a home loan modification or short sale workout option. According to the
California Homeowner Bills of Rights legislation, Mortgage
servicers will be required to render a decision on a loan modification or short
sale application before advancing the foreclosure process.
Said differently, the foreclosure process must be paused until the review of a
homeowner’s loss mitigation workout application is completed. This
provision will help many avoid foreclosure, as it will extend a homeowner
additional time to seek resolution should any given workout attempt go
unsuccessful. However, analysts are contending these political reforms
may have unintended side effects which may hinder market recovery.
A recent quote
from founder and CEO of ForeclosureRadar, Sean
O’Toole, says it all. “The California Homeowner Bill of Rights that takes
effect in January 2013 is beginning to impact foreclosure trends. This is
another example of where changes in foreclosure trends are driven by government
intervention, and not necessarily economic recovery. While the impacts are
still unclear, the elimination of dual tracking may avoid some unnecessary
foreclosures, but will lengthen the foreclosure process and delay ultimate
recovery. Expect further impacts to foreclosure trends in the months ahead.”
