Foreclosures On The Rise In Orange County

“Something wicked this way comes” is not just a dark fantasy novel by Ray Bradbury, it is also a warning that homeowners in Orange County and surrounding areas need to keep an eye on a growing trend.

In September the Federal Foreclosure Moratorium came to an end slowly opening the flood gates for lenders to start issuing Notice of Trustee Sales (the part where they actually take the property back) and you’ll see a pretty significant increase in both Notice of Defaults (The 90 day warning) and Notice of Trustee sales.

Notice of Default or NOD Definition
A Notice of Default is the document a lender records with the county the property is located in and sent to the borrower as active notice that the document has been recorded. This is a required step for a judicial foreclosure in the state of California. The Notice of Default is essentially giving the borrower at least 90 days notice that the property will be repossessed by the party filing the Notice of Default.

Notice of Trustee Sale or NOT Definition
A Notice of Trustee Sale is the document a lender records with the county the property is located in and is sent to the borrower as active notice that the document has been recorded. This too is a required step for a judicial foreclosure in the state of California. The Notice of Trustee Sale is the document that confirms a sale date of the property. Usually at a county auction. Upon sale of the property, title is transferred to the new owner and the previous owner may be evicted.

The interesting thing is that since September there’s more Notice of Trustee Sales (NOT) than there are Notice of Defaults (NOD).

This is backwards from the normal scenario. Usually there’s more NOD’s than NOT’s. This is simply because many people redeem or bring current their mortgage or just sell the house to cancel out the NOD. This would logically mean that in general there are fewer NOT’s than NOD’s.

So why are there more Notice of Trustee Sales than Notice of Defaults? I believe it’s just a case of pent up demand.

During the federal mortgage moratorium, people who had federally backed loans (Fannie Mae, Freddie Mac, FHA, VA) could not have a completed foreclosure against them. But it didn’t mean the lenders couldn’t file the NOD in anticipation of the end of the moratorium. Many lenders continued to record NOD’s only to have the moratorium extended on them. But they were OK with that because in general, a Notice of Default (NOD) doesn’t expire. Unless you bring current any outstanding balances and fees, the NOD stands.

Well if you look at pre-pandemic NOD vs. NOT filings there’s always been more NOD’s filed than NOT’s. Then in January 2021 it flipped and really started to shift in September 2021. This can only mean that these lenders who previously filed a NOD during the moratorium are now finally able to file and execute the NOT and force the sale of the home.

Never have I ever seen there be more NOT’s than NOD’s. In fact if you take all Orange County Notice of Trustee Sales since April 2020 up through January 2022 105.37% of all NOD’s filed during the pandemic are converting to NOT’s. In the past it’s usually around the mid 30%-40% range that will convert. The overage is likely due to NOD’s filed previous to the foreclosure moratorium that were not able to complete the foreclosure and are now catching up. But this is insane.

Why are more converting? I believe the simple answer is that many of these Notice of Trustee Sales are from banks where the borrowers either took a forbearance or just stopped making their house payments during the pandemic knowing that they couldn’t be foreclosed on. But now it’s time to pay the piper.

So how does this affect the local housing market? At the moment it may not have a huge impact because it appears to be a case of just playing catch up from the banks that couldn’t foreclose before. And if that’s all it is and pre-pandemic numbers resume then it’s business as usual.

The question is, how many people are still trying to work things out but won’t make it through?

Like I said, it’s something we’ll be keeping an eye on and you should too because if the current trend continues it only means that the mortgage holders are getting aggressive in recovering the losses they had as a result of receiving no payments for an extended period of time and they’ll take your house and sell it while there’s still equity.

What can people do who are in foreclosure?

1. Sell and take the money and run. I know this isn’t the most desirable option but it’s better than the alternative of losing the home AND YOUR EQUITY by going through a foreclosure. This is why we only charge a 1% Listing Fee. This let’s you keep the money in your pocket instead of paying high commissions.
2. See if you’re eligible to receive help from CA Mortgage Relief. You’ll be connected to a counselor that may offer some kind of assistance. However, just be prepared to get referred to a real estate agent to sell your house.
3. Hide your head in the sand and pretend that if you don’t do anything it will just go away.
   Sorry if this sounds harsh but some people need to hear this. I’ve seen it too many times. Being unable to keep your house is an emotionally difficult time. However, it’s not the time to hide and string everything along until the last minute. The cost of foreclosure is estimated to be about $76,000. This will be eaten up from any equity you have. And then when you’re forced to sell, it’s likely you’ll have to sell for much less than you can now. You’re probably in a unique situation because of the meteoric rise in values that you have significant equity in your home. By taking that, you will be able to rebuild comfortably instead of continuing to scrape by for the next several years after you lose your house. Make good decisions.

I’m here to answer any questions you might have.