California Sees Significant Drop in Mortgage Defaults

Is it a sign that the economy is on the road to recovery when 24 percent fewer homeowners in The Golden State are defaulting on their mortgages? According to a report on ABC News earlier this week, the fourth quarter or 2009 was a good three months for homeowners since about a quarter of mortgage borrowers were able to keep up with their payments without defaulting.

Between October and December, there were more than 84,560 default notices filed on mortgage loans. That might seems like a huge number, but it is quite a significant drop from the nearly 111,700 default notices filed from July to September of 2009. However, the number of defaulted notices in the fourth quarter of last year is up by about 12 percent over the last quarter of 2008.

The new numbers show a consecutive decline in the number of mortgage defaults throughout California. On the other hand, many homeowners in higher-end neighborhoods are receiving default notices as these pricier homes are getting harder and harder to pay for with the current job market. Although the homeowners in these areas were able to hold off the defaults longer than the homeowners in entry-level positions, those with more financial resources are starting to feel the pinch of the recession and the resulting job losses as well.

About 35 percent of the default notices from the last quarter of 2009 occurred in some of the more affordable areas of California. That number is a significant drop from the 52 percent of defaults from last year at the same time. The upscale areas of Orange County saw an increase in default notices with about 24 percent more homeowners in the affluent homes were not able to make their payments. Other areas that saw a rising number of defaulted mortgages include Santa Barbara, Santa Cruz and prominent towns along the coastline.

More than 51,000 homes have been lost to foreclosure in the last quarter of 2009. That is a two percent increase over the previous quarter which saw about 50,000 homes foreclosed on due to non-payment. During the same period in 2008, only about 46,180 homes were lost due to foreclosure, which equals about 11 percent less than the current standings.

So while it looks like things are starting to turn around, we are still not where we were just two years ago. Our foreclosures are on the decline but they are still outnumbering the number of foreclosures in 2008. Of course, any progress is better than nothing and we are excited to see something turning around in this economy. As long as these numbers continue along these paths, the market may stabilize itself and become better than it was just a few years ago. This is just something we will have to observe and see what happens. Along with the lowered mortgage rates, these new developments could be ideal for the housing market.