Gov Programs Push Up Numbers of California Repo Homes

State and federal foreclosure intervention programs to reduce the number of repo homes in California may have been causing unintended consequences, according to Sean O’Toole, head of California forelosure tracking enterprise ForeclosureRadar.

California foreclosures in March soared almost 26 percent over its peak level in April last year. Notices of trustee’s repo homes for sale rose by 82.3 percent compared to February notices.

O’Toole claimed there has been no government foreclosure intervention program that focused on solving negative equity. The lag between default or foreclosure filings and the sales of repo homes has also been affecting foreclosure prevention efforts.

O’Toole explained how several state and federal foreclosure programs increased the number of repo homes in March.

He argued that the state law which requires mortgage banks to contact borrowers before filing a default notice resulted in a drop of foreclosure filings starting September 2008, but it just created delays that resulted in increased filings and increased number of repo homes in March.

O’Toole also contended that the California Foreclosure Prevention Act, which extends the number of days borrowers are allowed to find ways to save their houses from becoming repo homes, has instead forced lenders to rush foreclosures before the law took effect.

The foreclosure moratoriums ordered by states and federal agencies also just delayed foreclosures. When the largest lenders ended their moratoriums, including Freddie Mac and Fannie Mae, the number of repo homes in California and many other states in March also soared.

Another O’Toole’s assertion is about the unintended effects of stabilization efforts, such as the Troubled Asset Relief Program (TARP) and Public Private Investment Program (PPIP). He said these programs, intended to help financial institutions rejuvenate the mortgage sector and credit markets, might instead be enticing lenders to delay completing foreclosures to obtain government guarantees for troubled loans or keep troubled assets on their records at higher values.

Based on ForelosureRadar’s data, the top counties in March in terms of number of repo homes per capita were Yuba, Merced, San Benito, Riverside, San Joaquin and Stanislaus. Sacramento was tenth in the ranking while the county of San Francisco had only one foreclosure home sale in every 32,981 households, the lowest amount counties that had sales of repo homes in March.

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