Not Damn Likely

Housing Wire has a piece this morning on the declining number of foreclosures in California, claiming that the lenders are going to switch from non-judicial foreclosure to judicial foreclosure because of the passage of the Homeowner's Bill of Rights.  Uh, huh.  In California.  Not damn likely.  No lender is going to want to spend five years in court to foreclose on a property worth $200K.  What's more likely is that lenders will do more short sales, even if they have to take a big haircut on the price, as judicial foreclosure only makes sense when the property owner has sufficient resources to be worth suing.  And judicial foreclosure would require that lenders have their paperwork in better order than the Homeowner Bill of Rights does.  Most defaulting homeowners don't have enough in resources to be worth the trouble, and would just go bankrupt to get out from under the judgment.  The lender then would pay a lot of money to get very little.

It's likely that (a) foreclosures are falling anyway, just because so many people have already lost their homes, and fewer homeowners are in danger of default, and (b) the lenders have to do a bit more work to foreclose, and have to do a different calculation to determine whether a short sale is a better option.