Short sales could be slowing down San Jose foreclosure auctions, in addition to other factors like strategic foreclosure control by lenders, based on statements from local housing analysts and realtors.
In May, default filings and auction home foreclosures slowed in San Jose and in other areas of Santa Clara County by over 40 percent compared to filings in May 2009. The May decline was the sixth month in a row that filings in the county dropped year-over-year.
There were 778 Santa Clara homeowners who received default notices in May, down by 42 percent from 1,339 owners in May last year and down by 28 percent from 966 in the preceding month. Similarly, the number of completed foreclosures dropped over the year to 410 units.
Local analysts said that there are at least three major reasons for the slowdown in San Jose foreclosure auctions in May: the excruciatingly slow loan modification process, the effort of lenders to control the entry of REO units into the market, and the realization by lenders that they need to slow down filing default notices to control the number of borrowers overwhelming their offices with HAMP applications.
The other big reason, according to some analysts, is the rising number of homeowners avoiding foreclosure through short sales. More lenders now are approving short sales compared to last year when only a few banks were entertaining distressed sales. With banks realizing the advantages of approving short sales over waiting for the time they can foreclose, more distressed homes are getting sold.
The Home Affordable Foreclosure Alternatives scheme of the federal government is also helping push short sales as there are cash incentives for lenders and homeowners. This is also among the reasons for the slowdown in home auctions in California in May compared to May 2009.
As more homeowners realize the advantages of losing their homes through short sales over losing them to foreclosure, the pace of San Jose foreclosure auctions is expected to slow down further.
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