John Clark Brown Jr., an attorney in Culver City, Calif., and longtime contributor to Servicing Management, checked in with Mortgage Orb this week to discuss his observations about California real estate and foreclosure.
Q: How would you describe the overall housing and real estate finance market in California today?
Brown: Except for select high-end properties, real estate values have suffered a greater decline than anytime since the savings and loan crisis. Real estate financing is less available due to tightening of underwriting standards and many lenders ceasing to offer subprime product.
Q: As an extension, how do you characterize the state's delinquency, default and foreclosure environment? Which areas of California are most noteworthy, and why?
Brown: Again, there are higher rates of delinquency and foreclosures than anytime since the S&L crisis. Foreclosure and delinquency rates are highest in the Inland Empire and Central Valley.
Q: Clearly, subprime has been the center of action in the default servicing and foreclosure world. But are you also seeing more Alt-A or prime borrowers being referred to foreclosure in California?
Brown: No. Almost all the delinquency and foreclosures I see involve subprime and exotic loans.
Q: Do you find your firm doing more and/or different work on behalf of clients, in terms of loss mitigation options and home retention? If so, what are clients asking you to do?
Brown: Yes. Due to falling real estate values, most lenders want to avoid foreclosures and REOs. So I am doing a lot of forbearance and workout arrangements.
Q: Any new trends in other servicing-related legal areas, such as bankruptcy or eviction?
Brown: Lenders are more closely monitoring borrowers in bankruptcy. They seem more amenable to avoiding relief from stay and foreclosure and accepting the adequate protection remedy to afford the borrower a last chance to make mortgage payments and avoid foreclosure. I think these are both healthy trends.
It also seems bankruptcy judges are more closely reviewing unopposed relief motions and are more reluctant to grant relief. This may be a result of the bad press on subprime lending. In consequence, relief motions must be very carefully prepared.
Additionally, lender eviction policies seem unchanged – do everything that legally can be done to recover the property as soon as possible.
