Number of foreclosures surging in South Bay, throughout state

Last month’s foreclosures totaled 22,838 statewide, according to ForeclosureRadar.com, a Discovery Bay company that provides such information to subscribers. That’s an average of 1,038 foreclosure auction sales occurring each business day in April, said company President and founder Sean O’Toole.

In Santa Clara County, 500 properties were foreclosed upon in April, up 47 percent from March 2008, and up 585 percent from April 2007. The county ranked 40th last month among California counties in terms of foreclosures per capita, ForeclosureRadar reported.

The total worth of the loans foreclosed upon in the county last month was $292.4 million.

The foreclosure process begins when a mortgage lender or loan servicing company files a “notice of default” with a county records office, typically a few months after a property owner stops making mortgage payments. About four months later, if the owner has been unable to sell the property or get up to date with his payments, the foreclosure concludes with an auction sale of the property at a courthouse or other public venue.

For at least the past year, these auction sales almost always have ended with the foreclosing mortgage lenders repossessing the properties because no third-party bidders offered to buy them.

O’Toole said that despite the fact that lenders are frequently offering big discounts at the courthouse auctions, 98 percent of the state’s foreclosed properties in April failed to find buyers, so the lenders took ownership. The properties then become known as “REOs,” for “real estate owned” by banks and other financial institutions. The banks then try to sell the homes through real estate agents who list them on local multiple listing services.

In Santa Clara County, the average discount offered at auction was 15 percent off the value of the mortgage being foreclosed upon. That means that if the previous homeowner had a mortgage balance of $400,000, the lender might start the initial auction bidding at $340,000.

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