Foreclosure activity in Sonoma County has dropped to its lowest level in nearly five years, the latest sign that banks are allowing more cash-strapped borrowers to unload their homes in short sales.
Banks seized 258 homes and condominiums in foreclosure proceedings in Sonoma County during the second quarter, down 38 percent from the first quarter, according to a report issued this week by DataQuick, a San Diego-based real estate information service. It was the lowest since the third quarter of 2007, when 201 foreclosures were recorded.
Mortgage defaults, the first step in the foreclosure process, also declined. Banks sent 680 default notices in the second quarter to borrowers who fell behind on their mortgages, dipping 3 percent from the first quarter. It was the lowest since the second quarter of 2007, when 462 default notices were recorded.
The drop in foreclosures came as agents report a continued rise in short sales, where the lender permits a borrower to sell their home for less than the amount owed on the mortgage.
For the first half of the year, the number of short sales in the county has been roughly equal to the number of foreclosures. In contrast, in 2009 there were five foreclosures for every two short sales.
"It's all about short sales right now," said Belinda Andrews, a broker associate with Century 21 in Santa Rosa.
Andrews and other agents who specialize in short sales said clients are less apt now to question the tactic. Some that once had qualms about not paying off their mortgage in full now view short sales as an accepted practice. Others believe it does not make financial sense to continue paying a mortgage on a home that will take years to regain its value. Increasingly, borrowers are seeing short sales as a better alternative to foreclosure, enabling them to more quickly repair their credit and re-enter the housing market.
"Almost everyone who comes to me now is saying, &‘Oh, I wish I'd done it sooner,'" Andrews said.
Since 2007, more than 10,000 county homeowners have lost their properties in foreclosure. The annual total peaked in 2008 at 2,820 homes and has slowly declined over the past three years, falling to 1,898 in 2011.
Real estate agents and experts said banks and mortgage servicers are under increasing pressure to do more short sales or loan modifications and fewer foreclosures.