The California Bankers Association and Beacon Economics Release California Banking Industry Intelligence Report
Report focuses on California’s housing market recovery and analyzes state’s home foreclosure trends

Press release

Sacramento, Calif. — The California Bankers Association (CBA), one of the largest state banking trade associations, and Beacon Economics have released a fourth California banking report that examines important issues that currently affect California’s banks and the overall economy. The report is authored by Chris Thornberg, Ph.D., founding partner, and Jordan Levine, economist and director of economic research, at Beacon Economics.

This report examines the state of California’s housing recovery and provides an analysis of the foreclosure trends. One of the report’s key findings: the state’s housing recovery was well underway prior to recent legislative and regulatory reforms impacting California’s foreclosure process and residential mortgage loan originations. By the end of 2012, the number of foreclosures in California had already declined by 40% from the prior year’s quarterly average, and had fallen 70% from the peak number seen in the third quarter of 2008. More important, as the report’s authors point out, many of the economic indicators that generally foreshadow trends in foreclosure activity improved considerably in 2012, and were at their worst much earlier. For example:

• Defaults declined by 45% from the fourth quarter of 2011 to the fourth quarter of 2012.
• Mortgages with negative equity declined by 17% during the same period.
• Existing single-family home prices increased by 23% during the year, yet homes prices remain affordable relative to incomes.
• Household balance sheets have improved, with the ratio of debt to personal income declining from 163% to 148% during 2012.
• The labor market has been on the mend, with weekly initial claims for unemployment insurance falling by 11% last year alone.

The report also details how new residential mortgage lending standards proposed by the Consumer Financial Protection Bureau, known as the Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) standards, will constrain the availability of non-conforming home loans in California.

“The cumulative effect of these new regulatory burdens at both the state and federal levels has resulted in lenders exiting the residential mortgage lending line of business or has served as a barrier to entry in the marketplace due primarily to increasing compliance costs, as well as heightened legal and regulatory risk,” said Rodney Brown, president and CEO of the California Bankers Association. “This outcome narrows the options of where consumers can find loans.”

“And while supporters of new regulations will point to the recent acceleration in the growth of the state’s housing market as evidence of how effective these policies have been, this report demonstrates that the improvement in California’s residential real estate market has been better driven by fundamentals such as declining unemployment rates, continued low interest rates and an improving economy,” Brown concluded.

Please contact Beth Mills to schedule a media interview with the study authors.

About the California Bankers Association (CBA)
Established 122 years ago, the California Bankers Association (CBA) is one of the largest state banking trade associations in the country.  CBA leads the way in developing relevant educational and legislative solutions to some of California’s more pressing financial and banking issues, including financial empowerment, identity theft, financial privacy, and financial elder abuse.  CBA’s membership includes the majority of California’s commercial, industrial and community banks and savings associations. For more information, visit

About Beacon Economics, LLC
Beacon Economics, LLC is an independent economic research and consulting firm with offices in Los Angeles and the San Francisco Bay Area. The firm delivers economic analysis and data sites that help their clients make informed, strategic decisions about investment, growth, revenue, policy, and other critical economic and financial issues. Their nationally recognized forecasters were among the first to predict the collapse of the housing market and foretell the onset and depth of the economic downturn that followed. Core areas of expertise include economic and revenue forecasting, market and industry analysis, economic impact studies, economic policy analysis, and international trade analysis.