California foreclosures slowed in Sept.

Foreclosure activity slowed dramatically in California in September. The latest data, released today by ForeclosureRadar.com, show the number of default notices filed against California homeowners plummeted 61.8% in September from August, and slipped 36.4% from a year ago. The tracking firm, based in Discovery Bay, Calif., attributed a large part of the decline to Bill 1137, a state law that took effect on Sept. 8. The law imposed new requirements that lenders must follow prior to foreclosing on a homeowner. “The drop indicates that the lenders were not ready for the impact,” Sean O’Toole, founder of ForeclosureRadar.com, said in a statement. “What is important to watch now is how quickly lenders and trustees adjust to the new law.” He expects the legislation will delay, but not stop, foreclosures. Under Bill 1137, lenders must contact homeowners prior to filing a foreclosure notice to ensure the homeowners are aware of all of their options and then wait 30 days. The legislation is aimed at encouraging lenders to make loan modifications rather than foreclose on properties. However, it doesn’t force lenders to modify loans. Mr. O’Toole believes this could slow the overall recovery. “Modifying loans to affordable levels either requires large principal balance reductions or extending the unsustainable teaser rates that created the foreclosure crisis in the first place,” he said. If lenders do this, he believes it will encourage non-defaulting homeowners to default on mortgage payments in the hopes of getting similar reductions. The number of default notices filed in September was 16,352, down from 42,790 in August. Also, 19,116 trustee sale notices were filed in September , down 47.3% from August, but still up 33.9% from a year ago. The number of properties auctioned off in September was 23,409, with a loan balance of $9.75 billion. That was down 12.4% from August, but up 163.2% from a year earlier.