SACRAMENTO — The number of people losing their homes in California hit a record high of nearly 80,000 in the last three months, but a new state law appears to be dramatically slowing the foreclosure process -- at least for now.
Loan default notices, the first step toward foreclosure, fell to 94,240 for the three months that ended Sept. 30. That's down sharply from the record 121,673 for the previous quarter, according to research firm MDA DataQuick.
The big drop came in September, when a new state law took effect that blocks lenders from initiating foreclosure proceedings until 30 days after contacting the borrower or making "due diligence" efforts to do so.
Default notices sank to 14,995 in September, after averaging more than 40,000 for each of the five preceding months.
"That new law virtually slammed the brakes on mortgage default filings," said Andrew LePage, a DataQuick analyst. "We don't know yet how many of those loans will get worked out versus just shifted to late this year or early next year."
State Senate President Pro Tem Don Perata (D-Oakland) introduced the bill after hearing numerous complaints from homeowners who said they had been unable to make contact with their lenders, or the firms servicing their loans, to avert foreclosure.
"Once all this stuff exploded and you realized how these mortgages were sold, packaged and resold, it was no wonder that the homeowner was confused," he said. "There wasn't anybody to talk to about their condition."
Consumer advocates said they hoped the Perata bill would be more than a temporary brake on foreclosures.
"Hopefully, the additional time will allow more win-win resolutions, where servicers and borrowers can figure out a modification that makes sense, is sustainable and provides some return for investors," said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco.
A mortgage lending group said another factor in the decline may be a new willingness on the part of lenders to renegotiate loans for struggling borrowers.
"I think it's a sign of real progress," said Beth Mills, a spokeswoman for the California Bankers Assn. "We really have seen the lines of communication between lenders and borrowers improve, and we're hoping that leads to more people staying in their homes."
