California Reports More Modifications, Fewer Foreclosures in September
An ongoing measure to prevent foreclosures in California showed continued success through the third quarter, according to the results of a government survey released Tuesday. California Department of Corporations commissioner Preston DuFauchard began the survey in 2007 when the Governor's Subprime Mortgage Agreement was announced in November of last year. "The newly issued figures for loan modification efforts to prevent home mortgage foreclosures in California show that the Governor's Agreement has helped result in a near doubling of loan modifications in the third quarter since the beginning of 2008," DuFauchard said in a press statement regarding the survey. The results showed the numbers of loan workouts both initiated and closed have increased, he said. DuFauchard also reported loan modifications -- "the type of workout most beneficial to consumers," according to the commissioner -- totaled 14,060 in September alone, the highest monthly count ever reported by the survey. Modifications as a portion of total closed workouts also passed 50 percent for the first time in September. Read the survey. "With this type of cooperation from loan servicers, we can save tens of thousands of people from being added to the foreclosure lists," Schwarzenegger said in an earlier press statement. "This common-sense approach does not involve a government subsidy or bailout...If these lenders are willing to meet more than halfway, it's important that consumers don't run when they reach out. It was a two-way street that got us into this mess and it will be a two-way street that gets us out." The survey also showed 13,186 foreclosures reported in September, the first drop in months. But that drop likely means little: SB 1137 recently added 45 days to the borrower notice period prior to filing a notice of default, a new regulation that has caused foreclosure starts to decline although overall delinquencies continue to increase. If recent experience with extended notice periods in other states is any indication, the dropoff in foreclosures is very likely to be a temporary phenomenon within California. While California the data shows much of the same trending seen in HOPE NOW datasets: that servicers as a whole are increasingly focused on executing loan modifications. The number of completed loan modifications statewide, for example, rose from 20,594 in first quarter 2008 to 30,151 in the second quarter, to 38,085 in the third quarter. The statewide dataset, however, did not break out modifications among prime and subprime borrowers; the HOPE NOW data has shown a strong divergence in loss mitigation activity among the two borrower groups. Write to Diana Golobay at email@example.com.