Good news, kind of: California saw both notices and trustee sale and actual foreclosure sales drop during August -- but that drop may say more about servicers than it suggests any improvement in statewide housing, according to a report released Tuesday evening by ForeclosureRadar. The company maintains a database of foreclosure actions within the state and found that only notices of default, which mark the start of the foreclosure process, had increased during the month. Notices of Default in the Golden State increased by 4.8 percent, to a total of 42,790 filings, while Notices of Trustee Sale declined by 7 percent and properties taken to sale at auction decreased by 8.6 percent. The company said the drop in trustee sale notices and actual sales "may simply reflect the inability of lenders and trustees to process additional files." "It is becoming increasingly apparent that lenders and trustees can either no longer process all of their foreclosures, or are purposefully delaying the foreclosure process," said Sean O'Toole, founder of ForeclosureRadar. "While the traditional measures of foreclosure activity are showing signs of slowing, the number of properties scheduled for sale increased by 7 percent from July, and doubled from the beginning of the year." In other words, don't break out the champagne just yet. The number of properties currently scheduled for sale has doubled to 70,000 since January, ForeclosureRadar estimated; and of these scheduled sales, 61 percent are being postponed at the banks discretion (lenders may postpone the foreclosure auction up to one year in California). For those properties that do make it to the auction steps, lenders are getting aggressive. Average discounts offered by lenders on the outstanding loan balance at foreclosure auction averaged 36 percent statewide; with one third of all properties taken to auction being offered at discounts of 50 percent or more. Looking at foreclosure sales at the county level, the largest percentage increases occurred in relatively strong markets, including Santa Cruz (91 percent), Santa Clara (32 percent), San Francisco (26 percent), Monterey (26 percent) and Napa (11 percent). In comparison, some of the harder hit areas like Stanislaus and San Bernardino saw substantial percentage declines. The shift would seem to suggest a fundamental shift in foreclosure activity away from subprime loans, to the pay-option ARM’s that are just now beginning to reset and recast to higher payments. For more information, visit http://www.foreclosureradar.com.