The California Homeowner Bill of Rights is slowing the movement of distressed properties in the West Coast state, Lender Processing Services said in a report.

HBOR is one of the more aggressive state-based pieces of legislation drafted in response to the national foreclosure crisis and the dramatic uptick in foreclosures that swept through California after the real estate market bust.

HBOR created a private right of action and numerous foreclosure rules for mortgage servicers foreclosing in the state. 

Analysts early on said the bill would slow foreclosures in the state, but LPS data shows results vary at different stages of the default process.

For example, foreclosure auction sales slowed dramatically in California even as 'foreclosure starts' — the beginning part of the foreclosure process — continued uninterrupted.

Foreclosure sales in California fell 35% in Q1 from the fourth quarter while increasing 13% nationally.

"On the foreclosure starts side of things, HBoR does not seem to be having much measurable impact - they're down just 1% over the same period," a spokesperson for LPS said.

This trend is not unusual, said Herb Blecher, senior vice president of LPS Applied Analytics. In fact, he said the firm expected foreclosure sales to decline when HBOR took effect.

"We were actually looking at that stage of the process," he explained. "We noticed a very similar drop in Nevada after the implemantion of their legislation led us to believe we needed to keep an eye on this."

As to why foreclosure starts continue while sales decline, Blecher says a 'start' is only the beginning of the default process. It's not until the foreclosing party is ready to take the property that regulations trip up servicing firms.

"These (regulations) typically impact the end of the process because the servicers can continue to work with the borrowers to pursue collection and loss mitigation options after a foreclosure referral," Blecher said. "The foreclosure sale is when the bank takes title."

At this point, the borrower's redemption period is over and Blecher says servicers begin to see the impact of state regulations as they try to foreclose on the property while complying with all of the new checkpoints and rules.