California NODs drop by 61.8% in September compared to August data

According to statistics by ForeclosureRadar, a Bay Area company, it seems the new California loan modification law has made some recent progress. According to their statistics, the number of notices of defaults fell by 61.8% and the number of homes put up for sale by auction fell by 47.3% in September.  These percentages were derived from the fact that “only” 16,352 notices of default were filed in September, compared to the 42,790 filed in August.

As a reminder, this new law required lenders to contact homeowners before immediately filing any foreclosure notices.  In these series of attempts, the lender may discuss the option of loan modifications which can involve rate reductions or principal reductions. The new law states they must contact homeowners, but provides no guarantee that loan modifications will be made. 

Last month, I mentioned that loan modifications were a great way to save money on your monthly payments. For many here in California, negative equity and adjusting interest rates are just making mortgages unbearable.  Now that so many banks have experienced the costs of the foreclosure process, lenders are more willing to explore the routes of loan modifications.

Is this an indication of reaching “the bottom”?
Even with the decline in NODs throughout California, there are really are no solid conclusions to be made based on this recent piece of news. While the news is something homeowners can look forward to, it is still no prediction of the future. As mentioned, the law states that lenders must contact homeowners; the law does not enforce loan modifications to be made.

September was a financial roller coaster for all of us on board. Between flip flopping bailout legislations, capital injection headlines, and massive bank takeovers, we’re just at a point where predictions are almost meaningless. On the flipside, given this recent piece of news, there are already some analysts commenting that this law may just be “delaying the inevitable”. So what’s a person to do? Sit around and wait? Hardly.

Here’s a few tips I’d share with you regarding loan modifications:

• Speak to your lender as soon as possible. Loan modifications involve negotiations and can take plenty of time of to process
• Be wary of “professionals” or “specialists” that charge significant fees for their loan modification services
• Do NOT try to trick the system. Yes, many lenders only consider defaulting homeowners eligible for loan modifications, but don’t intentionally miss your payments. If you do, you may end up in a trivial lawsuit like this couple.

This law is great because it brings awareness to homeowners. It doesn’t guarantee anything, but it does give individuals that forewarning to actually do something. If you are having troubles with your current mortgage, be sure to also visit the California Housing Finance Agency website on foreclosure avoidance.

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