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There was an interesting article in the LA Times recently noting that while more and more people in California are falling behind on their mortgages banks have not been foreclosing on people and evicting them for a long time in some cases. Here are some quotes:

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures. …

A default notice is the first step in the foreclosure process, and California homeowners received 135,431 of them in the three months ended March 31, MDA DataQuick of San Diego said Wednesday.

That’s an 80% increase over the previous three-month period and a 19% jump over the same period last year.

Meanwhile, the number of actual foreclosures, in which the home was repossessed by the lender, fell to 43,620 in the first quarter, a 6% drop from the last three months of 2008 and a 7.6% decline from the year-earlier quarter. Foreclosures peaked in the third quarter of 2008 at 79,511.

Much of the drop stems from a change in state law that made it more cumbersome for lenders to foreclose, DataQuick analysts said. That also led to procedural delays for banks and other lenders, which in many cases were not prepared to handle the additional paperwork.

The good news is that in most cases banks would very much prefer to work something out with struggling borrowers than foreclose. This is especially true in cases where the loan is greater than the current value of the home. The backlog of requests generally means that distressed borrowers may have more time than they expected to work something out with their lender.

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