A bill aimed at slowing the growing foreclosure epidemic in California has done little but delay the problem, according to a new report from ForeclosureRadar.com.
Notices of Default, which slowed in November after Senate Bill 1137 was implemented, rocketed back up in December, with 42,421 such filings reported.
That’s nearly double the 21,557 seen a month earlier and 24.7 percent more than the numbers from the same period a year ago.
“The effort by the California State Legislature to reduce foreclosures has now clearly failed,” said Sean O’Toole, founder of ForeclosureRadar, in a statement. “While State Senate Bill 1137 was well intentioned, forcing lenders to talk to homeowners won’t fix this problem.”
SB 1137 simply requires mortgage lenders to attempt to make contact with their borrowers, and then wait 30 days after satisfying specific due diligence requirements before initiating foreclosure proceedings.
“While a number of lenders have announced significant loan modification programs to reduce payments to affordable levels, these plans fail to address the fact that the average foreclosure in California now has $180,000 in negative equity.
“Lowering payments may provide a temporary fix,” added O’Toole, “but lenders simply don’t have sufficient reserves to lower principal balances enough to help homeowners in foreclosure escape the prison of debt their home now represents.”
Last month, the average estimated value of a home sold at auction was $283,624, while the average total loan balance was $464,270.
During 2008, a whopping 249,940 properties sold at trustee sale auction, with 96.4 percent being returned to the lender after failing to a garner any third-party bids.