Home loan woes ease

Foreclosure filings dropped dramatically throughout the Northern San Joaquin Valley in October, as lenders reportedly have become more willing to give homeowners breaks on their mortgage payments.

Far fewer homeowners were sent notices of default or had their homes repossessed during October, compared with July, August and September.

October foreclosure statistics from ForeclosureRadar, RealtyTrac and ForeclosureS.com agree the housing crisis eased last month.

In Stanislaus County, for instance, ForeclosureRadar reported only 423 properties repossessed by lenders in October, compared with 1,053 in July.

Eduardo Morales, a foreclosure prevention counselor for El Concilio in Modesto, said he's thrilled the situation is improving.

"A lot of progress has been made," said Morales, who helps homeowners renegotiate their mortgages so they can keep their homes. He said one of his clients Monday was able to get Wachovia Bank to significantly lower her loan payments. "Banks used to be hard to work with, but (this negotiation) was like cutting butter with a knife."

Increasingly, homeowners delinquent in paying their mortgages are discovering their lenders are willing to deal with them rather than foreclose. Part of that is because of an emergency California law passed this summer, Senate Bill 1137, which requires lenders to assess borrowers' financial situations before initiating foreclosure proceedings.

But that's not the only reason for the decline in foreclosures, according to Sean O'Toole, founder of ForeclosureRadar.

"There were nearly 60,000 (California) properties scheduled for sale at the beginning of October over which the law had no affect," O'Toole said. "The drop in foreclosure sales, therefore, can only be reasonably attributed to changes introduced by the lenders themselves and not in response to SB 1137."

O'Toole noted that Countrywide, particularly, postponed many of the foreclosures it had scheduled for October. Statewide, lenders called off 20 percent of the foreclosure sales scheduled for October.

"It would be a mistake to conclude that the declines in foreclosure activity indicate the foreclosure crisis is over," O'Toole warned. "While lenders now appear to be embracing the concept of foreclosure moratoriums and loan modifications, neither typically address the core issue of negative equity.

"Most loan modifications focus on lowering payments to affordable levels by using unsustainably low interest rates, not unlike the 'teaser rates' that many have blamed for the current crisis."

RealtyTrac, however, recorded a sharp decline in the number of notices of default filed. That's the first step in the foreclosure process.

California default filings this October were 44 percent below October 2007, according to James Saccacio, RealtyTrac's chief executive officer.

"While the intention behind (SB 1137) -- to prevent more foreclosures -- is admirable, without a more integrated approach that includes significant loan modifications, the net effect may be merely delaying inevitable foreclosures," Saccacio said. "In the meantime, the apparent slowing of foreclosure activity understates the severity of the foreclosure problem."

Alexis McGee, president of ForeclosureS.com, was more optimistic.

"The nation's foreclosure free-fall may be subsiding," McGee said. "We still have a long way to go, and some of the recent numbers are skewed by lender programs for homeowners that delay rather than eliminate foreclosures.

"But gains as measured by drops in foreclosure numbers in the past two months reflect that efforts by lenders, banks, organizations and government entities to work with strapped homeowners to avoid foreclosure are beginning to pay off," she said.

Some key banks and lenders recognize that keeping homeowners out of foreclosure is good business, McGee said.

She pointed out that banks like the now FDIC-operated IndyMac, Bank of America (which acquired Countrywide) and JPMorgan Chase (which acquired Washington Mutual) have pledged to cut monthly payments for many strapped borrowers by lowering interest rates and temporarily reducing home loan balances.

Bee staff writer J.N. Sbranti can be reached at jnsbranti@modbee.com or 578-2196.