While the number of homes entering the final stage of foreclosure hit another all-time record in July, the number of homes entering foreclosure actually declined.

This decrease may not be very meaningful, however. To begin with, the number of notices of default (NODs, which notify owners that they have entered the foreclosure process) is only slightly down from its recent record heights. As the accompanying graph shows, the number of NODs filed in July was substantially higher than anything seen during the region’s protracted 1990s housing bust.

In addition, even this decrease may be temporary. A recent Wall Street Journal article notes the significance of California’s recent foreclosure legislation:

A new state law in California requires lenders to wait an additional 30 days after a homeowner misses the first payment before filing a default notice and use more “due diligence” to attempt a loan modification. The law took effect July 8.

The article goes on to cite some experts as believing that the new law has simply caused a temporary respite in new foreclosures, and that the numbers will surge back up again within a few months as delayed foreclosures eventually get processed.

If this explanation is correct, then we can probably expect further decreases in NODs for at least another month and a corresponding increase soon thereafter.


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