If you didn’t know about a new state law, you might start partying like it’s the end of the housing slump if you caught this news in today’s Daily Transcript (subscription required):
Notices of default in San Diego County hit their lowest level since December 2006 last month. With 1,360 notices of default filed in September, the county saw a 57 percent decrease from the prior month.
But as people all over the internet are explaining today, that number is artificially low because of a lag in companies becoming compliant with a new state law before they can work through a backlog of troubled mortgages.
The law requires banks to do more to contact borrowers who’ve fallen behind on their mortgage payments before they file a notice of default, the first step in the foreclosure process, or a notice of trustee’s sale, which announces the bank is taking back the house from the borrowers. The banks — and their servicers or agents — must attach an affidavit to those records as proof they’ve attempted to communicate directly with the delinquent borrowers.
The stipulation is part of the state’s Mortgage Relief or Foreclosure Reform Bill and went into effect on Sept. 8. The state tally for notices of default plunged in September, too.
Some more insight from Mr. Mortgage, a great blog:
This will have a positive effect on the September monthly foreclosure numbers when they are reported the second week of October by Realty Trac and other data providers. Remember, CA makes up roughly 40% of all US foreclosure activity. However, it will make for a dramatic rise in the November numbers once they get caught up and in compliance.