California defaults rise again

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California mortgage defaults in December were double their November level, the website ForeclosureRadar.com reported today.

There were 42,421 notices of default issued by lenders in December, ForeclosureRadar said. Notices of default represent the first stage in the foreclosure process, when a lender cites a mortgage holder for missing multiple payments.

The number of NODs had dropped in the fall, after the July passage of Senate Bill 1137, which required lenders to contact homeowners before beginning the foreclosure process. The law resulted in an immediate dip in NODs, which proved temporary, according to the data from ForeclosureRadar, which sells default data for a subscription fee.

Defaults in 2008 totaled 437,955, up 56% from 279,821 in 2007, the site reported. When a notice of default is issued, the lender and borrower may work out an agreement to renegotiate the mortgage, or the property may be sold to cover part or all of the outstanding mortgage amount. If the mortgage default is not resolved, the property is put up for auction, typically with a starting bid set at the outstanding loan amount.

If no bidders emerge at auction, the lender will take the property in foreclosure and usually will sell it on the open market. In 2008, 250,000 properties went to auction statewide, with 96% of them taken back by the lender, according to ForeclosureRadar.

-- Peter Y. Hong