Bank Foreclosure Cancellation Stepped Up in California

by Simon Lindsay on States

Bank foreclosure cancellation efforts have been stepped up by mortgage lenders in California following pressures from lawmakers and Obama administration officials to modify more loans and to put more trial loan modifications into permanent modifications.

In November, nearly 10,500 scheduled foreclosure filings across California were canceled by lenders, a 20-percent increase from the 8,741 scheduled foreclosures canceled in October, based on data from a California-based foreclosure research firm.

In the county of Santa Clara, a total of 337 scheduled foreclosures were reversed, up from the 269 foreclosures canceled in October. Each working day in October, 416 cancellations were made and cancellations increased to 581 each working day in November.

Because of pressure from government officials and housing advocates, for most of the past 12 months, foreclosure cancellations increased to about 9,000 each month, peaking in July when 10,818 scheduled foreclosures were rescinded.

Under the Home Affordable Modification Program, qualified mortgages are modified and then put into a trial period of three months or more. If borrowers are able to make their modified monthly payments during their trial periods, their loan modifications become permanent and their bank foreclosure canceled. Based on Treasury Department data, modified loans result into a reduction of monthly payments by $550 on the average.

Sharleen Kilgore, a counselor for Sunnyvale-based HUD-certified nonprofit Project Sentinel, said that more modified mortgages are being shifted into permanent loan modifications, but more people are also experiencing four to six months of trial modification.

Tony Goyda, a spokesperson for Wells Fargo, said that the bank has put 3,537 modified mortgages into permanent loan modifications in November and that more will be modified and put into permanent modifications in December.

However, Christopher George, officer of the California Mortgage Bankers Association and head of CMG Mortgage, stated that not all foreclosure cancellations were due to loan modifications under the HAMP scheme. Some cancellations were due to significant payments made by borrowers to make their loans current while other cancellations were due to long delays that necessitated cancellation and refiling of foreclosure documents.

According to George, based on past records, borrowers whose loans were modified but whose total loan balances were still far above the value of their properties eventually redefaulted on their loans.

Analysts also said that in addition to the rise in bank foreclosure cancellations, the pace of foreclosure activity in California also slowed in November, with foreclosures dropping from more than 20,000 in October to 17,795 in November.