New state laws that require loan servicers to give advance notice before filing a notice of default helped push down foreclosure-related filings by 12 percent nationwide in September, data aggregator RealtyTrac said today.

California, which accounts for nearly one-third of foreclosure activity, passed legislation that took effect in September requiring lenders to make contact with borrowers 30 days before filing a notice of default. Notices of default in California dropped 51 percent in September, with a corresponding "significant impact" on national numbers, RealtyTrac said.

RealtyTrac said notices of default fell 66 percent in North Carolina, a state that now requires lenders to provide homeowners and the state commissioner of banks 45 days’ advance warning of plans to file a notice of default.

Lenders file notices of default as the first step in the foreclosure process, in most cases after borrowers fail to make two or more payments. A notice of default starts the clock ticking on a forced auction sale or bank repossession of a delinquent borrower’s home.

Foreclosure-related filings include default notices, auction sale notices and bank repossessions. Because many borrowers refinance, get current again on their loans, or negotiate a short sale or loan modification with their lender, not all properties subjected to filings are actually repossessed or sold by lenders.

But in many instances, the new laws governing notice of default filings may only delay lenders from initiating the foreclosure process.

After a new Massachusetts law took effect in May requiring that lenders give homeowners a 90-day right-to-cure notice, initial foreclosure filings were lower than normal for the following three months. But initial foreclosure filings were up 465 percent from August to September, RealtyTrac said, as the first loans subject to the new rule emerged from the 90-day window.

Nationwide, RealtyTrac counted foreclosure related-filings on 265,968 properties in September, down 12 percent from August but up 21 percent from a year ago.

At the state level, Nevada saw foreclosure-related filings jump 11 percent in September. The rate of foreclosure-related filings in Nevada — one for every 82 homes — was the highest in the nation, and more than five times the U.S. average of one filing per 475 homes.

With one filing for every 178 homes, Florida moved from fourth place to second on the list of states with the highest foreclosre rates.

In California, the dramatic decline in notices of default contributed to a 32 percent decrease in foreclosure-related filings. Still, one in 189 homes was subjected to a filing, the third-highest rate in the nation.

Arizona, Georgia, Michigan, Ohio, New Jersey, Indiana and Colorado rounded out the list of the 10 states with the highest foreclosure rates.

For the third quarter, RealtyTrac counted foreclosure filings on 765,558 homes, up about 3 percent from the second quarter and 71 percent from a year ago.

Six states — California, Florida, Arizona, Ohio, Michigan and Nevada — accounted for more than 60 percent of foreclosure-related filings.

The 10 cities with the highest foreclosure rates among the nation’s 100 largest metropolitan areas in the third quarter were located in California, Florida, Arizona and Nevada.

They were Stockton, Calif.; Las Vegas, Nev.; Riverside-San Bernardino, Calif.; Bakersfield, Calif.; Fort Lauderdale, Fla.; Phoeniz, Ariz.; Sacramento, Calif.; Orlando, Fla.; Fresno, Calif.; and Oakland, Calif.


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