Lenders started foreclosure proceedings on a record number of California homes in March, even as sales at auction fell dramatically, data aggregator ForeclosureRadar reported.

The number of California homes subjected to notices of default — the first step in the foreclosure process — surged 29.3 percent from February to March, to 54,268, the company said. That’s a 26.3 percent increase from a year ago, and 25.8 percent above the April 2008 peak.

Notices of trustee sale — formal notice that an auction date has been set for a home — were up 82.3 percent from February to March and 19.6 percent from a year ago, but 15 percent below a July 2008 peak.

Some 10,040 homes were sold at auction in March, ForeclosureRadar said, marking a 41.4 percent decline from February and off 36.6 percent from a year ago. Banks take back the majority of properties that go to auction, but about 11 percent of auction sales were to third parties.

ForeclosureRadar founder and Chief Executive Officer Sean O’Toole said government programs aimed at preventing foreclosures are the most likely explanation for the disparity between homes entering the foreclosure process and homes sold at auction.

A state law that requires lenders to contact homeowners before filing a notice of default took effect in September, likely creating a backlog of foreclosure filings. A portion of the decrease in auction sales seen in March may be explained by a drop in notice of default filings in September, ForeclosureRadar said.

The dramatic rise in notices of default now taking place may be the result of lenders trying to process as many foreclosures as possible before another law, The California Foreclosure Prevention Act, takes effect this summer. That law can add 90 days to the foreclosure process unless lenders follow required steps.

O’Toole said that because those and other programs do little to address the problem that many homeowners owe more than their homes are worth, "there is little evidence that these programs will result in anything but delays."


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