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California foreclosure starts fall to lowest level in four years

July 19, 2011 | 12:24 pm

ForeclosureThe number of Californians entering foreclosure dropped steeply in the second quarter to hit its lowest level since 2007, a sign the foreclosure crisis in the Golden State could be easing amid a more stable housing market and increased scrutiny from regulators.

Notices of default filed against California homes dropped 19.2% during the three months ended June 30, when compared withthe same period a year earlier, and 17.0% from the prior quarter, according to San Diego research firm MDA DataQuick.

A total of 56,633 homes received a notice of default, which is the first formal step in the foreclosure process.

Foreclosure practices have slowed nationally as homeowners challenge foreclosures in court and the nation's biggest banks face settlement talks with regulators over faulty repossession practices. The nation’s five largest mortgage servicers are currently negotiating with a committee of all 50 state attorneys general over last year's robo-signing scandal, where banks employed people who attested to the veracity of key documents without reading or understanding what they were signing.

Some experts believe if a settlement is reached, foreclosures could spike again once banks overhaul their practices. Unlike other states whose foreclosure system is overseen by the court system, foreclosure activity in California has seen a steady decline for more than two years, as the housing market has recovered faster than other hard-hit states.

John Walsh, DataQuick president, attributed the declines to a steadier housing market.

"Homeowner distress spreads fastest when home price declines are steepest," Walsh said in a statement. "And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us.”

The number of homes taken back by banks also fell in the second quarter. A total of 42,465 homes were taken back by banks during those three months, a 10.9% decline from the same period a year earlier and a 1.4% drop from the prior quarter.

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-- Alejandro Lazo

Photo:  A foreclosure sign hangs on a fence in front of a foreclosed home in Richmond. Credit: Justin Sullivan/Getty Images

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