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One in 10 California, L.A. homeowners in default

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New data from First American CoreLogic shows mortgage delinquencies climbing in June, with both California and Los Angeles posting default rates of about 10%. Yes, a staggering one out of 10 mortgage holders in Los Angeles County and California missed enough mortgage payments to receive a notice of default.

Default notices are the first stage in the foreclosure process. In June, Los Angeles County defaults rose to 9.9% of mortgage holders, from 9.5% in May. That’s nearly double the 5.2% Los Angeles default level in June 2008.

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Statewide, 9.5% of California mortgage holders were in default, up from 9.2% in May and 5.8% in June 2008.

Actual repossessions -- the final stage in foreclosure -- are not keeping pace with defaults. The Los Angeles repossession rate in June was 0.9%, down from 1.2% a year ago. California’s repo rate was 1%, down from 1.6% a year ago.

Lenders are clearly dragging their feet on foreclosures. Some contend they are trying to put foreclosed homes on the market at an orderly pace, to keep prices from collapsing. Lenders say they were simply complying with government-imposed moratoriums and were waiting to see what other foreclosure prevention measures would be coming from Washington.

Lenders may also be trying to complete more loan modifications to avoid more invasive government efforts such as passage of a law allowing bankruptcy judges to order reductions in loan principal. So-called ‘cramdown’ legislation has been supported by the Obama administration but was taken off the table earlier this year. Prominent Democrats, including Rep. Barney Frank (D-Mass.), who chairs the House Financial Services Committee, have said that they would push for cramdowns if loan modifications don’t go up.

-- Peter Y. Hong

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