We Were Expecting A New Flood Of Foreclosures In California

What happened? Lenders are working aggressively with homeowners to keep them in their home and paying off their mortgage. Lenders desperately do not want a flood of new foreclosures to drive down home prices and depress their mortgage-backed securities.

Banks have dramatically reduced their taking back of foreclosed properties.

Borrowers are getting more time from banks to catch up on their payments. Bank of America, for instance, says it is exhausting every option before it forecloses.

The Los Angeles Times reports:

Others believe that big lenders and government officials are operating under a tacit agreement: Keep a lid on foreclosures.

"I don't think people are saying it to each other, but they're seeing it's in nobody's interest to have mass foreclosures," said Richard Green, director of USC's Lusk Center for Real Estate.

Banks pushed to the brink of collapse in 2007-08 by the explosion in loan defaults have been propped up by the government's $700-billion Troubled Asset Relief Program. In turn, the government has put pressure on lenders to find ways to keep struggling borrowers in their homes — or face more aggressive action.

One possible club would be a law to allow borrowers to have loans adjusted or forgiven in Bankruptcy Court, a process known as "cramdowns."

"If there's so much as bad news on the foreclosure front, members of Congress will again start talking about bankruptcy cramdowns," said Sean O'Toole, chief executive of ForeclosureRadar, a firm that sells loan default data. "We're probably pretty close to the level of foreclosures we're likely to see going forward."

According to information released by MDA DataQuick on Tuesday, 50,013 homes were foreclosed upon in the three months ended Sept. 30, down from 79,511 for the same period in 2008.