Foreclosure figures are rising right across the continental USA and any county or State in particular, once it is normalized for regional variations, can act as a reliable weather vane for what is happening in every part of the country.

In California, the number of foreclosures is on the increase. Foreclosures are a distasteful but unfortunately necessary part of the Real Estate business. Lenders use foreclosures to send a strong message to borrowers who would otherwise default on their payments at the first sign of trouble with their finances.

To be honest, lenders do not like having to foreclose on a property and will, initially, exhaust all other avenues they have, trying to communicate with the property owner before they decide that it is now time to call it in and take possession of the property.

There is something here, at this highly emotive stage, that may people lose sight of: once a property moves into the foreclosure zone all is still not lost. Lenders may not be the kindest organizations on the planet but they work best when they lend money and receive payments back. Taking possession of a property, creating a huge administrative load dealing with a hard-to-reach house owner who has suddenly fallen on financial hard times, and then moving in and selling the property, are all loss-making activities.

The lender, by default, is geared up to try and find ways to minimize this loss. Precisely because of this there exists the possibility of a home owner moving out of the foreclosure zone and saving their property and credit rating by engaging in any of the following activities: 1. They could bring their payments current. 2. They could refinance either by taking another loan or a second mortgage which releases equity in their property 3. They could sell their property, pay back what they owe and move on.

Now all of these are viable options in a market that is still buoyant. However the moment the market tightens up the choices available to a home owner looking to save their property significantly narrow. This then leads to an increase in foreclosures as those in financial trouble are unable to get out of it.

The current figures available for California show that roughly half (54.6 percent) of the homeowners in default emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was 88.0 percent. The decrease is significant because it shows that we are now in the grip of a bear market for real estate which will only get worse as lenders are forced to dispose of the properties they have acquired at a loss and then proceed to tighten their own lending procedures further restraining the growth of the home buyers’ market.

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