As many as 325,229 U.S. homes were reeling under foreclosure process in various stages – received default notices; scheduled for foreclosure sale public auction; and repossessed by banks after public auction. This works out to one in every 397 housing units in the country, suffering the bitterness of foreclosure episode. The figure of July is an increase by 4 percent compared to June; but a decrease of 10 percent against July 2009.

The strikingly bad news is the decrease of foreclosure activity is wiped out by the record level of properties gone under the repossession of lenders, which are eventually marked to hit the housing markets sooner or later. The banks cannot keep these premises for long and they are to be converted into hard cash, selling them to buyers.

As against this grim situation nationally, there is a decline in Contra Costa County and Alameda County of SF Bay Area in the number of foreclosure filings in July. The number of default notices sent to distressed home owners, as the first step of foreclosure process was recorded as 896 in July; and the number of delinquent properties repossessed through foreclosure sale public auction were 636 in Contra Costa County.

In Alameda County – there is more distress – 1,790 home owners received default notices and 616 properties were repossessed in July. It goes without saying that the total number of repossessed properties in both the counties – numbering 1,252 properties – have to arrive at the respective housing markets, with great discounts because of the selling pressure.

What is most interesting is – these repossessions are fewer than the previous months. Thinking of it, the banks are adopting a new strategy of giving more time for the borrowers, by loan modifications and permitting a lot more short sales, as otherwise the numbers should have been much more.

"We are seeing a bit of seesaw or roller coaster ride here with the numbers, and I think it’s because of all the outside intervention that’s impacting the foreclosure process" said Daren Blomquist, marketing and communications manager for RealtyTrac. "Even though there are a lot of good signs, it’s really too early to say we are totally out of the woods in the foreclosure crisis."

The signals for foreclosure crisis end continue to be confusing. There are lots of positive signs, but we have to include the loan modifications programs, unemployment and the way banks manage their foreclosure backlogs.

For example Alameda County registered a 143.6% increase in notice of defaults, In June. This comes as a result of the high unemployment, which is impacting lots of people. However, if we take a look at the year over year numbers, there is a slight improvement: some 896 homeowners in Contra Costa County received a notice of default in July, which means 53.8% drop from a year ago and a 15.9% decline from June. July brought another 636 homes to the banks, which represents a 17% drop from 2009, but a 10.4% gain from June.

In the Bay Area 3,149 homeowners receive a notice of default, meaning a 35.1% down from a year ago but 26.3% up from June. Bank became owners of a number of 1,467 foreclosed properties, which is down 11.5% from a year ago but up 18.8% from June.

Foreclosure drops come as a result of short sales, when a home is sold for less than the loan amount, and banks decide not to proceed with the foreclosure proceedings.

"I think certain markets have stabilized. In some cases were even have price increases, and we are going to see less homeowners underwater," Mayfield said. "Unemployment is the big unknown. Regardless of unemployment, I think that we can see some improvement in home values and continuation of low interest rates, so the the housing market continues to recover," he added.

June brought 20% discount from the properties sale price, so professionals from San Francisco came across the bay and bought homes in Oakland. According to the report the buyers paid 0.1% less than asking price, that means only $1,080 less than the last listing price.

"We’re seeing multiple offers, we’re seeing above asking price" said David Kerr, a ZipRealty agent from Oakland. "People are buying foreclosure, fixing them up and selling them and getting offers", he added.

However the lenders don’t give out money so easily. They generally require appraisals before giving a mortgage and appraisers consider what foreclosed homes in the area sell for when determining how much home is worth. And if the home is sold at too a right prices, the sale falls apart.

Although San Francisco struggles to regain its footing, that doesn’t seem to have influence on the Noe Valley neighborhood. Here most homes are going to just above listing price – according to the Zillow.com. Homes sold for and average of 0.02 percent more than the selling price. Although that’s only around $200 but the phenomenon is what drags the attention.

"It’s crazy. I had some house with five offers and it went from $1,4 million to 1.7 million," said Brendon DeSimone a San Francisco realtor. "The valley just popped. It’s not uncommon for one open house to have 200 people come through" he added.

The latest foreclosure activity report, pertaining to the first half year of 2010, released by Realtytrac says there will be near about 1 million foreclosures hitting the U.S. housing markets this year. This is based on the anticipation that the ARM mortgages of 2006 will be resetting towards the year end, paving way for more number of delinquencies.

California continues to be in the top 10 list of States worst-hit by foreclosure epidemic –  in the 4^th rank, consistently for the last few months. 2.54 percent of California homes went into foreclosure during the half year – numbering 340,740 properties. This is the highest total of all the States of U.S. country. However, in comparison, the foreclosure filings have dropped by 15 percent from that of the second half year of 2009, and by 13 percent from the first half of last year.

As far as SF Bay Area is concerned, new foreclosure filings are down by 41 percent in the first six months of this year, compared to the same period last year. This trend is also visible in Alameda County, where the number is down by 51 percent and in Contra Costa County by 44 percent.

Market analysts differ in their opinion – while some of them say it indicates that the SF Bay Area housing market is on the path of recovery, some others are not ready to accept this, since lending banks are holding back another bundle of foreclosed properties, with a view to stop the home prices falling again.

Another point of interest to support this theory is – there is growing number of re-defaults by home owners, even after loan modification and adjustment of repayment installments.

On the other hand, lending banks are adopting a strategy of wait and see – instead of rushing to expensive foreclosure route – they are giving more time for the home owners with the hope of retrieving their capital, by extending trial modifications to the distressed borrower-home owners.

By taking the year-over-year sales figure, one can assume that the end of the tax-break incentive program on 30^th April (only extended for closing till 30^th September) has its impact in dousing up the spirit of home buyers and investors. But this presumption is belied, by the fact home shoppers are active in their hunt and thus there is a rise in home sales compared to May.

Inventory of homes available for sale rose during the month of June in the SF Bay Area unusually, since the month of June every year will see fewer listings of homes for sale. Figuratively there are 22,403 residential properties waiting for buyers at the end of June, an increase of 8.7% from that of May.

Market watchers are of the view that there will be higher influx of homes into the market by the end of 2010. The reason being – Bank repo properties are steadily on the increase month after month of late and more ARM mortgages resetting will increase the delinquency rates nationally, as well as in Bay Area. It is reported that more than 7 million home owners are behind their mortgages, and will fall into the foreclosure trap during the second half of 2010.

However there is encouraging news though for home sellers. The median price of a Bay Area home, recorded in June at $410,000 is up by 16.5 percent – than what it was in June 2009.

Other statistics worth noting are – Jumbo loans – that is amount of loan over $417, 00 involved in home sales for June is 33 percent; adjustable rate mortgages accounted for 11.9 percent of total home sales in June, where 16 percent of buyers are supposed to be investors, buying properties for business purposes and not for their own living, in SF Bay Area.

News reports appearing in San Francisco Chronicle, about Contra Costa County are somewhat encouraging in that although the property values in cities of this county still facing south (dropping down) they are not dramatic, as they were in 2009. Across the Contra Costa County, on an average, the assessed property values decreased by only 3.4 percent, but the decline in tax revenue because of reduced property tax collection continues.

Here is the list of cities and the percentage decrease as reported:

Richmond    12.82%

San Pablo       5.90%

Hercules       5.28%

Antioch       4.88%

Brentwood        4.10%

Oakley        2.83%

Danville        2.10%

Rest of the cities of Concord; Moraga; Pinole; Pleasant Hill; Pittsburg; Martinez; San Ramon – in that order have dropped assessed values of properties in percentage ranging from 1.91 to 1.45 respectively. In the case of cities like Clayton; Walnut Creek and Orinda – the drop in value of properties is going down from 0.96 to 0.35 percent.

Contra Costa County consists an array of cities ranging in their economy – from somewhat Industrial city of Richmond to affluent Danville. It is pointed out that the largest drops in values have taken place in cities of working class communities, where already the home values lingered in the lower end.

Another point of interest is the two cities – El Cerrito and Lafayette – have shed assessed value of properties by 1.09 percent and 0.97 percent only. The County officials were a relieved lot, as they expected the property value drops should be higher, as experienced during the last two years, when more than 10 percent decrease was recorded.

The County has been experiencing budget cuts arising out of lesser revenue collection through property tax levies.  Overall the sad-state-of-affairs are not over yet and they can smile if only the market values are going up.

Although the exact contents of the proposed legislation are yet to be revealed officially, discussion has already started among Industry circles, about the repercussions of the law, if promulgated in California.

What are the repercussions? Going back in the history, during times of Great Depression, the State Legislature enforced laws so to allow homeowners, who have lost their homes due to mortgage foreclosure, from being pursued by lenders for the “deficiency” that is difference between their former home’s market value and the dues on mortgage.

These protective laws were made at a time, when people were not using refinancing that frequently as now. So they did not include mortgage loans that were refinanced by the home owners – even for obtaining a lower interest rate – into this protection.

Today’s position is once a foreclosure is complete, lenders may use the way of obtaining a deficiency judgment through the Court and pursue the borrowers for the balance amount, even after their forfeiting their home. Although it is a cumbersome procedure to obtain a deficiency judgment, some lending banks use it as leverage for negotiation for loan modifications of the distressed home owners.

There is a growing tendency of people just walking away from their mortgaged homes, without caring for foreclosure and they don’t even care about the damage to their credit record. They can save their future earnings.  Also there is another tendency of so-called strategic defaults – people who can afford but refrain from paying mortgage installments. The proposed legislation will save them all, from the lending bank’s persuasion for deficiency.

The California Association of Realtors has sponsored the proposed legislation and the State Bankers’  groups are trying to alter the bill, saying the existing mortgages should not be altered, and if need be, this can be extended to future mortgages.

More info will be available once the bill becomes a law.

During this week, in Contra Costa County the city council and school board meetings were engaged in this and approved budgets with deep cuts, with impacts concerning services, jobs and welfare programs, affecting tens of thousands of area residents.

The economic down turn and the steep decline in Property Tax revenues have been causing reductions – somewhat deeper into public treasuries, making them shrink rapidly for the past few years. Apart from some cities like Richmond and Brentwood, which had foreseen the deficit and prepared for tougher times, other cities and school districts with multi-million dollar budgets had to swallow the bitter pill of big reductions in staffing and services.

Budget trimming effected in Concord is about $5.5 million and it expects to spend from its reserves nearly $5 millions. The members of the city council took a first step towards putting a tax measure on the November ballot.

The effect of lesser revenue in Antioch is resulting in a shortfall of $2.9 million, which is being managed by ordering layoff of 20 city workers; cut back its recreation department and animal shelter services. According to City Manager Jim Jakel – the city will be left with about 50 city workers, not counting the Police Department.

In Dublin the cut of $1.5 million from its $72.4 million operating and capital improvement budget is going to cost the city – one police officer; fewer hours of work for library patrons and the cancellation in full of the annual Day on the Glen celebration.

In the West Contra Costa school district, where the deficit will be to the tune of $3.2 million next year, the funding looks even tighter for the next two school years. Although the school board’s approved budget this week preserved programs such as class-size reduction in elementary schools and adult education, the district will need to trim $3 million from its 2011-12 budget and another $3 million from the 2012-13 budget.

The issuance of a Default Notice commences the foreclosure process. In the present foreclosure scenario, the numbers of Default Notices issued are taken as the barometer, to assess the foreclosure activity in a certain region – by its increase or decrease. Eventually it gives a wider meaning for industry analysts to interpret into more analytical predictions.

This way, the statistics released by Realtytrac for the month of May reveals that the number of Default Notices fell by about half in the East Bay, during May 2010, from a year ago, since more distressed homeowners opted for Short Sales.

Industry observers are of the view that the slowdown in Default Notices that began this year are tied to home loan borrowers facing foreclosure process, getting into trial loan modification programs.

According to Daren Blomquist, marketing and communications manager of Realtytrac, which released its latest foreclosure activity report, while defaults are down, the number of previously foreclosed homes being taken by banks is on the rise; lenders continue to work through a backlog of delayed home repossessions, including many that failed to get permanent loan modifications.

Blomquist commented that it is a tale of two different trends with the foreclosure process; it’s kind of good news and bad news.

The concept of Short Sale is selling a distressed home for a price less than the mortgage amount, which requires the approval and consent of the lender. The fact that the number of Default Notices are declining is an indication that more number of troubled home owners are opting for Short Sale route and thereby escape from the foreclosure process.