“Certain consumers who defaulted on a mortgage in the recent recession only did so because of the recession – they are otherwise good credit risks,” the report said.

TransUnion collects data on Americans’ borrowing and bill paying habits and it their report carries high importance in how lenders view defaulting borrowers. The only problem here is that TransUnion and its survey won’t change the way mortgage delinquencies affect credit scores, but it can be a guideline for lenders to consider mitigating circumstances like job loss in extending credit to troubled homeowners.

“Lenders always try to distinguish a one-off, life-crisis event like divorce or a medical catastrophe versus people who are just ineffective at managing credit,” said Ezra Becker, TransUnion vice president of research and consulting, and one of the study’s authors. “Our argument is that this economy disproportionately affected certain people in a way akin to a one-time crisis. Those consumers have not in fact forever changed their personal philosophy on repaying debt. It was a one-time event because of the specific and personal circumstances of the recession, and they otherwise would be good credit risks.”

The report involved 129,000 mortgage holders out of 5 million who were 120 days to more delinquent and who has additional lines of credit. The TransUnion researchers followed their loan performances over 12 to 17 months.

The result: they found that consumers whose only delinquencies were on their mortgage (as opposed to ones who previously were late on credit card payments and other loans) do indeed present less credit risk. Becker said, “It’s the environmental impact (of the recession and high unemployment) that has come into play for those consumers.”

The California Association of Realtors also confirm in their latest report the above trend; and point out three primary reasons as of date, for the drop in home sales figures in California, which includes the San Francisco Bay Area housing markets. They are – weak economy; usual seasonal slowdown normally found during this time of the year; and unrealistic asking price by some home sellers, if not all.

While the first two backgrounds are understandable, the third one – disproportionate asking price – is arising because home sellers fail to understand that today’s market is a different one, from what they have been seeing for decades; there are no competitors for a single California home, as was during the boom years; sellers have no option to select buyers, since finding a buyer for a property, a qualified one at that, with the stricter norms of lenders to finance the buying process is – to put it simply, an uphill task.

So pricing a California home should be inevitably realistic, given the fact every buyer searching for a home, finds not less than 12 identical properties – both from traditional as well as foreclosure listings – and the price tag is the predominant factor, in carrying out the final selection.

The latest report for October says statewide home sales dropped by 3.5 percent compared to September; year-over-year there is a drop of 19.6 percent (of course now the federal tax credit incentive is absent).

The brightest bit of the report is Silicon Valley of SF Bay area is still the holder of priciest communities in the entire country – Los Altos at $1.7 million and Palo Alto at $1.5 million, capturing the first and third ranks of the top list, to quote a few.

The suit states that Aurora reaped more than $100 million in what the court documents call "illicit profits" from the alleged scheme.

The suit was filed in the U.S. District Court fro the Northern District of California in San Jose, and it represents the homeowners who paid the Littletoon, Colorado-based company money for the company to help them in "curing’ delinquent home mortgages.

The fraud scheme was the following: Aurora promised the troubled homeowners the foreclosure process’ halt if they engage themselves in three to six large monthly payments. In addition, the company will work with the homeowners to restructure, modify of resell the loan, allowing homeowners a chance to keep their homes.

"We intend to prove that Aurora’s workout plan was nothing more than a cynical ploy to take advantage of homeowners desperate to hold on to their homes," said Steve Berman, managing partner of Seattle-based Hagens Berman Sobol Shapiro LLP and the attorney representing the proposed class.

The suit states that after a give period of months Aurora foreclosed on the homes without giving the borrowers any notice that their requests for loan modifications were denied and they not let the borrowers to access any method for ending their loan deficiency, despite the provisions of the workout agreements. This provided four methods of ending loan deficiency: bringing the loan current, refinancing with another lender, modification of the terms of the loan at the discretion of Aurora and another workout option at the company’s discretion.

"The pas three years have been tough enough on homeowners without them having to worry about being preyed upon by unscrupulous loan services," said Berman.

The suit papers outline two stories of married couples who tried to stop foreclosure by contacting Aurora for a loan modification. The first couple refinanced their home with a mortgage company in early 2006. The couple suffered economic setbacks in 2008: loss of work and poorly performing investment. They contacted Aurora in 2009 and signed one of the so-called workout agreements.

The couple paid a total of $33,500 during the next several months and in return Aurora promised them to modify the terms of the loan. But this never happened. In May 2010 the couple received a Notice of Vacate indicating their home has been sold in foreclosure. They have never received a notice of  foreclosure sale or something about the foreclosure process to be completed. In addition, Aurora did not notify the family that it had been denied for a loan modification according to the complaint.

"We’ve heard of cases like this a lot over the last few year,"Berman said. "We’d like to bring struggling homeowners some sense of belief."

Berma believes the workout agreements were fraudulent in nature and he seeks to have the agreements declared void. In addition the law firm seeks an injunction against Aurora in order to forbid the company to continuously offer this deceptive workout agreements.

This necessitated home buyers, aspiring for a San Francisco property, to inevitably go in for the so-called Jumbo loans – with conforming limits beyond $417,000, so as to buy a home since the median price of a San Francisco area home, ruled during the years 2002 to 2007 in the range of $675,000 each.

Prior to the credit-crunch, due to foreclosure tornado hitting this region somewhere in August 2007, the norm for purchasing homes from SF Bay Area was to get jumbo loans and the percentage of these bigger size loans was 60% out of all sales made. Now that lenders are not inclined to take more risk and are hesitant to entertain loans from this category of applicants, the percentage recorded for June sales has diminished to 33.3% of all home sales.

However, purchase of properties from low end neighborhoods – in the bottom of the price ladder at $300,000 – showed an increase last month, by accounting 34.2 percent of all SF Bay Area home sales. Same period last year, there were still large numbers of foreclosure properties from this price range, and so the share of purchases from this category was recorded as 39.5%.

In the medium price range of $500,000 and above, home sales accounted for 39.2% in June. Sales of single-family homes priced above $800,000 recorded 17.5 percent of the total home sales in June.

Experts view this trend in a different way – had the origination of jumbo loans been higher as in the past, the sales of high-end properties in SF Bay Area would have been much more in June. We will see what happens in the coming months of 2010.

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.

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.

On the official statistics part, the U.S. Treasury Department and the Department of Housing and Urban Development (HUD) have stated in their official release of data for April 2010 that under the Home Affordable Modification Program (HAMP), the permanent loan modifications have reached almost 300,000 troubled home owners – an increase of 68,000 or nearly 13 percent over the month of March.

Now that the mortgage interest rates have touched an all-time low – 4.72 percent on an average for a 30 year-fixed mortgage – market watchers expected that there will be upsurge in home loan applications. A steady campaign by the Federal Reserve to reduce borrowing costs for consumers has done this pushing down of mortgage rates, to extraordinary low levels last year. Actually the rates were expected to rise after the government program ended this spring, but have fallen instead in the last two months.

Has the down-level mortgage rates pushed up housing market activity? The national index of the Mortgage Bankers Association says those applying for a mortgage towards buying home fell to the lowest levels in 13 years, as per records last week and down by 35 percent from the previous month.

But local reports in the Bay Area are different. Cindy Romero-Lowary, a loan officer with the Pleasanton office of Cherry Creek Mortgage says that she haven’t seen a drop off in purchase home loans; Low prices for homes are a bigger factor for buying than today’s low-interest rates; People are going out and purchasing homes regardless of what the interest rate is.

Karen Mayfield, Bay Area regional manager for mortgage banking at Bank of the West, San Francisco, says "People who did not have enough equity to qualify in the fall of 2009 may now qualify. Prices have stabilized and in some cases increased.”