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The number of U.S. homes entering the foreclosure process fell in January to a level not seen since the peak of the housing boom, a consequence of a package of state laws aimed at stemming foreclosures that went into effect in California at the beginning of the year.
So-called foreclosure starts — when a home with a mortgage gone unpaid is placed on a countdown clock to possible foreclosure — declined 28 percent nationally last month from January 2012, foreclosure listing firm RealtyTrac Inc. said Thursday.
Foreclosure starts also fell 11 percent from December, the firm said.
The last time fewer homes entered the foreclosure process in a single month was June 2006, when the U.S. housing market was roaring and home values were rising — trends that helped homeowners avoid foreclosure.
January's decline in foreclosure starts was most pronounced in California. The number of homes in the state that started on the path to foreclosure plunged 75 percent from a year earlier and sank 62 percent from December.
As the nation's most-populous state, California has seen a larger share of the fallout from the housing downturn that most states. That's why the state's sharp drop in foreclosure starts last month had such an outsized impact on the national figures.
The package of laws that went into effect on Jan. 1 increased homeowners' protections from foreclosure, effectively buying them more time to potentially avoid losing their homes.
Among the provisions: Large lenders must provide a single point of contact for homeowners who want to negotiate loan modifications and are prohibited from foreclosing while they evaluate homeowners' requests for alternatives. Homeowners also can sue lenders to stop foreclosures or seek monetary damages if the lender violates state law.
That may help some homeowners stave off foreclosure entirely. Others, however, may not be able to avoid losing their home, just delay the process.
Similar laws have gone into effect in states such as Nevada and Washington. And in each case, foreclosure starts declined sharply.
"Unfortunately, down the road, we usually see a boomerang effect as some of those delayed foreclosures come back and actually end up being foreclosed-upon," said Daren Blomquist, a vice president at RealtyTrac.
Blomquist anticipates that could happen at the end of the year or early 2014.
Because foreclosures typically sell at a sharp discount to other homes, a delayed wave of California foreclosures could potentially bring down the value of nearby homes when they sell.
Still, should housing demand and home prices continue to grow this year, the speed bumps along the foreclosure path enacted by the California legislature could give homeowners time to avoid foreclosure by enabling them to qualify for mortgage refinancing or sell their home.
All told, 64,773 homes nationwide were placed on the path to foreclosure in January, RealtyTrac said.
Some states, such as Arkansas, Washington and Nevada, saw big increases in foreclosure starts.
Meanwhile, the number of homes scheduled to be auctioned climbed between December and January in 26 states and Washington D.C. In several of those states, including Florida, Illinois and Pennsylvania, scheduled foreclosure auctions were at 12-month highs or greater.
Lenders also took possession of the fewest homes since February 2008 last month.
Completed foreclosures totaled 50,453 in January, down 5 percent from December and a decline of 24 percent from January 2012, RealtyTrac said.
Some states, however, continued to see a big increase in homes repossessed by banks last month. Among them: Maryland, where repossessions rose 50 percent from a year earlier, and Ohio, where completed foreclosures jumped 23 percent.
Historically, about half of all homes that enter the foreclosure process end up being taken back by lenders.
Blomquist forecasts that 600,000 homes will end up being repossessed by banks nationally this year. Last year, lenders took back 671,251 homes, down nearly 17 percent from 2011's total.