California: More Missed Mortgage Payments, Fewer Foreclosures

More Californians are failing to make their mortgage payments than at any time in the last 20 years, but fewer of them are losing their homes, according to new figures.

The drop in foreclosures follows moratoriums adopted by major banks and mortgage giants Fannie Mae and Freddie Mac. The increase in loan defaults, meanwhile, suggests that rising unemployment and the continuing recession are still claiming fresh victims.

But another factor in the soaring default rate could be that some struggling homeowners are purposely skipping their payments so that they can get their loans refinanced, industry experts say. [Los Angeles Times]

In the complex world of loan modifications, distressed homeowners are finding the fastest route to obtaining a loan workout is to stop paying the mortgage altogether.

Banks are so deluged with loan-mod requests and are so understaffed that only the neediest cases -- homeowners in default and on the route to foreclosure -- are getting the attention.

Rewarding homeowners in default runs counter to the newly-launched "Making Home Affordable" Program, which offers refinances to homeowners whose loans are held by Fannie Mae and Freddie Mac. Only homeowners who are current on their loan are eligible for the program.