It was bound to happen, and probably sooner rather than later. The number of new foreclosure filings went up in the third quarter of 2011 after a year of going down. San Diego foreclosure attorneys have pointed out before, though, including in posts to this blog, that while foreclosure numbers were going down, the number of distressed homeowners was not. In other words, the reason for new foreclosure numbers being in decline was not that there were fewer mortgage defaults. The backlog of potential foreclosure cases was still growing.

There were two main reasons why foreclosure numbers were looking better when the reality was that the situation was not better. First, the system was so saturated with foreclosure cases that the banks and the courts were not prepared to take on more cases. Second, the banks were not sure what kind of punishment they might be facing for the robo-signing scandal and for other improper procedures related to foreclosures. They held back for awhile to see what would happen in negotiations with the state attorneys general.

Apparently, both reasons are having a reduced impact on the mortgage lenders' decisions on starting new foreclosure actions. As some foreclosure cases have been resolved, there is more capacity to begin new proceedings. And, even though the negotiations with the state attorneys general have not yet produced a settlement on fines or other punishments for the major mortgage lenders, the banks are either feeling more confident about their paperwork and procedures, or they feel they just cannot afford to wait for the outcome of the negotiations before proceeding with some new foreclosures.

California had the fifth most new foreclosure starts in the country in the third quarter, with 1.45 percent of all mortgage loans in the state going into foreclosure during those three months.

Source: Bloomberg Businessweek "Foreclosures Rise for First Time in Year as Backlogs Ease" Nov. 17, 2011