California's mortgage-workout program had its busiest month in September since the voluntary program began last November, the state said Tuesday.
A total of 27,829 troubled mortgages were resolved in one form or another through the program brokered by Gov. Arnold Schwarzenegger, according to the Department of Corporations. That beat the previous high of 26,358 in July.
Department spokesman Mark Leyes said the state is encouraged that structural modifications accounted for half of the September workouts, or about 14,000. That's the most since the program started.
The modifications included reducing or freezing interest rates.
Those results show the program "is having some effect," Leyes said.
The other half of the mortgages were resolved through other means, including short sales or some sort of forbearance agreements in which lenders gave borrowers extra time to make their payments.
Short sales occur when banks accept less than they're owed to avoid the higher costs of foreclosing.
The department said only 79 mortgages had their principal written down in September, a sore point with some borrowers and consumer advocates. These advocates believe that principals should be written down to reflect the decrease in home values, making it far easier for borrowers to hold onto their properties.
"From the consumer perspective it would be wonderful if we saw more of that," Leyes said.
The workout program, launched with the participation of 10 loan servicers, is designed to curtail the state's foreclosures.
The latest statistics show foreclosures remain a major problem. The 10 servicing firms participating in the program, plus eight others, reported that 13,186 of their mortgages went into foreclosure in September.
Consumer advocate Paul Leonard said it's not clear whether the program is succeeding.
Although the volume of loan modifications is up, "in general the levels of modifications have not kept pace with notices of default and foreclosures," said Leonard, who runs the California office of the Center for Responsible Lending.
More than 79,000 foreclosures were recorded in the third quarter, according to MDA DataQuick, a La Jolla-based real estate researcher.
The state's voluntary program "doesn't really meet the scale of the problem," said Pam Canada of NeighborWorks HomeOwnership Center, which assists troubled borrowers. But "we'll take any silver lining we can find."
Call The Bee's Dale Kasler, (916) 321-1066.
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