It’s possible that all the bail out talk gave people a spark of hope. This may have enticed them to make a payment in the hopes that the bail out would save them.
This would explain the decline in NODs, but not the decline in foreclosures. People who were supposed to be foreclosed upon in November are the ones that stopped paying for their homes sometime around March and were served a notice of default in July. Making a single payment does not save you from a foreclosure if you’re 6 months behind. Once you get a NOD, there are only three ways out. 1) Refinance 2) Sell 3) Foreclose. Foreclosures aren’t happening, sales are still slow, and third-party refinancing is probably very hard to find, given recent price declines. That leaves two options. Either lenders are engaged in mass modification of defaulting loans, or they are delaying foreclosures for whatever reason. One plausible explanation is that they are not foreclosing on any borrower attempting a short sale. Short sale leaves much more money in the lender’s pocket than REO.
