First the bad news:  L.A. Land, the Los Angeles Times real estate blog (quoting Bloomberg News service, quoting PropertyShark.com) reported that new foreclosures in Los Angeles nearly quadrupled in the second quarter.  The post didn't say whether they meant LA County or City, but the news is not pretty either way.

On the good news front, in an article in today's business section by Mark Lifsher, the Times reported that the California Senate passed a mortgage bill aimed at heading off foreclosures by requiring lenders to communicate with borrowers when their loan is in danger of defaulting.  The legislation, which passed on a 32-8 vote, would require lenders to give homeowners more - and earlier - warnings that they were heading toward default. The bill, SB 1137, will take effect immediately once it is signed, as expected, by Gov. Arnold Schwarzenegger.

There are so many resources available to help homeowners stay in their homes.  If you find yourself falling behind in payments, get help immediately.  Call your mortgage broker (if he or she is still in business), call your agent (same) or call HopeNow (www.HopeNow.com),  to structure a workout early in the process.  The last thing banks want right now is another foreclosed property on their books.

If there is no way to keep the borrower in the home (lost job, divorce, borrower just can't handle to payments), then a "short sale" can be structured where the borrower sells the home and the bank accepts a purchase price for an amount less than the mortgage owed.  I learned of a company today, www.ShortSalePlan.com, that is training agents and banks to "prepackage" short sales to take much of the uncertainty and time delay out of the process - a great idea.  (See my post on May 30, 2008 on the pros and cons of short sales).  In a short sale, both the borrower who is underwater and the bank win (or don't lose as badly).  The borrower does not have a foreclosure on his record (although he may lose equity) and the bank does not incur the expense and lost revenue from a 4-5 month foreclosure process, payment of trustee fees and the hassle of trying to sell a vacant foreclosure property.