July 2008 may be looked upon as a study in contrasts. On the one hand, it was the month that Congress and the White House put aside their differences to enact sweeping legislation aimed at stemming off foreclosures and propping up Fannie Mae and Freddie Mac.

And then there's the bloodletting on the ground.

In July, the rate of foreclosures in California was estimated at a staggering 1,300 per business day. That's triple the estimate from a year ago. California's foreclosure rate was up 22.5% from June 2008.

The most depressing news: Notices of Trustee's Sale are recording at a rate of 97% of Notices of Default. Under normal circumstances, this figure would be at or below 50%. This means that nearly all homeowners who go into default will end up losing their home at auction.

Speaking of auctions, lenders are taking back over 96% of properties put up for auction, despite opening bids that cut up to 40% off a property's current value.

In a move to clear its backlog of REOs, Fannie Mae is opening offices in California and Florida and considering bulk sales to distressed asset investors.

So these contrasting events beg the question: when are lenders going to start working with homeowners to turn these junk loans into more stable, performing loans?

With the new rules enacted last month, a loan servicer can modify a loan without risking an investor lawsuit, as long as the net present value of the modified loan exceeds the value of the loan as a foreclosure.