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Holiday moratoriums slowed California foreclosures in December

The 17.5% month-to-month decrease in foreclosure activity is attributed to lenders' giving struggling homeowners a bonus grace period.

Foreclosure activity in California took a steep dive in December, a report shows, but the decline had more to do with holiday forbearance than economic improvement.

Notices of default dropped 17.5% compared with November, according to the report by ForeclosureRadar.com. The number of homes seized by lenders dropped 12%, and the number of homes sold to third parties declined 28.9%.

The drop in foreclosures appears to reflect an easing in activity by banks and other lenders hoping to avoid delivering disheartening news to troubled buyers and shutting people out of their homes during the holiday season, the website said.

Mortgage titans Fannie Mae and Freddie Mac last month halted foreclosures through Jan. 3, and Citigroup Inc. said it would suspend some foreclosures through Jan. 17.

"The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners," Sean O'Toole, chief executive of ForeclosureRadar.com, said. "Given rising mortgage delinquencies, it is becoming increasingly clear that foreclosure activity no longer fully represents market realities."

The number of foreclosure cancellations also increased in December, but at a slower rate than anticipated by analysts at ForeclosureRadar.com in light of the Obama administration's push to make trial loan modifications under its Home Affordable Modification Program permanent.