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Foreclosure activity in Sonoma County has dropped to its lowest level in nearly five years, the latest sign that banks are allowing more cash-strapped borrowers to unload their homes in short sales.

Banks seized 258 homes and condominiums in foreclosure proceedings in Sonoma County during the second quarter, down 38 percent from the first quarter, according to a report issued this week by DataQuick, a San Diego-based real estate information service. It was the lowest since the third quarter of 2007, when 201 foreclosures were recorded.

Mortgage defaults, the first step in the foreclosure process, also declined. Banks sent 680 default notices in the second quarter to borrowers who fell behind on their mortgages, dipping 3 percent from the first quarter. It was the lowest since the second quarter of 2007, when 462 default notices were recorded.

The drop in foreclosures came as agents report a continued rise in short sales, where the lender permits a borrower to sell their home for less than the amount owed on the mortgage.

For the first half of the year, the number of short sales in the county has been roughly equal to the number of foreclosures. In contrast, in 2009 there were five foreclosures for every two short sales.

"It's all about short sales right now," said Belinda Andrews, a broker associate with Century 21 in Santa Rosa.

Andrews and other agents who specialize in short sales said clients are less apt now to question the tactic. Some that once had qualms about not paying off their mortgage in full now view short sales as an accepted practice. Others believe it does not make financial sense to continue paying a mortgage on a home that will take years to regain its value. Increasingly, borrowers are seeing short sales as a better alternative to foreclosure, enabling them to more quickly repair their credit and re-enter the housing market.

"Almost everyone who comes to me now is saying, &‘Oh, I wish I'd done it sooner,'" Andrews said.

Since 2007, more than 10,000 county homeowners have lost their properties in foreclosure. The annual total peaked in 2008 at 2,820 homes and has slowly declined over the past three years, falling to 1,898 in 2011.

Real estate agents and experts said banks and mortgage servicers are under increasing pressure to do more short sales or loan modifications and fewer foreclosures.

"In politics they've decided that foreclosures are evil," said Sean O'Toole, CEO of ForeclosureRadar, a Discovery Bay company that tracks foreclosure data.

The pressure has come as part of the "robo-signing" settlement in February between state attorneys general and the nation's biggest banks. Also, in California the Homeowners' Bill of Rights will take effect in January, specifically allowing homeowners to sue lenders for failing to follow new rules.

In 2009, the short sale process "was the most chaotic thing I've ever seen in my life in real estate," said James Madison, an agent for Coldwell Banker in Santa Rosa who specializes in selling bank-owned foreclosures.

Real estate agents sent the same documents multiple times to lenders, waited months for an answer about the sale and often had to seek new buyers because the original ones had walked away in frustration.

But Madison said new listings for bank-owned homes dropped significantly this spring.

"I'm going to start working on short sales," said Madison. "I really don't have a choice."

Teri Shaughnessy, a broker associate at Pacific Union International in Santa Rosa, said short sales still can take longer to complete than transactions where the owners have equity in their homes. But the deals have become more acceptable for banks, buyers and sellers.

"Short sale is definitely becoming the trend," said Teri Shaughnessy, a broker associate at Pacific Union International in Santa Rosa. "We're going to see it, and in all price ranges."

On Tuesday, the California Association of Realtors cited a lack of inventory of bank-owned properties for a decline in pending sales last month. O'Toole predicted the inventory of foreclosure properties will shrink even more in the coming months and he doubted short sales will increase fast enough to offset the loss.

"My feeling is that it's more likely that we're going to see a decline in sales volume," he said.

Statewide, there are about 450,000 homes where the owners are delinquent in their mortgage payments but the banks have yet to initiate foreclosure proceedings, O'Toole said. At the current rate, it will likely take three to four years to find a resolution for those problem loans — either by short sales, foreclosures or loan modifications.

DataQuick reported this week that 1.45 million of the state's roughly 8.7 million houses and condos have been caught up in foreclosure proceedings in the past five years. Of those, 835,000 homes were lost to foreclosure and the other 615,000 were either sold, or the payments were brought current.

Most of the loans that have gone into default were made between 2005 and 2007, when banks employed weak underwriting standards.

Investors are playing a larger role in the real estate market. Last quarter, an estimated 40 percent of properties at foreclosure auctions were purchased by investors, up from 33 percent in the previous quarter and 28 percent a year earlier.