California foreclosure activity plummeted in December, especially when looked at on a daily average basis, according to the monthly California Foreclosure Report released by ForeclosureRadar, a Website devoted to tracking every California foreclosure.

Notices of default dropped 17.5 percent in aggregate, but they actually dropped 32.5 percent on a daily average basis. This percentage difference is due to that fact that December had 22 days on which documents were recorded, versus only 18 in November. In addition, notice of trustee sale filings dropped 23 percent. ForeclosureRadar said this is not simply a regular season decline, as it has not seen a similar drop in recent years.

“The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners,” said Sean O’Toole, founder and CEO of ForeclosureRadar. “However, given rising mortgage delinquencies, it is becoming increasingly clear that foreclosure activity no longer fully represents market realities.”

On an average daily basis, cancellations only increased 3.5 percent. Given the Obama administration’s drive to make trial loan modifications under the Home Affordable Modification Program permanent, this was a smaller increase than expected. Based on the timing of these cancellations, ForeclosureRadar believes 21 percent were cancelled due to statutory requirement that a foreclosure sale be held within one year, thus forcing a cancellation. In addition, tracking Website estimates 61.9 percent were likely due to some form of loan workout, and 17.1 were more likely the result of a filing error.

On a month-to-month basis, pre-foreclosure properties and foreclosure properties scheduled for sale decreased, but year-over-year these inventories saw huge gains. In December, pre-foreclosure properties fell 0.4 percent from the prior month but jumped 55.12 percent from December 2008. In addition, foreclosure properties scheduled for sale fell 2.64 percent from November but surged 117.52 percent year-over-year. However, REO properties did the opposite. Compared to November, REO properties increased 3.41 percent in December but plummeted 34.89 percent from the prior year.

Foreclosures that went back-to-bank declined 28 percent, and those that sold to third parties fell 41.8 percent. A significant decline in foreclosure discounting by lenders appears to be the reason for such a dramatic drop in sales to third parties, ForeclosureRadar said. For most of the last year lenders discounted the opening bid from the amount that they were owed by nearly 40 percent, but in December, that discount dropped to 33.7 percent. In addition, the percentage of sales that were discounted declined from nearly 90 percent in December 2008 to just 75 percent in December 2009.