After an across the board drop in California’s foreclosure activity in January, Notices of Default, Sales at Auction and negative equity at foreclosure surged once again in February, according to Foreclosure Radar’s California Foreclosure Report released Friday. Notices of default increased 21.3 percent from January, nearly returning to peak levels reached in April 2008 — despite the President’s Day holiday and February being a short month. Properties sold at foreclosure auction rose 11.9 percent from January to February, reaching 17,131, representing $7.2 billion in loan value, the report said. While sales were up 1.2 percent year-over-year, they remained 41 percent below the peak reached in July 2008. Of the properties sold at auction, 92.8 percent went back to the lender, representing $6.65 billion in loan value for the 15,904 properties. Properties sold to third parties at auction continued to increase, rising 222.9 percent from the same time last year to a record 1,227 properties, a 38.8 percent increase from January. “Despite their unpopularity, foreclosures and short sales are currently the only mechanisms working to eliminate the negative equity now plaguing 30 percent of Californians,” said Sean O’Toole, founder and CEO of ForeclosureRadar. “While prices have corrected to affordable levels in many parts of California, housing markets and the economy continue to suffer due to the unsustainable debt taken on during the housing bubble.” Opening bids at auction in February were discounted an average of 36.3 percent from the outstanding loan balance, a decline of nearly 5 percent from the prior month. Still, the number of properties that were discounted by 50 percent or more increased to 6,307 of the 17,131 taken to auction. The largest discounts were found in Monterey, San Benito and San Joaquin counties, at over 46 percent, while San Francisco County continued to see the smallest discounts of any major county at 20 percent. “These deep auction discounts reflect the significant negative equity lenders and homeowners are facing, while also offering opportunities for knowledgeable investors,” O’Toole said. The average difference between current market value and outstanding loan amount exceeded $200,000 for properties sold at foreclosure auction in February, according to ForeclosureRadar. This represents a whopping 189 percent increase in negative equity when compared to properties foreclosed on a year earlier. And these averages likely underestimate negative equity, the report said, as they exclude past due amounts and negative amortization on second mortgages for which no Notice of Default has been filed. As for Notices of Trustee Sales filed in February, they actually decreased 14.7 percent from January filings, with a moderate year-over-year increase of 2.2 percent from February 2008. With the current average delay of 125 days from the filing of a Notice of Default to filing the Notice of Trustee Sale, this drop follows the decline in Notices of Default seen late last year in response to Senate Bill 1137, which requires lenders to contact homeowners and explore restructuring options before initiating the foreclosure process. Nearly 99 percent of the loans foreclosed on in February were originally made between 2004 and 2007, with 46 percent having been made in 2006 alone. On average, these properties were 3 bedrooms, 2 baths and 1,589 square feet. In 2005, more homes were built than any other year, comprising 5.7 percent of February’s foreclosures. Write to Kelly Curran at kelly.curran@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade