By Alejandro Lazo
January 23, 2013, 9:50 a.m.

California witnessed a steep fourth-quarter decline in the number of homes pushed into the repossession process, indicating California’s foreclosure mess will continue to fade in 2013.

The real estate firm DataQuick reported a 37.9% decline in notices of default during the final three months of 2012 when compared to the same period the year before. It was the lowest level since the fourth quarter of 2006. A notice of default is the first formal step filed in California’s foreclosure process.

A steadily improving economy has helped. And the vast number of underwater borrowers — those who owe more on their homes than those properties are worth — have continued to pay their mortgages instead of walking away, leading to fewer home repossessions.

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