Boulder County foreclosure filings have fallen drastically in the past two months, but the drop is not due to an improving housing market.

Rather, a new state law is temporarily delaying the flow of foreclosure filings, said Richard Gebhardt, Boulder County public trustee.

The law requires lenders to mail a notice containing the phone numbers of the Colorado Foreclosure Hotline and the lender's loss mitigation department to defaulting borrowers at least 30 days prior to filing a foreclosure on the borrower. Colorado House Bill 1402 went into effect for foreclosures filed after Aug. 1.

"Lenders had to put the break on foreclosures for 30 days," Gebhardt said. "We're expecting an increase of foreclosures in October."

Gebhardt said the new foreclosure notification rules should "lead to more dialogue" between lenders and borrowers, but overall he thinks Boulder County will set another record for foreclosure filings this year.

From January through July this year, 692 foreclosures were filed in Boulder County, up 40 percent from 496 foreclosures during the same period a year ago.

After the new law went into effect Aug. 1, monthly filings were cut in half - from an average of nearly 100 per month to 44 filings in August and 48 filings September.

It will be a lull in the storm, said Ken Hotard, Boulder Area Realtor Association senior vice president of public affairs.

"I think we're in for another round of resets on variable mortgage rates, leading to more foreclosures," Hotard said. "I wouldn't expect foreclosures to bottom out until 2009."

Hotard said there are some small signs of stabilization in the local housing market. Inventory levels of homes for sale in some Boulder County cities are starting to drop. He expects the overall housing market to level off in 2009, and start a slow recovery in 2010.

Contact David Clucas at 303-440-4950 or e-mail dclucas@bcbr.com.