Foreclosure activity appears to finally be on a downward track, although the road is still a rough one in many states.   The RealtyTrac U.S. Foreclosure Market Report for shows that foreclosure filings were down 3 percent in July compared to June and were 10 percent lower than in July 2011.  This was the 22^nd consecutive month that the annual rate declined.  One in every 686 U.S. housing units in the country received some type of foreclosure filing during the month, a total of 191,925 filings.  Filings increased in many states and metropolitan areas and in some cases are multiple-multiples of the national per-unit rate. 

RealtyTrac is an Irvine, California firm that tracks three categories of foreclosure filings gathered from county level sources. 

1. Notice of Default (NOD) and Lis Pendens (LIS). This is the first legal notification from a lender that the borrower on a mortgage loan has defaulted under the terms of their mortgage and the lender intends to foreclose unless the loan is brought current.
2. Auction - Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS): if the borrower does not catch up on their payments the lender will file a notice of sale (the lender intends to sell the property). This notice is published in local paper and contains information pertaining to the date, time and subject property address.
3. Real Estate Owned or REO properties : "REO" stands for "real estate owned" and typically refers to the inventory of real estate that banks and mortgage companies have foreclosed on and subsequently purchased through the foreclosure auction if there was no offer higher than the minimum bid.

While the total numbers were down not all types of filings decreased.  Much of the annual decline was driven by a 21 percent year-over-year drop in bank repossessions or REO while foreclosure starts increased on an annual basis for the third straight month.

Daren Blomquist, RealtyTrac vice president said, state figures were also uneven.  "Recent foreclosure activity patterns vary significantly from state to state, often hinging on the level of dysfunction that exists in each state's foreclosure process. In states like Florida, Illinois and New Jersey, where processing and procedural issues slowed foreclosure activity to a crawl last year, foreclosure numbers continue to rebound off those artificially low levels. But in states like Texas, Arizona and Virginia, where the average time to foreclose is well below the national average of 378 days, foreclosure activity continues on a long-term downward trend.

There were 98,174 foreclosure starts, default or auction notices filed during July, a 6 percent decrease from the previous month but still up 6 percent from the same month in 2011.  Starts also increased annually in 27 states including 16 judicial states and 11 where foreclosures are processed outside of the court system.   Some of the judicial process states had extremely large annual increases in foreclosure states including Connecticut (201 percent), New Jersey (164 percent), Pennsylvania (139 percent), Indiana (83 percent), and Massachusetts (65 percent).   Big jumps were also noted in some non-judicial states such as New Hampshire (55 percent), Missouri (39 percent), and Alabama (35 percent).  

Lenders completed 53,654 foreclosures in July, down 1 percent from June and 21 percent from a year earlier.  This was the 21^st consecutive month when REO activity was down on an annual basis.  There was an annual decline noted in 38 states and the District of Columbia with the largest decreases in Nevada (71 percent) and Virginia (65 percent.)   California, Washington, and Georgia also had notable decreases.  There were also a few states, all using the judicial process, where REO activity increased annual including Florida (38 percent), Ohio (25 percent), Illinois (22 percent), and New Jersey (21 percent.

"Recent legislation and court rulings could lengthen the foreclosure process in some of the states with the shorter timelines, however, resulting in a temporary foreclosure lull and subsequent rebound in those states as well," Blomquist continued. "Case in point is a new Oregon law that took effect in July and gives homeowners in default - or at risk of default - the right to request mediation to avoid foreclosure. Oregon foreclosure activity dropped 42 percent from June to July, hitting a five-year low, but we would expect the Oregon numbers to trend back higher sometime in the next several months based on the pattern we've seen in other states with similar legislation." 

Nevada finally fell out of its long held position as one of the top three states, and almost always number one, for foreclosure activity, falling to sixth place.  California had an 11 percent decrease in filings but still ranked as the state with the highest percentage of foreclosure activity with one in every 325 housing units receiving a filing during the month, more than twice the national average. 

Arizona was the second most active state despite both annual and monthly declines with a filing on one in 346 units and Florida, with a 14 month increase since both June and July 2011, rose from sixth to third in foreclosure activity with one in every 352 units receiving a notice.

The most beleaguered metropolitan areas were in California.   In Stockton, which recently filed bankruptcy, one in every 153 units, more than four times the national average, received a filing, and the metro areas of Vallejo-Fairfield and Riverside-San Bernardino-Ontario had respective rates of one in every 185 units and 187 units respectively.  The last area has been in the news because of a decision by the governing boards of San Bernardino County and the city of Ontario to use their right of eminent domain to seize and restructure underwater mortgages.