US foreclosure filings have dropped to a five-year low in September as fewer homes are on track to be seized by lenders.
It was the second consecutive monthly decline in filings, although there remains a sharp divergence along state lines, according to a report on Thursday by foreclosure listing firm RealtyTrac Inc.
On a national level, overall foreclosure filings last month - including home repossessions - fell 7 per cent from August and 16 per cent from September 2011. There were 180,427 foreclosure filings reported for September, the fewest since July 2007 amid the housing market bust.
The number of homes entering the foreclosure process, so-called foreclosure starts, fell to 87,066 in September, down 12 per cent from August and 15 per cent from a year earlier. It was the second-straight month of declines following three months of increases, California-based RealtyTrac reported.
Foreclosure starts since peaked in April 2009 around 203,000. But the current level is still well above the 34,000 starts recorded in May 2005, before the collapse of the housing market.
Overall foreclosure filings include notices of defaults on mortgages, scheduled auctions and repossessions. Foreclosure starts are either default notices or scheduled auctions, depending on the state's legal process.
Foreclosure starts declined in September on an annual basis in 31 states, with the biggest drops in California, Arizona, Michigan, Georgia and Texas, the new report showed. They are among the so-called non-judicial states, in which court approval isn't required for foreclosures.
Foreclosure activity has been declining in most non-judicial states because they didn't build a huge backlog of pending cases during an industry-wide slowdown in foreclosures last year. The slowdown stemmed from widespread claims that lenders had been processing foreclosures without verifying documents.
Of the 19 states in which foreclosure starts rose in September, those with the largest annual increases were New Jersey, Pennsylvania, New York, Washington state and Florida. Except for Washington, they are judicial states, where the courts must sign off on foreclosures.
The slower process in states where courts play a role in foreclosures contributed to a logjam of pending foreclosure cases that now has mortgage lenders catching up.
In Washington, a non-judicial state, lenders were catching up with foreclosure cases that had been delayed by a state law that took effect in July 2011 and allowed borrowers facing foreclosure to request mediation, RealtyTrac noted.
The pace of homes entering the foreclosure process is expected to slow gradually, barring another severe economic shock that would send the recovering housing market into a tailspin, experts say. But the decline in foreclosures is likely to continue playing out unevenly, in part because of the differing approaches to handling foreclosures from state to state.