After months of predicting that significant declines in foreclosure numbers were merely delays caused by paperwork issues, the analysts at RealtyTrac have changed their tune.

For the tenth month in a row, foreclosure filings declined in July, dropping 4% from June and down 35% from July 2010, according to RealtyTrac data released today.

"This string of decreases was initially triggered by the robo-signing controversy back in October 2010, which forced lenders to substantially slow the pace of foreclosing, but the downward trend in foreclosure activity has now taken on a life of its own," said RealtyTrac CEO James Saccacio in a statement. "It appears that the foreclosure processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts … may be allowing more distressed homeowners to stave off foreclosure."

Across the board, foreclosure activity by type declined in July, with default notices down 7% from June and 39% lower on an annual basis; foreclosure auctions were down 5% and 37% on a monthly and yearly basis, respectively; and lender repossessions declined 1% from June and 27% from the previous year.

More than 70% of July foreclosure filings occurred in only 10 states—California, Florida, Georgia, Michigan, Illinois, Texas, Arizona, Nevada, Ohio, and Wisconsin.
Credit: RealtyTrac

"We can’t deny, looking back over 10 months of decreasing foreclosure activity, that this is more than just a delay," said Daren Blomquist, a RealtyTrac spokesman, on a call with Builder yesterday. "We’re past the peak in this foreclosure cycle."

And other data appear to be backing that estimation. Fannie Mae’s serious delinquency report, a leading indicator for foreclosures, shows that delinquent loans peaked in early 2010 at 5.59% and have since fallen to 4.08% as of June 2011. Based on that data, "the worst is over," Patrick Newport, U.S. economist at IHS Global Insight, told Builder in an email yesterday. "The situation has improved, but remains a bad one."

Certainly there is still pain to come, especially on the local level. RealtyTrac forecasts that there will be an uptick within the next six months to a year as paperwork issues get resolved, "but the numbers won’t rebound to what we saw in 2010," Blomquist says.

Local areas will likely see significant swings as paperwork issues are worked out. For example, Stockton, Calif., saw a 57% month-over-month increase in foreclosure activity in July. Manatee County, Fla., saw a monthly increase of 103%. However, both those cities were still below the levels they saw a year ago.

"I think that’s the kind of pattern we’ll see," Blomquist says. "It may not play out on a national level. It will be more local."

Certainly some states are feeling far more pain than others. Of the 212,764 foreclosure filings reported nationwide in July, more than 70% occurred in only 10 states: California, Florida, Georgia, Michigan, Illinois, Texas, Arizona, Nevada, Ohio, and Wisconsin.

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Greenville, SC.