Foreclosure starts fell even further in October after a steep drop in September, according to data from Lender Processing Services (LPS).
In October, foreclosure starts numbered about 124,000, which represents a 22 percent decline from September to October and a 48 percent decrease from October 2011, the analytics company reported. In September, foreclosure starts were down monthly and yearly by 21 percent and 28 percent, respectively.
LPS explained the plunge in foreclosure starts was likely driven by new borrower notification requirements from the national mortgage settlement.
â€œLPS observed a drop-off in foreclosure starts in September that accelerated in October,â€ said Herb Blecher, LPS Applied Analytics SVP. â€œThis decline coincided with the implementation of new procedural changes outlined in the National Mortgage Settlement, which requires, among other things, that mortgage servicers provide written notice to borrowers 14 days prior to referring a delinquent loan to a foreclosure attorney.â€
However, LPS believes the influence of the national mortgage settlement will not have a lasting effect.
â€œThis has resulted in what is likely a temporary slowdown in foreclosure starts that we do not believe is indicative of a longer-term trend. However, we will continue to monitor this activity closely in the coming months,â€ Blecher added.
LPS also stated the drop in foreclosure starts helped to bring down the foreclosure inventory rate, which fell nearly 7 percent month-over-month and 16 percent year-over-year.
Foreclosure inventory in judicial states continued to remain over three times higher than non-judicial states. In judicial states, the foreclosure inventory rate was 5.92 percent compared to 1.96 percent for non-judicial states.
As foreclosure starts dropped off, foreclosure sales increased 14 percent month-over-month and totaled 68,000, according to LPS.
The delinquency rate in October was 7.03 percent, down by 4.9 percent month-over-month after spiking by 7.7 percent in September.
The seriously delinquent rate, which includes 90-plus delinquencies and foreclosures, stood at 7 percent, down by 3 percent from September and 11 percent from October 2011.
LPS found nearly one third of all transactions were distressed over a recent one-year period. Since September 2012, sales have totaled 4.1 million, with 1.3 million of those sales counted as distressed.
In November 2005, when sales peaked at 8.2 million over a 12-month period, only 260,000 of those transactions were distressed sales.