Foreclosure activity patterns are varying significantly from state to state, often hinging on the level of dysfunction that exists in each state’s foreclosure process, reported RealtyTrac yesterday. 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, said Daren Blomquist, Vice President of RealtyTrac.

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.

“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,” said Blomquist.

Foreclosure filings – default notices, scheduled auctions and bank repossessions – were reported on 191,925 U.S. properties in July, a decrease of 3 percent from the previous month and a decrease of 10 percent from July 2011. The report also shows one in every 686 U.S. housing units with a foreclosure filing during the month. Overall numbers declined on an annual basis for the 22nd straight month, but properties starting the foreclosure process increased on an annual basis for the third straight month.

High-level findings from the report:

• Overall foreclosure activity decreased on a year-over-year basis for the 22nd consecutive month in July, dropping to its lowest level since April.

• The decline in overall foreclosure activity was driven primarily by a 21 percent year-over-year decrease in bank repossessions, or REOs.

• Thirty-eight states and the District of Columbia posted annual decreases in REO activity, but there were some notable exceptions where REO activity increased annually, including Florida (38 percent), Ohio (25 percent), Illinois (22 percent), and New Jersey (21 percent) – all judicial foreclosure states where foreclosures are processed through the court system.

• U.S. foreclosure starts in July increased 6 percent on a year-over-year basis, the third straight month with an annual increase in foreclosure starts following 27 consecutive months of decreasing foreclosure starts on an annual basis.

• Foreclosure starts increased on a year-over-year basis in 27 states, led by Connecticut (201 percent), New Jersey (164 percent), Pennsylvania (139 percent), Indiana (83 percent), and Massachusetts (65 percent) – all judicial foreclosure states.

Foreclosure starts – default notices or scheduled foreclosure auctions, depending on the state – were filed on 98,174 U.S. properties in July, a 6 percent decrease from June but still up 6 percent from July 2011.

Foreclosure starts increased annually in 27 out of the 50 states – 16 “judicial” states where foreclosures are processed through the court system and 11 “non-judicial” states where foreclosures are processed outside of the court system.

Along with judicial states with substantial annual increases in foreclosure starts, the non-judicial states with the biggest year-over-year increases were New Hampshire (55 percent), Missouri (39 percent), Alabama (35 percent), Washington (30 percent), and Georgia (25 percent).

Lenders completed the foreclosure process on 53,654 U.S. properties in July, a 1 percent decrease from the previous month and a 21 percent decrease from July 2011 – the 21st consecutive month with a year-over-year decline in bank repossessions (REOs).

REO activity decreased annually in 38 states and the District of Columbia. Some of the biggest REO decreases were in Nevada (71 percent), Virginia (65 percent), California (44 percent), Georgia (39 percent), and Washington (35 percent) – all non-judicial foreclosure states.

California posted the nation’s highest state foreclosure rate in July despite an 11 percent decrease in foreclosure activity from the previous month and a 25 percent decrease in foreclosure activity from July 2011. One in every 325 California housing units had a foreclosure filing during the month, more than twice the national average.

Arizona foreclosure activity was also down on a monthly and annual basis, but the state still posted the nation’s second highest state foreclosure rate: one in every 346 housing units with a foreclosure filing during the month.

Florida’s foreclosure rate ranked third highest among the states in July, up from sixth highest in June thanks in part to a 14 percent month-over-month increase in foreclosure activity. A total of 25,534 Florida properties had a foreclosure filing in July, a rate of one in every 352 housing units and an increase of 14 percent from July 2011.

Along with Florida, the four other judicial foreclosure states with foreclosure rates in the top 10 all posted year-over-year increases in foreclosure activity in July: Illinois at No. 5 (one in every 385 housing units with a foreclosure filing); Ohio at No. 8 (one in every 528 housing units); South Carolina at No. 9 (one in every 536 housing units); and Indiana at No. 10 (one in every 665 housing units).

Along with California and Arizona, the other non-judicial foreclosure states with foreclosure rates in the top 10 all posted year-over-year decreases in foreclosure activity in July: Georgia at No. 4 (one in every 376 housing units with a foreclosure filing); Nevada at No. 6 (one in every 415 housing units); and Michigan at No. 7 (one in every 518 housing units).