Delinquency rates and incidence of properties in foreclosure fell again in July, Lender Processing Services (LPS) reports, but more than 4.5 million mortgage loans remain in some category of distress.  The company released a preview of its Mortgage Monitor reflecting conditions at the end of July, a key finding of which was a dramatic year-over-year decrease in the pre-sale foreclosure inventory.

The pre-sale inventory was down 2.82 percent from June to July to a total of 1.4 million homes.  Since July 2012 this number has dropped by 30.76 percent.  This so-called shadow inventory has been a major concern of the housing industry since the beginning of the crisis as it was feared the sheer size of the backlog of homes that might eventually come into bank ownership would present a significant barrier to recovery.

The delinquency rate, the number of loans that were 30 days or more past due but not in foreclosure, was down 3.96 percent to 6.41 percent of U.S. homes with a mortgage.  This represents a -8.76 percent annual reduction in the rate.  At the end of July 3.19 million properties were considered delinquent but not in foreclosure and 1.35 million of those were seriously delinquent, i.e. 90 or more days past due but not in foreclosure. 

Florida, Mississippi, and New Jersey were the states with the highest percentage of non-current loans in July.

LPS will release the July Mortgage Monitor with the remainder of its July statistics by September 3.