After a tiny spike in January, foreclosure activity continued to decline in February. Activity across all stages of foreclosure fell by 13.9%, according to foreclosure tracker RealtyTrac. With 225,101 filings, February was the slowest month of activity in three years. Last month default notices, auctions, and seizures all fell. As we've been saying since October, declining foreclosures continue to likely be more a sign of banks and servicers continued struggle to file as quickly as they reform their processes than genuine improvement in housing market health.

Here's a chart showing how activity on a whole has changed, with the various stages broken out:

foreclosures bars 2011-02.png

This really makes it clear just how much foreclosure activity has fallen since September, when some banks and servicers were found to have engaged in poor foreclosure processing and procedures. Here's another chart that better tracks the three stages:

foreclosures line 2011-02.png

From this, you can see that filings for each stage also fell significantly in February, below levels seen late last year. Default notices, auctions, and bank repossessions fell by 16.0%, 9.9%, and 17.3%, respectively.

On a state-by-state basis, the usual suspects remain mostly the same. Here's the ten with the highest foreclosure activity concentrations in February:

foreclosures states 2011-02.png

The only real surprise here is that Florida isn't higher on the list. It, like many of the other states with long-suffering housing markets due to the bubble's pop, is seeing a big drop in activity as banks and servicers work through the mess they got themselves into due to poor procedures. You can see that Florida's foreclosures are down 65.3% compared to a year earlier. Some of the other states on this list had smaller -- but still sizable -- declines.

As mentioned, it's hard to get excited over the decline we've been seeing recently in foreclosure activity. RealtyTrac CEO James Saccacio explains that "allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets." He expects to see numbers bounce back in several months, though probably not to the level we saw activity peak at in March 2010.

Other measures of housing market health also indicate that foreclosures will continue to be high for some time. Last month the Mortgage Bankers Association reported that, although delinquencies were down in the fourth quarter, residential mortgages in foreclosure reached an all-time high. So what we're seeing in the data above is clearly more an indication that banks and servicers are still struggling to get things right -- not a sign that the U.S. housing market is improving.

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