Is the Foreclosure Crisis Finally Fading?

Foreclosures decreased by 8.4 percent -- or 130,000 -- in 2011, according to research by CoreLogic.

"The pace at which properties are entering foreclosure is slowing," Mark Fleming, chief economist with CoreLogic, told CNNMoney. "And servicers nationwide stepped up the rate at which they were able to process distressed assets."

So why are foreclosures dropping?

For one, lenders are being more cautious. Homes are entering the foreclosure process more slowly as lenders more carefully scrutinize paperwork before processing a foreclosure, after getting into big trouble for the mishandling of some foreclosures in recent years.

Also, with stricter credit conditions nowadays, lenders are being more choosy in who they give loans too, reserving mortgages for mostly only low-risk borrowers who have less chance of default and foreclosure.

Banks also are doing more loan modifications to prevent foreclosures. And when a home does land in foreclosure, banks are trying to process them faster or trying to encourage a short sale.

Fleming also notes "this is the first time in a year that REO sales [those of bank-owned properties] have outpaced completed foreclosures." Case in point: There were 103 sales of bank-owned homes for every 100 homes in foreclosure inventory in December 2011. That’s compared to November 2010 when there were 94 REO sales for every 100 in the foreclosure process.

Source: “Homes in Foreclosure Decline by 130,000,” CNNMoney (Feb. 8, 2012)