Home repossessions dropped 28 percent from October and 12 percent from November last year, foreclosure listing firm RealtyTrac Inc. said Thursday.
The 67,428 homes lenders took back last month were the fewest since May 2009. But even with the decline, it was enough to push the total number of repossessions so far this year to more than 980,000 - the highest annual tally of properties lost to foreclosure on RealtyTrac's records dating back to 2005.
"It's almost impossible to imagine that we won't break a million" for the year, said Rick Sharga, a senior vice president at RealtyTrac. "Unfortunately, it's a record that we'll probably break again next year."
Banks had been on pace to take back up to 1.2 million homes this year before problems with foreclosure documents surfaced in late September.
Several lenders responded to heightened scrutiny over the foreclosure process by temporarily ceasing taking action against borrowers severely behind in payments while they checked to see if their employees made errors in loan documents needed to complete foreclosures.
Some banks later announced plans to resume foreclosures, though at a more measured pace, in an attempt to ensure there aren't any flaws in the process.
Lenders' initial freeze and slow ramp-up in foreclosure activity likely caused the sharp decline in foreclosure-related notices sent to households last month. And it's likely to cause another drop in December, Sharga said.
But activity will likely pick up with in the new year.
"In the first quarter, we really anticipate seeing a pretty rapid acceleration of foreclosure proceedings as everybody catches up," Sharga said.
Among them: high unemployment, a weak housing market, flat-to-falling home values and tighter lending standards making it tougher for buyers to qualify for financing.
In addition, there are some 5 million mortgages that are at least two months past due, and many of them have yet to even enter the foreclosure process.
Meanwhile, millions of homeowners owe more on their mortgage than their home is worth, which makes it more likely they will default on their loan.
About 10.8 million households, or 22.5 percent of all homes with a mortgage, were under water in the July-September quarter, according to housing data firm CoreLogic. The figure is down from 23 percent in the second quarter, mainly because more homes fell into foreclosure and not because home prices increased.
In all, 262,339 U.S. homes received at least one foreclosure-related notice in November, or one in every 492 households. The notices were down 21 percent from October and down 14 percent from November last year, RealtyTrac said.
The firm tracks notices for defaults, scheduled home auctions and home repossessions - warnings that can lead up to a home eventually being lost to foreclosure.
The decline in foreclosure activity was most pronounced in the more than 20 states that require foreclosures to be approved by judges and where many of the documentation errors came to light.
Initial notices sent to homeowners in those states who fell behind on their mortgage were off 43 percent from last year, while foreclosure auctions were down 38 percent, RealtyTrac said.
Some 37 states recorded a drop in home repossessions from October to November.
The number of foreclosure-related notices sent to homes in Nevada fell 20 percent from October, but the state still registered the highest foreclosure rate in the U.S. last month, with one in every 99 households receiving a foreclosure notice. That's nearly 5 times the national average.
Utah leapfrogged several states to the No. 2 spot, mostly because of sharp monthly drops in foreclosure activity in California, Florida, Arizona and Michigan.
One in every 221 households in Utah received a foreclosure-related notice in November, more than twice the national average.
California posted the third-highest foreclosure rate despite a nearly 14 percent drop in foreclosure activity.
Rounding out the top 10 states with the highest foreclosure rate in November were: Arizona, Florida, Georgia, Michigan, Idaho, Illinois and Colorado.