The seasonally adjusted mortgage delinquency rate for the third quarter ended Sept. 30 fell 18 basis points to 7.4 percent, erasing the 18 basis point jump from the previous quarter, according to the Mortgage Bankers Association.

The lower rate was fueled largely by a sizable drop in the share of loans 90 or more days past due, which came in under 3 percent for the first time since 2008. The foreclosure inventory rate also contracted 20 basis points to 4.07 percent, marking the largest quarterly percentage point decline in the history of the survey for this metric.

Foreclosure starts declined to 0.9 percent of all first-lien mortgages during the third quarter of 2012 — the lowest reading since the end of 2007. A total of 38 states saw the foreclosure starts rate fall versus the second quarter of 2012 while 39 registered a decline compared to the third quarter last year.

In terms of the overall geographic concentration, Florida continues to account for nearly a quarter (23.4 percent) of all mortgage loans in foreclosure and when combined with California, New York, Illinois and New Jersey, these five states accounted for nearly 52 percent of all foreclosures and less than one-third of all mortgages.

According to Mike Fratantoni, MBA’s vice president of Research and Economics, the combination of lower 90-plus day delinquency and foreclosure inventory rates is a positive for the housing market since it “indicates a significant drop in the shadow inventory of distressed loans.”

New Jersey had the highest rate of foreclosure starts during the quarter due to a large backlog of 90+ day delinquent loans entering the foreclosure process. Arizona and Nevada, states that had foreclosure start rates at least twice the national average as recently as two years ago, are now seeing only slightly above-average rates of new foreclosure activity.

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