U.S. foreclosure filings dropped to a five-year low in September, the second-consecutive monthly decline in filings, although there remains a sharp divergence along state lines, according to a report Thursday by foreclosure listing firm RealtyTrac Inc.

Overall foreclosure filings nationwide — including home repossessions — fell 7 percent from August and 16 percent from September 2011. There were 180,427 foreclosure filings reported for September, the fewest since July 2007 in the midst the housing market bust.

The number of homes entering the foreclosure process, so-called foreclosure starts, fell to 87,066 in September, down 12 percent from August and 15 percent from a year earlier, Irvine, Calif.-based RealtyTrac reported.

Foreclosure starts since peaked in April 2009 at around 203,000. But the current level is still well above the 34,000 starts recorded in May 2005, before the collapse of the housing market.

Foreclosure starts declined in September on an annual basis in 31 states, with the biggest drops in California, Arizona, Michigan, Georgia and Texas, the report showed. They are among the so-called non-judicial states, in which court approval isn't required for foreclosures.

Foreclosure activity has been declining in most non-judicial states because they didn't build a huge backlog of pending cases during an industrywide slowdown in foreclosures last year. The slowdown stemmed from widespread claims that lenders had been processing foreclosures without verifying documents.

Overall foreclosure filings include notices of defaults on mortgages, scheduled auctions and repossessions. Foreclosure starts are either default notices or scheduled auctions, depending on the state's legal process.

Between January and September, banks completed foreclosures on 505,585 homes. At that pace, the country is on track to end the year with about 675,000 completed foreclosures, down from around 800,000 last year, according to Daren Blomquist, a vice president at RealtyTrac.

Florida had the highest foreclosure rate in the country last month, a rate of one in every 117 households in some stage of foreclosure.

Arizona, California, Illinois and Georgia rounded out the top five states with the highest foreclosure rates in September.

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