Foreclosure starts recorded during the 12-month period ending in July fell to an activity level not seen since 2007,Lender Processing Services said in its latest Mortgage Monitor report.

The report overall showed loan delinquencies and foreclosures on a downward trajectory despite the new influence of rising interest rates and fears that the economy may be slowing coming out of the month of August.

The delinquency rate month-over-month fell 3.96% with 6.41% of all U.S. mortgages delinquent, LPS data shows. Vintage loans originated after 2010 continue to outperform earlier vintages, which continually record higher delinquency rates.

Meanwhile, the total U.S. foreclosure presale inventory rate hit 2.82%, down 3.46% from the previous month.

Originations are beginning to feel the impact of higher interest rates, but July prepayment rates are equal to year ago levels, suggesting mortgage refis continue at a consistent pace.

In fact, LPS notes that prepayments are equal to levels reached during the refi booms experienced in 2010 and 2009—time periods when interest rates were either higher or equal to current levels.

Yet, Herb Blecher, senior vice president of LPS, suggests prepayments could decline as interest rates edge higher.

Refinancing activity through the government’s HARP program in July showed a unique trend with prepayments on loans with 100% LTVs actually increasing during the month.

And troubled assets are no longer a major headache, at least not at the same level they were in 2011. The real estate market continues to see fewer sales of troubled properties with distressed sales down 30% for the 12-month period ending in June. Short sales on their own fell 60% from last year, making up only 10% of sales for the 12-month period ending in June.

The states with the highest percentages of distressed sales included Nevada, Florida, California and Arizona – all of which are recovering sand states.

Foreclosure starts plummet to six-year lows | 2013-09-03 | HousingWire.