Foreclosures up 21 percent from year ago

NEW YORK (Reuters) - Foreclosure activity in September rose 21 percent from a year earlier but fell by double-digits from the prior month as some state laws slowed the foreclosure process, according to a monthly report by research firm RealtyTrac.

Foreclosure filings -- default notices, auction sale notices and bank repossessions -- fell by 12 percent from August to 265,968 in September, according to RealtyTrac, which records property in various stages of foreclosure.

That means one in every 475 U.S. households received a foreclosure filing in September, the firm said in its report released on Thursday.

"Much of the 12 percent decrease in September can be attributed to changes in state laws that have at least temporarily slowed down the pace at which lenders are moving forward with foreclosures," James Saccacio, RealtyTrac chief executive, said in a statement.

Most significantly, a California law that requires lenders to make contact with borrowers at least 30 days before filing a Notice of Default (NOD) took effect in early September. The state saw a drop 51 percent from the previous month, according to RealtyTrac. That helped drive the national rate down, given that California accounts for close to a third of monthly U.S. foreclosures.

A new law in North Carolina resulted in a 66 percent drop in notices of defaults in September in that state.

However the reprieve may be short-lived. After a Massachusetts law requiring lenders to give homeowners 90-days to become current before initiating foreclosure proceedings took effect in May, the foreclosure rate dropped. But three months later initial foreclosure filings jumped and were back near levels seen a year earlier, RealtyTrac said.

The markets that once lead the housing boom topped the foreclosure list in September.

Nevada posted the highest foreclosure rate in September, with an 11 percent increase from the previous month, according to RealtyTrac. Foreclosure filings rose 137 percent from a year earlier to 13,022 in September translating into one in every 82 housing units -- more than 5 times the national average.

Florida was second with one in every 178 housing units receiving a foreclosure filing in September. Foreclosure filings rose 44 percent from a year earlier to 47,956, according to RealtyTrac

California was third after seeing a 32 decrease from August but a 36 rise from a year earlier to 69,548. One in every 189 homes received a foreclosure filing in September.

Arizona, Georgia, Michigan, Ohio, New Jersey, Indiana and Colorado were among the top ten states with the highest foreclosure rate in September.

For the third quarter, U.S. foreclosure filings rose 3 percent from the prior quarter to 765,558 and were 71 percent higher than the third quarter 2007, RealtyTrac said.

Six states accounted for more than 60 percent of U.S. foreclosure activity in the third quarter. California accounted for more than 27 percent of the nation's foreclosure activity, with 210,845 properties receiving a foreclosure filing during the quarter. That's up 4 percent from the second quarter and more than 122 percent from the third quarter of 2007, according to RealtyTrac.

Florida came in second with 127,306 properties in some type of foreclosure activity in the third quarter, the second highest state total. Arizona was third with 40,419 properties receiving a foreclosure filing.

Ohio, Michigan and Nevada all reported foreclosure filings on more than 30,000 properties during the third quarter. While Ohio and Michigan saw foreclosure activity decline from the second quarter, Nevada saw it rise 22 percent, RealtyTrac said.

(Reporting by Ilaina Jonas; editing by Carol Bishopric)