Loan mods, short sales reduce foreclosure rate

Foreclosures decreased by 8.4 percent – or 130,000 – in 2011, according to research by CoreLogic.

“The pace at which properties are entering foreclosure is slowing,” Mark Fleming, chief economist with CoreLogic, told CNNMoney. “And servicers nationwide stepped up the rate at which they were able to process distressed assets.”

So why are foreclosures dropping?

First, lenders are being more cautious. Homes are entering the foreclosure process more slowly as lenders more carefully scrutinize paperwork before processing a foreclosure, after getting into big trouble for the mishandling of some foreclosures in recent years.

Also, with stricter credit conditions nowadays, lenders are being more scrutinizing, reserving mortgages for mostly only low-risk borrowers who have less chance of default and foreclosure.

Banks also are doing more loan modifications to prevent foreclosures. And when a home does land in foreclosure, banks are trying to process them faster or encourage a short sale.