Foreclosure filings - default notices, scheduled auctions and bank repossessions - were reported on 205,990 U.S. properties in May, an increase of 9% from April but still down 4% from the year-ago period.

The report also shows one in every 639 U.S. housing units with a foreclosure filing during the month, according to RealtyTrac's U.S. Foreclosure Market Report released Thursday.

“U.S. foreclosure activity has now decreased on a year-over-basis for 20 straight months including May, but the jump in May foreclosure starts shows that it’s going to be a bumpy ride down to the bottom of this foreclosure cycle,” says Brandon Moore, CEO of RealtyTrac. “Based on the rise in pre-foreclosure sales we’ve seen so far this year, a higher percentage of these new foreclosure starts will likely end up as short sales or auction sales to third parties rather than bank repossessions going forward. While pre-foreclosure sales have less of a negative impact on home values than bank-owned sales, they still represent a discounted sale where a distressed homeowner is losing his or her home."

High-level findings from the report:

· Foreclosure activity rose back up above the 200,000 level in May after two consecutive months below 200,000.

· Foreclosure starts nationwide increased on an annual basis after 27 consecutive months of year-over-year declines.

· Judicial states combined posted a 26% year-over-year increase in overall foreclosure activity while non-judicial states combined posted a 20% year-over-year decrease in foreclosure activity.

· Foreclosure starts increased on a year-over-year basis in 17 of the 26 judicial states and in 16 of the 24 non-judicial states.

· Georgia leapfrogged past Arizona, Florida, California and Nevada to post the nation’s highest state foreclosure rate in May, the first time since February 2006 that Georgia’s foreclosure rate has ranked highest among the states.

“Disposing of distressed homes by pre-foreclosure sale can also benefit lenders and servicers because pre-foreclosure homes sell at a higher average price point than bank-owned homes,” Moore says. “Our first quarter foreclosure sales report showed that the average price of a pre-foreclosure home was more than $27,000 higher than the average price of a bank-owned home, which quickly adds up given that there have been an average of 1.6 million nationwide foreclosure starts per year for the past five years.

“More banks are now recognizing that treating the problem of delinquent mortgages with short sales rather than bank repossessions can help them minimize their losses and also avoid taking on more REOs, which they then have to manage, maintain and market for sale," he added.

Foreclosure starts - default notices or scheduled foreclosure auctions, depending on the state - were filed on 109,051 U.S. properties in May, a 12% increase from April and a 16% increase from the year-ago period.

Foreclosure starts increased annually in 33 out of the 50 states - 17 states with the judicial process and 16 states with the non-judicial process. States with some of the biggest annual increases in foreclosure starts included the judicial foreclosure states of New Jersey (118%), Pennsylvania (97%), Florida (83%), Massachusetts (60%), New York (59%), South Carolina (43%), Ohio (32%) and Illinois (28%), and the non-judicial foreclosure states of Tennessee (165%), Texas (51%), Missouri (35%), Georgia (30%), and Michigan (24%).

After three straight monthly decreases to a 49-month low in April, bank repossessions (REOs) increased 7% on a monthly basis in May. Lenders completed the foreclosure process on 54,844 U.S. properties during the month, still down 18% from May 2011.

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