Foreclosure starts increased in July while completed foreclosures eased, funneling more loans into the foreclosure pipeline. Loss mitigation efforts, however, seem to enjoy a greater degree of success. Foreclosure inventory rose 4.2% in July from June and is up 89.6% from July 2008, according to the August mortgage monitor report by Lender Processing Services (LPS). The total US foreclosure inventory rate sits at 3%. Foreclosure starts rose 7.1% to their second-highest record. The rate of loans rolling into the final foreclosure stage, however, are narrowing back toward levels seen in mid-2006 and remain below ’07 and ’08 levels as servicers step up loss mitigation efforts, LPS said. These loss mitigation and foreclosure prevention efforts taken in Q109 and Q209 so far outperform the efforts taken in all of last year. Modifications made in the first two quarters of 2009 experienced lower redefault rates in their initial three months than those modifications made in every quarter of 2008. In another bit of positive data, new delinquencies dropped in July to their second-lowest level in the last year. The rate of total delinquencies remained unchanged from June at 8.6% but hold 40% above year-ago levels. The national rate for all non-current loans — both delinquencies and foreclosures — edged up to 11.6% in July, a 50% year-on-year increase. The deterioration ratio of loans worsening in status versus improving now sits at 2.2 to 1. Jumbo prime, option adjustable-rate mortgages (ARMs) and non-agency conforming prime loans experienced the highest deterioration rates. Jumbo prime foreclosure rates, for example, are up 634% from January 2008. “[T]he percentage of 90-day or greater delinquent loans rolling to foreclosure status has decreased from 2007 and 2008 levels; however those loans not referred into foreclosure continue to roll to the next stage of delinquency, showing the volume of at-risk loans worsening,” LPS said. “Meanwhile, the absolute volume and percentage of foreclosure starts relative to the total number of active loans continues to increase as well.” Write to Diana Golobay.