The fact that there are fewer homes entering the foreclosure process does not mean there are fewer homes being repossessed. In fact, in the month of August, more homes have been taken back by lenders since the start of the U.S. mortgage crisis.

The banks are currently trying to clear backlog of bad loans, with plans of eventually selling the foreclosed homes. This is why August became the ninth month in a row that home repossessions increased on an annual basis; the previous high was in May of this year. With the sluggish economy, high unemployment rate, and low consumer confidence, homes cannot be easily dumped in the market – this may account for the lowering of number of properties entering the process of foreclosure.

RealtyTrac Inc., a foreclosure listing firm that looks at warnings leading to foreclosure (such as notices for defaults, scheduled home auctions, and home repossessions), revealed that with the expiration of the federal home buyer tax credits home sales also went downhill. Senior vice president Rick Sharga says this may explain why less than one-third of repossessed homes are posted on the market.

Sharga further explains, “These (properties) are going to come to market, but very slowly because nobody wants to overwhelm a soft buyer’s market with too much distressed inventory for fear of what it would do for house prices.”

With home sales down and the housing market still on its staggering state, lenders are thinking it best to hold off on initiating the foreclosure process. August saw a 1% slip in homes receiving initial default notice versus July figures and 30% slip versus August 2009. In the past seven months, initial defaults have been declining in an annual basis with its peak in April 2009.

Even the number of homes scheduled for a first time selling has increased 9% fro the previous month and 2% from the pervious year. Since December 2007, when recession began, more than 2.3 million homes have been taken back by lenders. RealtyTrac boldly announces that as 2010 comes to an end, at least one million American homes will be foreclosed.

In August, one in 381 U.S. homes – or 338,836 properties – has received a foreclosure-related warning. This number is 4% higher than July’s but 5% lower than August 2009’s. The states with the highest number of foreclosures are lorida, Arizona, California, Idaho, Utah, Georgia, Michigan, Illinois and Hawaii.