Lenders started and completed more foreclosures in Massachusetts during the third quarter than the previous quarter, but foreclosures have declined almost 30 percent year-over-year, according to a new report by The Warren Group.

A total of 2,048 foreclosure deeds were recorded from July through September, a 3.9 percent increase from the 1,971 in the second quarter. But foreclosures dropped 29.4 percent from 2,903 in the third quarter of 2008. There were 702 foreclosures in September up 6.7 percent from 658 in August and down 12.1 percent from 799 in September 2008. Year-to-date foreclosure deeds fell 29.5 percent to 6,778 from 9,610 the prior year.

"A combination of factors has led to a drop in foreclosures this year. Lenders have been facing pressure from federal leaders to offer trial loan modifications to troubled homeowners, and some banks had instituted foreclosure moratoriums late last year. Here in Massachusetts a law that went into effect last year delayed foreclosure proceedings from starting," said Timothy M. Warren, CEO of The Warren Group, which publishes Banker & Tradesman.

Warren also noted that a recent court ruling has caused many lenders to proceed more cautiously before completing foreclosures. Last week, a Massachusetts Land Court judge reaffirmed an earlier decision that invalidated two foreclosures because the lenders had not properly proven that they owned the properties at the time they advertised the foreclosure auctions.

"This ruling has forced some lenders to hold back on proceedings until proper mortgage assignments have been made," Warren said.

Petitions to foreclose, which mark the first step in the foreclosure process in Massachusetts, have remained fairly steady this year. Foreclosure petitions rose 9 percent to 7,822 in the third quarter from 7,177 in the second quarter. Third quarter petitions also shot up 111 percent from 3,703 in the third quarter of last year. But Warren noted that the jump in year-over-year foreclosure petitions is mostly due to a state law that went into effect last May that led to a temporary lull in the initiation of foreclosure proceedings. The law requires lenders intending to start foreclosure proceedings to give defaulting borrowers 90 days to catch up with missed payments.

"Even though there’s been a drop in actual foreclosures, lenders have been starting foreclosure proceedings at about the same pace for most of the year. September marked the third month so far this year when more than 2,500 petitions to foreclose were filed. There are thousands of homeowners who are under enormous financial stress who face the loss of their homes," Warren added.

September foreclosure petitions climbed 5.5 percent to 2,527 from 2,396 in August and were also 11.9 percent higher than the 2,258 petitions filed in September 2008. Lenders have filed a total of 21,635 petitions to foreclose from January through September, up 28.9 percent from 16,779 during the same months in 2008.

The Warren Group tracked 1,716 auction announcements in September, a 21.8 percent increase from 1,409 in August and 15.6 percent higher than the 1,484 auction announcements last September. Year-to-date auction announcements slipped 18.1 percent to 12,519 from 15,282 a year earlier.