Contrary to popular perception, the foreclosure process can be very costly for a lender…it remains a puzzle as to why such large numbers of mortgages in default enter into foreclosure in the first place.

On a national level, the number of vacant homes is declining, as is the percentage of mortgages in serious delinquency. However, the demand for housing hasn't picked up, nor have prices.

At least early in the financial crisis, the high rate of foreclosures seemed to be due more to households' overreaching than to predatory lending. A disproportionate number of those being foreclosed on were well-educated, well-off and relatively young people.

Many analysts are cautiously optimistic that the house price decline has ended, citing that house prices increased in June and July. There are several reasons for being cautious.