Lender Processing Services recently previewed its latest Mortgage Monitor, revealing that, at the end of July, more than 4.5 million mortgages were still distressed (some more distressed than others). This indicates a massive reduction in pre-sale foreclosure inventory, also known as “shadow inventory.”

The pre-sale inventory between June and July was down 2.82% to a total of 1.4 million homes, but since last July, the number fell by 30.76%, according to LPS. Furthermore, the delinquency rate dropped 8.76% year over year to 6.41% of U.S. homes with a mortgage, or 3.19 million homes. (These are homes that are 30 days or more past due but not in foreclosure.) Of that number, 1.35 million were seriously delinquent (90 or more days past due but not in foreclosure).

Many in the housing industry feared that the shadow inventory — these homes that have yet to be sold — might grow in size and inhibit any signs of recovery in the housing market as these properties wind up in the hands of bank ownership.