Lenders initiated foreclosure proceedings against more U.S. homeowners in May, setting the stage
for increases in home repossessions and short sales - scenarios that could further weigh down
home sales in coming months.

Default or home auction notices were filed for the first time against 109,051 homes last month. That's
an increase of 12 percent from April and up 16% versus May last year, according to RealtyTrac.

The firm monitors documents filed on properties with mortgages that have gone unpaid. Once that
process begins, homes can end up foreclosed, sold at auction or via a short sale.

May was the first month since January 2010 that the number of homes on the foreclosure path rose
on an annual basis.

This data reflects how banks and mortgage servicers have been stepping up efforts this year to address
unpaid mortgages.

Notably, cities and states that have been foreclosure hotbeds throughout the housing downturn - Las Vegas, Nevada, California and Arizona - each reported sharp annual declines in home repos last month.

One factor: banks are increasingly opting to resolve foreclosure via short sales.

A $25 billion settlement reached in February between the nation's largest banks and mortgage lenders cleared the way for banks to move against homeowners who have fallen behind on their mortgage payments.

Some 33 states saw annual increases in homes entering the foreclosure process last month, with New Jersey, Pennsylvania and Florida posting the biggest gains.

Some 8.7 million U.S. homes entered the foreclosure process between January 2007 and last month. Of
these 4.3 million homes ended up being foreclosed.

"The trend we are seeing is actually short sales becoming the preferred method for many lenders, rather than bank repos."