Foreclosure filings fell 5 percent in the first six months of 2010, with 1.9 million foreclosures filed on 1.6 million properties, RealtyTrac Inc. announced today.

Although foreclosure filings have started to decline, the number of bank repossessions has started to rise. Banks seized 38 percent more properties in the second quarter of 2010 than in the same quarter last year.

James Saccacio, CEO of RealtyTac, said in a statement that the latest report isn’t all bad news because although banks are seizing more properties, fewer homes are going into the foreclosure process. He predicted that by the end of the year, more than 3 million properties will have foreclosure filings.

“The roller coaster pattern of foreclosure activity over the past 12 months demonstrates that while the foreclosure problem is being managed on the surface, a massive number of distressed properties and underwater loans continue to sit just below the surface, threatening the fragile stability of the housing market,” he said.

Arizona, Florida and Nevada had the highest foreclosure rates in the plast six months and Arizona, California and Nevada had the most filings, according to the report.

Bloomberg reported that the housing recovery has been slowed by the expiration of a tax credit for first-time home buyers and high unemployment. Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, told Bloomberg that bank repossessions will continue to rise because unemployment is still high.