A new report argues that nonjudicial foreclosure states, because of how they approach foreclosures, are leading the housing recovery.

Judicial and nonjudicial states have radically different approaches to foreclosure proceedings, and they may produce different recoveries in the appropriate states.

Currently, few analysts argue that a housing recovery is not happening; debate still persists, though, on the particulars – how strong the recovery is, how long it will last and what states are outpacing others on the recovery scale.

A big source of divergence the last couple months has been the nature of foreclosure proceedings, and how states with nonjudicial approaches (where foreclosures are not handled in a court of law with a judge) are sifting through their inventories much faster that states with judicial processes.

A new study from Capital Economics is arguing that judicial states, with how much quicker they clear through distressed properties, are showing stronger signs of a recovery in terms of home prices and housing activity.

According to a HousingWire summary of the study, Paul Diggle, a property economist for Capital Economics, used data from the FHFA to show that home price growth for judicial states in 2011’s fourth quarter fell by 0.3 percent from the third quarter and 2.3 percent year-over-year, compared with a 0.3 percent quarterly increase in nonjudicial states and 1.6 percent yearly increase. The foreclosure systems, Diggle said, are responsible for the data.

“We think that differences in foreclosure procedures will continue to affect state-level house price trends, with nonjudicial states outperforming,” Diggle said in the HousingWire piece. “After all, as foreclosure pipelines are brought down to healthier levels in nonjudicial, high burn-through states, supply conditions can more rapidly tighten to the point that they support price growth.”

Because judicial states take so much longer, Diggle argues, prices are negatively impacted (for a detailed examination of the two approaches, consult this report from the Mortgage Bankers Association).

Capital Economics, though, is far from the only research firm to assess the real estate recovery. Tom Feltner of the Woodstock Institute, for instance, said there are a number of forces that impact home values other than foreclosures, from demand, to credit availability to consumer confidence in the particular local markets. He also added that there is one major benefit to a nonjudicial system – it allows for greater opportunity for the homeowner to stay in his or her home.

“I think that from our perspective, there are obviously a lot of challenges with moving properties through the judicial process,” Feltner said in the HousingWire article. “It takes more time, but I think as part of that process, there are more inbuilt foreclosure intervention points for homeowners who are working through the process of trying to save their home … I think in terms of whether or not it’s better to move properties through faster or not, it’s most important to ensure the borrower has every single opportunity to save their home.”

The judicial/nonjudicial view was also addressed in the latest mortgage delinquency report from Foreclosure-Response.org, which framed the debate less between judicial and nonjudicial and more between extensive supply and dwindling resources. Judicial states, the research firm argued, are overburdened with the substantial amount of foreclosures from the last five years, and local governments have no committed adequate resources to confront the problem.

As Maya Brennan, a senior research associate with the Center for Housing Policy, put it: “Devoting more judicial resources to processing the high volume of foreclosures would help ensure due process without burdening homeowners, lenders and neighborhoods with unreasonably long foreclosure timelines.”

Interestingly, both Feltner and Diggle agreed on one unexpected topic – the impending foreclosure wave following the mortgage settlement. For months, analysts at RealtyTrac argued that once the settlement was signed, banks would dump thousands of foreclosed properties on the marketplace, once they were rid of the legislative scrutiny that followed the robo signing scandals. So far, though, and nearly halfway through 2012, that trend has failed to materialize.