A new report today from Campbell/Inside Mortgage Finance shows distressed sales, that is bank-owned properties (REO's) and short sales, where the home is sold for less than the value of the mortgage, made up 47 percent of all home sales in December. That's up from 44.5 percent in November.

The National Association of Realtors put out a lower percentage last week (36 percent), but after speaking with the number crunchers at Campbell, I'm thinking the higher share is more accurate. We also just got numbers from DataQuick out West, showing 38 percent of California sales in December were REOs, and that doesn't include short sales, so you see the evidence.

Where am I going with this? After talking with Thomas Popik over at Campbell, I was struck by how much the sales volume in December was skewed by this surge in distressed sales. The normal seasonal pattern should have home sales flat between November and December, but that certainly wasn't the case, with sales up 12.3 percent seasonally adjusted and up nearly 14 percent not seasonally adjusted, according to the National Association of Realtors.

What explains it?

Well for one, it may have been some first time buyers jumping off the fence as they saw mortgage rates rising, but those would have had to be contracts signed in October, when the interest rate rise wasn't as big as it was in December (the existing homes numbers represent closings). I don't think that was it.

"There were signed purchase and sale agreements, and those closings were delayed until the paperwork was reviewed," notes Popik, describing the effects of the "robo-signing" scandal. "The major servicers pulled from the market houses that had been listed, and buyers were found. Once those transactions went back on, then they closed, and that's what bumped up these December statistics so much."

Popik doesn't believe the sales surge will last. Yes, banks are ramping up the foreclosure sales again, but slowly, and measurably. I continue to believe the recovery in housing will rest entirely on the shoulders of financing. Changes are brewing on several regulatory fronts, and the mortgage market is ground zero.