Nov. 1, 2010 (DSNews) -- New figures released by Fitch Ratings put the industry’s shadow inventory at 7 million homes. The agency defines the shadow supply of properties as loans that aredelinquent, in foreclosure, or real-estate-owned (REO) by the servicer, and Fitch says based on recent liquidation trends, it will take more than 40 months to clear this existing distressed inventory.
According to the ratings agency, the number of months between the date of the borrower’s last payment and the date of liquidation has steadily increased over the past several years, and is now at more than 18 months on average. Fitch says that is the highest figure on record.
While the volume of newly delinquent mortgages has begun to improve in recent quarters, Fitch says liquidation rates of existing distressed properties have been constrained by weak demand and expanded initiatives to modify loans for troubled borrowers.
On top of that, the agency’s analysts believe the recent discovery of defects in the residential mortgage foreclosure process will further extend liquidation timelines, slowing the resolution of distressed properties in the shadow inventory and preventing home prices from finding a floor.
