HUD homes shadow inventory

Most industry observers know that the last year has seen foreclosures nationwide drop considerably from their peaks three or four years ago. But a glimpse past those numbers reveals another truth as well: “Shadow inventory,” the 1.7 million accounts currently delinquent by 90 days or more. Per a new report out of Washington (via Reuters):

“Not only are current REO inventory levels elevated … they may rise over the next several years depending on the number of shadow inventory properties that are ultimately foreclosed on,” the report stated.

[…] The report said the shadow inventory, which is made up of loans that have been delinquent for at least 90 days, is more than seven times the inventory of REOs that Fannie Mae, Freddie Mac and HUD currently own.

“Even a fraction of the shadow inventory falling into foreclosure could considerably swell … inventories of REO properties,” the report warned.

The full report is here. Mortgage News Daily has an even more in-depth analysis as well, reminding observers “REO management and disposition are challenging tasks and are likely to become more so as shadow inventory becomes REO, and substantial attention must continue to be paid to the manner in which HUD, FHFA, and the GSEs [government-sponsored enterprises] handle such issues.”

Amid the climbing prices and other bright outlooks around the market, the shadow inventory could definitely live up to its name. It’ll be interesting to see if or how last week’s extension of the HAMP program for troubled mortgages impacts these properties. Any guesses? Either way, stay tuned…

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