Equifax: Shadow inventory to supress real estate market

Thu, Jun 30, 2011


Equifax released discouraging data Friday that suggests shadow inventory in the real estate market may continue to suppress prices and the economy in general.

Banks continue to write off large amounts for home finance dollars, which includes first mortgage and home equity installment loans as well as home equity revolving accounts, according to an Equifax press release. Those numbers are still climbing and have yet to show signs of peaking. In fact, home finance write-offs reached $304.6 billion in 2010 compared to a combined total of $126.7 billion for 2006 and 2007.

Equifax data shows that severe delinquencies among these loan vintages have remained nearly constant since the first quarter of 2010. Further analysis reveals that as of May 2011 there are approximately $319.7 billion in 2006 and 2007 first mortgage vintages that are in the initial foreclosure process – many of which may be written off.

Bank-owned real estate, also known as real estate owned properties, represent another roadblock to recovery, according to Equifax. Properties remain on the books at banks as lenders struggle to divest of properties that were not sold through a short sale or foreclosure auction. Rates of lender-owned real estate have been on the rise since March 2011, according to Equifax. In May of 2011, 3 percent of all U.S. first mortgages, representing $21.8 billion, were lender-owned properties.

“Shadow inventory and real estate owned properties are still playing a dominant role in today’s mortgage market and slowing the pace of economic recovery,” Craig Crabtree, senior vice president and general manager of Equifax Mortgage Services, was quoted in the press release. “While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth.”

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