Foreclosure glut will it depress home values for years to come?

New loan delinquencies are down, but a “bloated” pipeline of foreclosure properties continues to drag down prices and will depress the market for years to come.

As of March, foreclosure inventories were running at eight times historical norms, as servicers move to correct paperwork and revise their processes, according to an April performance report by LPS Applied Analytics.At the same time, the sheer volume of delinquent properties has overwhelmed servicer capacity, leading to bottlenecks in processing.

I’ve seen the problem progress from newly deteriorating loans to the foreclosure pipeline of older real-estate-owned properties (REOs). The numbers behind this backlog are staggering:

Foreclosures and loans that are delinquent more than 90 days outnumber foreclosure sales 45 to one, according to LPS.
Almost twice as many loans are more than 90 days delinquent versus those starting the foreclosure process.
The average length of time that homes remain more than three months delinquent but are not taken back by the bank is about a year — 368 days.
For 31% of loans in foreclosure proceedings, no payment has been made for more than two years.
A total of 6.33 million loans are delinquent or in foreclosure, more than many analysts had predicted.

Everything is moving in slow motion now. This is something we as Investors and the market professionals in general are experiencing. Unless the banks come to the conclusion that they must “loosen” both the credit crunch and qualifying criteria, we will continue to see the rise in the foreclosure market and inventory to stay high.

*God Speed*


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