Regarding the article posted on RealtorMag.Realtor.com:
It’s Not Over: Report Warns Shadow Inventory Threat Remains
Foreclosures have been falling in recent months, but two government watchdogs warn that the foreclosure crisis isn’t over yet. About 1.7 million borrowers have missed more than one payment on their government-backed mortgages, according to a newly released report by the inspectors general of the Federal Housing Finance Agency and Department of Housing and Urban Development.
The shadow inventory is made up of loans that have been delinquent for at least 90 days. If these delinquent loans become foreclosures, they could pose significant financial challenges to mortgage giants Fannie Mae, Freddie Mac, or other federal housing agencies, the report notes.
“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.
According to the report, the shadow inventory 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 notes.
I work with large institutional buyers wielding, in some cases, billions of dollars in investment capital. I am told by the “smart money” that not all is as it seems and that the US is only about 1/3 or so of the way through the “shadow inventory” glut. There is a widely held belief that the government has brought the flow of these properties to the market down to a trickle in order to boost home prices and stage a recovery. I am also told, and this could simply be hearsay, that Fannie Mae is still sitting on over 3 Trillion USD in bad loans (i.e.: assets, essentially) and the banks, using the wide berth the Generally Accepted Accounting Principals give them, have been shifting tons of these bad mortgages around while they scramble to recapitalize. This, however, can only go on for so long and I expect at least one major bank to either fail (or have a serious problem) within the next 12 months. My sources of information are generally people who are 60+ years of age and been in the real estate investment & brokerage business for 30+ years. They cannot ALL be wrong…