Thanks to the national foreclosure mess, it could take up to 40 months to clear a 1.5 million unit "shadow inventory" tied to non-agency delinquent mortgages, foreclosures and REOs, according to a new report from Fitch Ratings.

"While the reduced volume of distressed sales since 2009 has temporarily helped home prices, Fitch believes that the extension in foreclosure and liquidation timelines is simply prolonging the housing correction underway," writes Fitch analyst Grant Bailey and two others.

Although the non-agency shadow inventory is pegged at 1.5 million units, the total nationwide inventory is 7 million, Fitch said.

The value of RMBS also will be harmed by the foreclosure crisis, the rating agency believes.

"Specifically, longer timelines in arrears and foreclosure results in higher servicing advance expenses and other carrying costs that generally result in a higher loss severity," Bailey wrote.

Shadow inventory refers to loans and properties that are delinquent, in foreclosure, or REO, and controlled by a residential servicer.

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