New Jersey, Illinois and Maryland don't get much attention for their middle-of-the-pack foreclosure rates. But CoreLogic said these three states have the highest levels of distressed homes that are not yet listed for sale but make up the shadow inventory.
In January the nationwide shadow inventory of delinquent loans and reposssessed homes not on the market stood at nine months' worth of supply, or 1.8 million homes, the data company said. While that was a slight drop from 2 million homes in the shadow inventory a year earlier, the situation remains grim, said Mark Fleming, CoreLogic's chief economist.
Loan modifications and short sales could cut the shadow inventory in half, Fleming said. But low borrower response rates and high redefaults have made it difficult to clear the huge backlog.
In addition to the shadow inventory, another 2 million borrowers are expected to go into foreclosure because they owe more on their mortgages than their homes are worth - all of them by more than 50%, Fleming said.
The shadow inventory is actually much worse by another measure: the enormous backlog of foreclosures that have not yet been processed, according to Lender Processing Services (LPS).
Because many of the largest servicers halted foreclosures last year, the inventory of loans in foreclosure keeps building; most of those homes will ultimately have to be put on the market. That will put more downward pressure on home values, LPS said Tuesday.
Roughly 30% of all borrowers in foreclosure have not made a payment in more than two years, LPS found. At the end of February, borrowers were delinquent an average of 537 days before being foreclosed on, compared with 417 days a year earlier, LPS found.