While both the real estate markets and mortgage credit performance have shown signs of bottoming out, the foreclosure picture remains grim. In its delinquency report for the first quarter of 2009, the Mortgage Bankers Association reported that 3.85% of the loans in their population were in some form of foreclosure, and RealtyTrac notes that just under two million homes in the U.S. were in foreclosure as of June. Considering that the annualized rate of existing home sales in June was 4.8 million homes, the size of the foreclosure pipeline is astonishing.

Aside from the surge in delinquencies over the past two years, the massive accumulation of foreclosed homes is attributable in part to servicers' slow progress in working through their inventories of nonperforming loans. In addition to the sheer volume of loans, the process has been slowed by the various foreclosure moratoria, as well as the need to individually screen loans for eligibility for the Obama administration's modification program.

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