Shadow Inventory Estimated to Take Four or More Years to Clear

Although the volume of distressed non-agency residential mortgage properties in the U.S. continues to decline, the pace of moving distressed properties through the foreclosure process continues to slow, according to Standard & Poor’s Ratings Services.  S&P currently estimates that the principal balance of these distressed homes amounts to about $450 billion, representing nearly one-third of the non-agency residential mortgage-backed securities market.  This shadow inventory of distressed properties is defined as outstanding properties whose borrowers are (or recently were) 90 days or more delinquent on their mortgage payments, properties currently or recently in foreclosure, or properties that are real estate owned.

At the end of fourth-quarter 2010, S&P estimated it will take 49 months, or more than four years, to clear the supply of distressed homes on the market in the U.S. as a whole. This is an 11 percent increase over the previous quarter and a 40 percent increase from fourth quarter 2009 for the average time to clear these properties in the U.S.