Banks trimmed 1.2 million troubled mortgages or foreclosed homes out of the
massive shadow inventory hanging over the housing market in the first half of
2012, according to JPMorgan Chase ($41.71 -0.11%)
research.
The progress could double by the end
of the year, though more than 4 million loans and properties would remain.
Still, that would be down from a peak of 6 million in
2010.
The nearly 335,000 short sales completed in the first half neared the
420,000 modifications done. Another 470,000 in REO sold as
well.
The $25 billion foreclosure settlement
with the five largest mortgage servicers in March resulted in many more short
sales than modifications.
Chase analysts expect
the AG settlement could result in 100,000 principal reduction mods for an
average of $100,000 reduced for each borrower. Servicers would have to rally in
the back half of 2012 to get there. A total of just 7,000 were completed through
June, but banks said they began ramping up offers over the last two
months.
By the end of the year, servicers could
sell more than 950,000 foreclosed homes and another 670,000 properties through
short sale. Analysts expect 800,000 modifications total for
2012.
Estimates on the shadow inventory vary
based on how delinquent a loan must be before researchers add it to the pile.
Chase estimates include loans that have gone at least 60 days without a payment.
Still, the consensus is that banks are making progress and with it, house prices
will also improve.
This could then help solve
the other major drag on housing: the amount of borrowers stuck making payments
on a loan they owe more on than their house is
worth.
Should prices increase another 10%, the
10.8 million underwater borrowers could drop to 9 million, Chase
estimates.
"Although re-defaults and new
delinquencies will continue to keep shadow inventory elevated, the rapid decline
should prevent downward pressure on home prices going into 2013," analysts said.
"Combined with better existing home sales, investors have reason to be
optimistic about running recovery scenarios."
Source:
Housingwire.com
Reported by Jon Prior
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