St Louis Mortgage Refinancing and Home Loan Mortgage: Shadow Inventory Pushes Foreclosures

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St Louis Finance and Mortgage Broker News: Shadow Inventory Will Push Foreclosures
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Two reports from separate credit rating agencies are drawing the same conclusion and that is foreclosures will reach new heights in 2011, even after setting records in 2010 according to St Louis finance experts.

"DBRS expects foreclosure filings and completed foreclosures to reach record levels in 2011 as alternatives such as modifications for seriously delinquent borrowers

are exhausted," said Kathleen Tillwitz, an operational risk strategist at the rating agency.

She goes on to say: "Consequently, losses to residential mortgage-backed securities will likely increase as REO inventories are sold at deep discounts causing writedowns in transactions particularly in the areas of the subordinate tranches."

Standard & Poor's ratings currently estimates that the principal balance of distressed homes amounts to about $450 billion, representing nearly one-third of the nonagency RMBS market currently outstanding, according to the firm's fourth quarter 2010 report on foreclosure timelines.

S&P expects that it will take 49 months to clear the supply of distressed homes on the market in the U.S. which is an 11 percent increase over the previous quarter and a considerable 40 percent increase from the 4th quarter in 2009.

S&P reports that the volume of distressed residential mortgage properties that are not associated with Fannie Mae or Freddie Mac continues to fall, but at an ever-slowing pace.

The company estimates that the principal balance of these distressed homes amounts to about $450 billion, representing nearly one-third of the private RMBS market outstanding. And in some markets, clearing the shadow inventory will take a very long time.

"The shadow inventory in the New York MSA will take the longest to clear estimating 130 months as of the fourth-quarter in 2010. That is at least twice as long as it will take in any of the other top 20 MSAs and 2.7 times the average time to clear for the U.S. as a whole," the S&P report states.

The report concludes: "This is primarily due to very low liquidation rates in New York."

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