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S&P: Shadow inventory to grow

Loan mod candidates drying up, redefaulting

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Lenders are likely to add at least 1.75 million homes to their real estate owned (REO) property rolls that will take nearly three years to sell and put pressure on home prices, according to a new report from Standard & Poor's Financial Services LLC. Loan servicers appear to have "exhausted the supply of plausible candidates for loan modifications and switched their emphasis" back to foreclosure, the report said. The high redefault rate on loan modifications will also add to the "shadow inventory" problem, analysts at Standard & Poor's said. To assess the potential magnitude of the shadow inventory problem -- homes that are either owned by lenders or destined to end up in their hands but that have not yet been put up for sale -- Standard & Poor's looked at four categories of loans: performing; recently "cured"; seriously delinquent; and REO. In early 2009, loan servicers had switched their strategy from rapid foreclosure to loan mod...