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Fears of an REO glut persist

Part 1: Sizing up the 'shadow inventory'

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Editor's note: This series shines a light on the "shadow inventory" of distressed properties that haven't yet reached the market. This article, Part 1, explores the various definitions and projections for shadow inventory, and Part 2 ("Skeptics don't expect REO flood") details the potential impact of this inventory on the housing market as a whole. There are lingering fears that the fragile recovery under way in many housing markets could be derailed by a "shadow inventory" of homes that have either been repossessed by lenders, are in foreclosure, or whose owners are behind on their loans. An estimated 7 million homeowners are currently behind on their loans or in the foreclosure process -- roughly double the number two years ago. Not all of those homes will end up on back on the market. Some homeowners will "cure" their delinquent loans through a loan modification or by refinancing. But lenders are also managin...