For those of you who think the markets have in any way reached bottom please read this article from the Washington Post:

A growing number of American homeowners are falling into financial limbo: They’re badly behind on payments, but their banks have not yet foreclosed.

The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation’s housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.

“It just means foreclosure rates are going to keep rising,” said Patrick Newport, an economist for IHS Global Insight.

Rising mortgage delinquencies were at the root of the recession, and many economists say an economic recovery will be difficult until the housing market recovers and home prices stabilize.

And how bad is the problem….

During the first quarter of this year, the share of all homeowners seriously delinquent on their mortgage but not yet facing foreclosure more than doubled to 3.04 percent, or about $227 billion in loans. There was a total of $97 billion in such loans during the same period in 2008, according to Inside Mortgage Finance. In more prosperous times, the rate is much lower — it was less than 1 percent in the first quarter of 2007, according to the industry publication.

We are hearing that in areas like Las Vegas there are 30,000 REOs coming on the market….in the next 3-6 months!

Some of the backlog reflects the inability of lenders to keep up with the swelling rolls of delinquent properties.

And the question that everyone wants to know….how long will this foreclosure (REO Listing and Short Sale Listing) dominated market last….

The glut of foreclosed homes on the market has already pushed down prices across the country. Existing-home prices fell another 16.8 percent in May compared with a year ago, according to industry data released yesterday. The overhang of homes in limbo means that foreclosure rates are likely to increase dramatically during the second half of this year and into 2010 as lenders work through the backlog, said Bob Bellack, chairman of Zetabid, which auctions foreclosed properties.

Why is the foreclosure process taking soooooo long?

In better times, lenders tended to begin the foreclosure process after three months, said Guy Cecala, publisher of Inside Mortgage Finance. Now it is not unusual for it to take nine months for the process to begin, he said.

“No one is in a rush, lender-wise, to deal with the property,” he said. “If you have to sell at a loss, why rush?”

Lenders traditionally write down the value of the home six months after an owner stops making payments, but the total loss is not recorded until the property is sold in foreclosure, said Mark Zandi, chief economist of Moody’s Economy.com.

Agents, remember you CAN help someone even when they are missing payments. Lenders WANT TO avoid foreclosure. The last thing the lenders want in this housing market is another REO. Learn how to do short sales. Expect the new ’solutions to the housing crisis’ coming out of Washington to focus on Mortgage Loan Mods and Short Sales.

Even seriously delinquent borrowers can restart negotiations with lenders to stay in their homes with a modified mortgage or persuade them to accept a short sale, which involves a homeowner selling the property for less than the outstanding mortgage balance and then turning the proceeds over to the lender to satisfy the loan.

Jay Brinkmann, chief economist for the Mortgage Bankers Association, said his industry is doing its best to work through the backlog while carrying out federal foreclosure prevention programs. “If a lender has a house that they know they will have to sell eventually,” he said, “they almost always want to sell it as quickly as possible because of the interest cost of holding the loan on the books, in addition to costs like taxes, keeping the grass cut and other maintenance.”

So, what do you do with all of this information? (Warning, shameless pitch coming)…Learn how to do Easily List Short Sales and Become a REO Listing Agent. Really, what choice do you have in this market?

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