Though mortgage defaults have been falling for several months, bank repossessions (where borrowers actually lose their homes) have been climbing ever higher as mortgage lenders continue to work through their backlogs.
They reportedly reached a new all-time high last month, according to data set to be released by RealtyTrac tomorrow (via Realty Check).
The number of bank repos completed during the month is expected to come in just short of 100,000.
In July, mortgage lenders took back 92,858 properties, a nine percent rise from June and a six percent increase from a year ago.
July’s bank repossession (REO) total had been the second highest since RealtyTrac began tracking in April 2005, and was just one percent below the monthly REO activity peak of 93,777 set back in May.
It’s clearly bad news for homeowners who were unable to take advantage of loan modifications and other loss mitigation tools, and also a problem for home prices.
Housing Won’t Recover Until 2014
All that distressed property will add to the growing shadow inventory, which refers to the homes repossessed by banks and mortgage lenders (or soon to be) that have yet to make it back onto the market.
Some analyst estimates peg the number of shadow properties at over seven million, meaning home prices will be dragged down for much longer than the standard inventory numbers imply.
In fact, JP Morgan Chase said yesterday it didn’t expect a housing recovery until 2014, thanks to the large number of foreclosed properties out there.
There’s also a big question mark regarding the success of loan modifications, as the high re-default rate could add even more supply to the shadow inventory.