The government imposed moratorium may have helped in the short term to lower REO inventory and allow 20% of eligible homeowners to modify their mortgages but the 600 pound gorilla is still in the room. As the moratorium comes to an end an unemployment still hovering around 10.5% there will be a second tsunami of foreclosures during the first and second quarters in 2010.

The news reports show increased delinquent mortgages are occurring all over the US and there is still a large number of homes that were foreclosed on that are still not listed for sale aka Ghosts or Shadow Inventory. There are several reasons for these assets to not be listed for sale but eventually those houses will either enter the real estate market and could further depress resale values. 

Below is an article from today's DS News to further illustrate the problem.

Even as home prices are beginning to show signs of stabilizing and the industry is ramping up efforts to keep troubled borrowers in their homes, the latest market study from Jacksonville, Florida's Lender Processing Services (LPS) shows that mortgage delinquencies and foreclosures remain alarmingly elevated.

The company's October Mortgage Monitor report also cites large "shadow" foreclosure and REO inventories. Thenumber of loans deteriorating further into delinquent status is now more than twice the number of foreclosure starts, indicating another major wave of troubled loans in an already clogged loan pipeline, LPS said.

Nearly one-third of foreclosures remain in pre-sale status after 12 months - twice as many as the year prior, LPS said in its study, further adding to the threat of a shadow eclipse. In addition, the six-month average deterioration ratio on troubled mortgages has risen the past two months to 300 percent, showing that for every loan that improves in status, three more deteriorate further, LPS explained.

LPS' October Mortgage Monitor reveals record high rates for non-current loans. The company reported that total U.S. delinquency rate stood at 9.37 percent at the end of September, while the nation's September foreclosure rate hit 3.12 percent - a month-over-month increase of 2.6 percent and a year-over-year increase of 88.9 percent.

Among individual states, it comes as no surprise that Florida posted the most troubling results, with 10.4 percent of loans in foreclosure and more than 12 percent more delinquent.

Other states reporting high levels of non-current loans - which includes both foreclosures and delinquencies as a percentage of active loans in the state - were Mississippi, Georgia, and Michigan, as well as the usual high-foreclosure states of Nevada, Arizona, and California.

The one positive reported by LPS was an upswing in loan production volume over the previous year. Year-to-date 2009 loans totaled 2,032,973, LPS said, versus 1,903,723 for the same period in 2008.