Report: Servicers Decrease Loans in Shadow Inventory in Q3

Report: Servicers Decrease Loans in Shadow Inventory in Q3

01/22/2013 BY: ESTHER CHO

As servicers rise out of the paralysis caused by regulatory issues, they are able to take necessary steps to clear out aging loans in shadow inventory, according to a report from Moody’s Investors Service.

In the report, Moody’s revealed the number of loans in foreclosure shadow inventory, or loans in the process of foreclosure but with no resolution, decreased from Q2 to Q3, with the exception of jumbo loans from Citi and subprime loans from Bank of America.

Across all product types, JPMorgan Chase experienced the biggest decrease in loans in shadow inventory.

“This is a good sign for servicers as it is an indication that they have addressed the operational and staffing hurdles they faced in the past and have begun to reduce the backlog of aged foreclosures and REO properties,” Moody’s stated.

Moody’s also noted two other factors are driving the improvement in shadow inventory: recent bulk sales and subservicing of seriously delinquent loans to special servicers.

Although loans in foreclosure decreased in Q3, the average number of days loans remained in the foreclosure process increased from Q2 to Q3.

The number of loans sitting in REO inventory fell in Q3, with the exception of certain product types from Citi (jumbo), Chase (Alt-A) and Wells Fargo Bank (subprime).

“We believe that an increase in short sale volumes and an ability to sell houses quicker in the improved housing market resulted in the drop in REO inventory,” rating agency stated.

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