The shadow inventory of delinquent loans, foreclosures, and REOs stands at 7 million homes, which would take the market more than 40 months to clear, more than three years, according to Fitch Ratings.
And as major banks fix recent problems in the foreclosure process, that number will only grow. Liquidation and resolution timelines were extended because of the affidavit issues. Consumer advocacy groups and state attorneys general offices filed lawsuits, and regulators launched investigations.
All of it, Fitch said, simply prolonged the housing correction underway and will bring about further house price declines and losses on residential mortgage-backed securities.
Analysts did say it is still unclear how long the foreclosure delay will last, but even before the problems came to light, Fitch believed prices would drop another 10% with the majority of the recovery coming at the end of 2012.