I believe this “shadow inventory” you speak IS there but has not yet been foreclosed upon (so it is not yet “bank owned”). A NOD may have been filed and even a NOS (which was not followed through). Many FB’s are squatting and some are making very low payments in trial mods to delay foreclosure (which they will likely not stay in for the long term due to never building equity). The “FB trial-mod group” and the “FB squatting group” will continue the charade as long as their lender(s) allow it because it is FREE or VERY CHEAP for them to do so.
So, yes, the lenders ARE “holding back” but they have yet to take title to these properties and thus the responsibility for all their cleanup, maintenance and taxpaying headaches.
Unless these lenders are hopelessly incompetent, they must also realize that many of their FB’s aren’t paying taxes or hazard insurance premiums either, so if something happens to their “collateral” while still “owned” by their FB, they are SOL. And, of course, they’re going to be left in the end holding the bag for back taxes and penalties :=0
