You observations about securitised mortgages confirm a suspicion of many I am sure that there is a second shadow inventory. The first is cause by the delays to market in the bank chain and the second is the stock of effective NODs that are undeclared, but will clearly proceed to foreclosure when the securitised mortgage administration chain eventually gets its act together.
It is not clear what the pressure inside the latter are. The secondary market value of securitised bonds is directly affected by payment flow (the servicing agents diligently reports the level of payments received) , so the non-payments of these ‘friends’ will be measured and the bond’s value fall accordingly. It could be that foreclosing and selling those properties may have no more negative impact on the value of the bonds than the present situation of non-payment; for non-payment may have the effect of marking the value of that mortgage down to zero in effect in the way the secondary market value these bond is reached. In this case eventually , the bond holders may realise that actual sale of the properties may boost the value of the bonds by recouping some value. But how and when such pressure to get the foreclosure process going in these cases in unknown. This second shadow inventory is having no impact on the house market today (since the property with non-payment securitised mortgage is not on the market , not empty and not reported) but could do later; perhaps even years down the road. I doubt if we have an insider from that world, but who knows. In the meantime, I will forward this column to some key FT journalists to see if they can find out.
