This has been a common observation by Piggs. Banks are not moving homes from the NOD stage to the REO stage. The “shadow inventory” isn’t the banks owning and holding the houses – it’s the houses they should have – by all rights – foreclosed on.
The argument is that they are trying to work loan mods, or that they’re backlogged, or that there were moratoriums… There’s also the fact that the banks that service the mortgage probably don’t OWN the mortgage… so the process of taking a home back needs approval from the owners.
But I suspect it has a lot more to do with the fact that when a house goes back to the bank – it has to be marked to current value – not the inflated value it had previously been mortgaged at. Banks and mortgage owners don’t want to mark down those losses.
