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Foreclosure update: resetting loan terms and shadow inventory

So-called "shadow inventory" flooding the market.

Even if you don't know what that is, you know it can't be good.

And it isn't. In fact, a Florida real estate agent says that such inventory -- houses not currently in foreclosure, but marching steadily and even inexorably toward that status -- is with certainty going to add to the foreclosure crisis in Florida and prolong the pain for high numbers of people who will be forced to leave their homes.

As noted by an economic correspondent in a recent PBS report on continuing foreclosure woes across the country, Florida has been hit singularly hard when It comes to home-related headaches over the past several years. Reportedly, there are more than 300,000 foreclosure cases still pending. On top of that, many hundreds of thousands of homeowners in the state are estimated to be delinquent on mortgage payments but not yet in foreclosure.

And then there is that shadow inventory, which is a looming harbinger of woes to come. What is essential to note about the term is what preceded the reality of a house about to enter the foreclosure process in many instances, namely, modified loan terms that were negotiated only for a limited time period.

Following that period, the payments balloon, either reverting back to their original terms or, in some cases, being readjusted to reflect even higher payments.

The above-cited realtor says that the loan modifications homeowners negotiated a few years back were "only a Band-Aid on the problem."

With terms about to reset for many owners, the wounds are about to be uncovered.

The PBS report states that approximately 600,000 families in Florida have been forced to vacate their homes since 2007.

It further notes that about 25 percent of all Florida homes have been served foreclosure notices since the great mortgage debacle commenced a few short years ago.

That is a flatly staggering number underscoring the sheer magnitude of the long-term housing problem that persists in the state.

Things obviously need to improve, and they hopefully will as the country continues to regain economic traction in the wake of the so-called Great Recession and the financial dislocations it has visited upon many millions of Americans.

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