A ratings agency report takes a look at why New York’s shadow inventory is three times worse than the nation’s.
Standard & Poor’s Ratings Services previously estimated that it would take more than three times as long to clear the shadow inventory of distressed properties in New York than in the rest of the country. The estimate was based on properties securing private-label residential mortgage-backed securities.
The ratings agency includes 90-day delinquent loans, loans in foreclosure and real estate owned in its shadow-inventory statistics.
S&P Managing Director of Global Surveillance Analytics Diane Westerback noted in a statement that despite the bloated numbers the Empire State’s shadow inventory is not much higher than the overall U.S. market as a percentage of the original balance of all outstanding loans.
“This implies that the long timeline for clearing New York’s distressed mortgages is due to long liquidation timelines rather than a high default rate,” Westerback explained. “In 2010, average liquidation rates in New York were among the lowest in the country.”
S&P, which is based in New York, said two factors are responsible for the state’s extreme shadow inventory.
The first is New York’s judicial foreclosure process.
Also at fault is the strictness of its mandatory foreclosure mediations. S&P said these are adding to the delays in liquidating REO properties.
