Homeownership Symposium - The Home Mortgage Foreclosure Crisis: Lessons Learned

Patricia McCoy

HBTL-01: From 2007 through 2011, the United States housing market suffered from a severe imbalance in supply and demand. On the supply side, there were too many homes for sale and too many of those listings were for foreclosed homes. In addition, there were several million homes awaiting sale in the foreclosure pipeline. Many of these homes in the so-called “shadow housing inventory” eventually came on the market and pushed down house prices. The demand for homes was also depressed. In the aftermath of the financial crisis, banks tightened their lending standards. Meanwhile, millions of households suffered a decline in creditworthiness, making it difficult or impossible for them to get loans. Reducing the shadow housing inventory is one method to help correct the imbalance in housing supply. There are two ways to reduce that inventory. One is through foreclosure prevention, to keep homes with distressed loans from entering the shadow inventory to begin with. The other is to speed up sale of real estate owned (REO) on the back end.