Shadow REO: 90% Foreclosed Held Off Market #realstate @aolrealestate

In fact, if lenders turn their REO release valve to full blast, the deluge of foreclosures cascading onto the market could plunge the country into a recession, said Thomas Martin, president of consumer advocacy group Americas Watchdog.

"If they let the dam essentially break. It could be a catastrophic disaster for the U.S. economy," he said, predicting that some major banks would fail and home prices would nosedive by 20 percent.

That doomsday scenario has many industry professionals supporting lenders' tactics of holding onto most of their REOs. Otherwise, they would be "causing the floor to fall out from underneath the entire market," Faranda said.

Read the whole article: Shadow REO: As Many as 90% of Foreclosed Properties Held Off the Market, Estimates Suggest | AOL Real Estate.

Yes, and it's also why Ben Bernanke lent so much money to Wall Street banks, some of them former investment houses quickly converted to standard commercial banks, that were also allowed to turn around and park that borrowed money at the Fed to earn more interest than they were paying on the loans from the Fed.

It's all been a tactic to, in Ben's mind, delay handling the shadow inventory and toxic securities until the whole economy will have very slowly absorbed the losses. It was a method to avoid nationalizing those banks, the way AIG was nationalized, only to be operated by the government as well and likely as utilities.

Whether or not one agrees with his reasons, it has to be admitted that Ben Bernanke has done a masterful job (so far) in pulling it off. Didn't most people believe he'd not be able to avoid high price-inflation by now? He's really done a balancing act. Will he be able to stay up there on the high wire with no balancing pole? It's going to get windy. Has he had them installing a net in case he finally slips? What's Plan-B, still nationalizing if push comes to shove?

If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.

Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.

Did this post help you? Let us know by leaving your comment below.

Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.

Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.

We do not necessarily fact checked the contents of every linked article or page, etc.

If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.

The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?

For our part, we believe in strong regulations and strong regulators.

We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.

We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.