In his recent posting on, publisher Paul Jackson scrutinizes current data from Lender Processing Services – which showed that a record 7.5 million loans are non-current – and posits that the real key to resolving the housing market problems yet-to-come is REO property sales.

And here’s why:

For all loans at 90+ days delinquent, the average days delinquent is 272. For loans in foreclosure, the average days delinquent is 410. Which means that severely delinquent borrowers have gone almost 10 months without making a loan payment – and foreclosure hasn’t started yet for them. Those in the foreclosure process have not made a payment for over a year.

Clearly, short sales will not cover all this distressed property. Jackson says the key indicator that the housing market is on the road to recovery will be an increase in REO volume; here’s a forecast from JPMorgan Chase:

To read the full story (good stuff), go here.

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