NEW YORK (BankingMyWay) -- Banks are foreclosing on so many homes, it’s becoming impossible to get rid of them all. That in turn is driving the foreclosure rate upward--not downward as some experts have been saying—and it’s a trend that could worsen if banks and lenders don’t take action, Equifax says.

It’s true that foreclosure home sales are up, but only slightly. According to RealtyTrac, there were 79,331 foreclosed homes sold in the U.S. during May 2011, up 0.32% from April. But the pace of foreclosed home sales hasn’t kept up with the rate of new foreclosures. That number, RealtyTrac says, stands at 222,754 for May, up 3.64% from April.

Now credit rating agency Equifax has released an even harsher assessment of the foreclosure market.

In a June 30 statement, Equifax said that it sees no end in sight for the housing crisis, with more than $300 billion worth of home foreclosures in 2010. That’s more than twice the combined amount recorded in 2006 and 2007 (at $126.7 billion, Equifax says).

A big part of the problem is that the housing market is stuck so deep in the mud that banks can’t sell all the foreclosed homes they’ve repossessed. The credit agency says that about $22 billion worth of foreclosed homes remain unsold, with more foreclosures coming through the pipeline every day. Equifax cited a few additional issues as well:

• About half of all U.S. foreclosures stem from bad mortgage loans made between 2005 and 2007, when lenders lowered their lending standards and granted mortgages to legions of not-so-creditworthy customers.
• “Severe delinquencies” have remained “nearly constant” since the first quarter of 2010, and banks and lenders will likely have to write most of them off, Equifax says, taking a loss in the process.
• U.S. foreclosure rates mirror bankruptcy rates just about number to number. Equifax says that foreclosure completion rates – at 1.45% - almost match bankruptcy rates, which sit at 1.6%.
• Almost two thirds of past-due balances are sourced from loans originating from 2005-2007, with home equity revolving potential foreclosures totaling $11.9 billion in May 2011.

All told, the heavy weight of foreclosures remains a serious burden to the U.S. housing market, and Equifax doesn’t see a light at the end of the tunnel.

"Shadow inventory and real estate-owned properties are still playing a dominant role in today's mortgage market and slowing the pace of economic recovery,” says Craig Crabtree, senior vice president and general manager at Equifax Mortgage Services. “While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth.”

It’s the ultimate Catch 22: The economy can’t recover until the housing market improves, but based on the unemployment numbers and certain indexes, the housing market won’t improve until more Americans are working again and feel confident that a genuine recovery is near.

In the meantime, Equifax says to expect more foreclosures to hit the market, reducing local home values and forcing banks to absorb more losses.

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