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As Congress moves to kill off a federal program aimed at helping homeowners avoid foreclosure, a new report finds there’s a huge backlog of foreclosed houses waiting to be sold.

Over 6.8 million homes in the U.S. are in foreclosure, according to Lender Processing Services, a mortgage data firm. At the current rate, it would take 30 months to sell that huge backlog of homes to new owners. And that doesn’t include the thousands of new homes falling into foreclosure every month.

[Related: Strategic Default and the Morality of Walking Away]

“(W)hile delinquencies continue to decline, an enormous backlog of foreclosures still exists,” according to the report.

Not surprisingly, the loans that received the most scrutiny during the housing bubble are now the ones most likely to go bad. “Option ARM’s” are mortgages with adjustable interest rates where the homeowner has a choice about which kind of payments to make. Consumer advocates criticized such loans during the boom, saying they contained hidden balloon payments and rates that gradually increased over time–features that many low- and moderate-income people could not afford.

By February, 18.8% of all Option ARM loans were in foreclosure, a 23% increase in foreclosure rates for Option ARM’s over the last six months and “far more than any other product type,” the company found.

Meanwhile, the tide of new delinquencies, which could eventually lead to new foreclosures, appears to be waning. Among loans that were more than 90 days delinquent a year ago, 22% are now current.

[Resource: Misconceptions May Keep Homeowners From Getting Low-rate Refi’s]

But for homes already in foreclosure, the picture appears to be getting worse. The average foreclosed loan spends 537 days in delinquency, an all-time record, according to the study, and 30% of loans in foreclosure have not received a payment in more than two years.

Adding it all up, the latest housing numbers will end up “putting even more downward pressure on U.S. home values,” the report found.

Image by sean dreilinger, via Flickr

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