This data shows the shift that has occurred over the last year when it comes to banks repossessing properties, says the company. The percentage of borrowers in pre-foreclosure has decreased since 2012; while the number of months delinquent has increased in 2013. These statistics point to the change in lenders' response time, the effect of housing market recovery as well as the ominous foreclosure backlog.

Foreclosure backlog is commonly referenced as “shadow inventory.” Many reports throw the term around loosely. However it is important to understand the three specific types of shadow inventory, according to the firm.

Shadow inventory typically refers to the amount of unlisted bank-owned homes (REOs) that are not yet on the market. These are vacant homes that have already gone through the foreclosure process and are owned by the foreclosing lender. A simple Zillow search for California homes will return results for 17,000 foreclosed homes that have yet to be put on the market for sale. Zillow shows 40,000 off market REO homes in Florida, 6,146 in Arizona, 1,120 in Nevada, 1,896 in New York and 1,553 in New Jersey, says the firm.

According to Zillow, there are 88,000 California pre-market homes that have a publicly recorded foreclosure notice. Zillow shows 124,000 in Florida, 12,000 in Arizona, 11,000 in Nevada, 17,000 in New York, and 37,000 in New Jersey. RealtyTrac reports one in every 885 homes has a foreclosure filing, while foreclosure starts are down 33% from a year ago. These properties are not poised for short sale, but will likely become foreclosed bank owned homes.

The third type of shadow inventory is possibly the scariest, according to YouWalkAway.com, as it refers to the homes in pre-foreclosure that have not received a public foreclosure notice but are in default. They are often unreported and rarely accounted for because reliable data is elusive. The direct relationship YouWalkAway.com has with homeowners in foreclosure allows the collection of this data and sheds light on the prevalence of these pre-foreclosure properties.

YouWalkAway.com found 54% of their current customer base to be at the third level of shadow inventory, which is a 30% decrease since 2012. As the housing market begins to turn, real estate is gaining value nationwide. In turn lenders have begun moving forward with foreclosures.

While the foreclosure process is progressing more quickly than in past years, the average number of months before a foreclosure notice is issued raises alarm. Those YouWalkAway.com customers determined to be in pre-foreclosure were found to be an average of 20 months in default, says the company. Although lenders are moving forward with the foreclosure process, the nation's housing market still has close to two years of shadow inventory to process.

YouWalkAway.com's report indicates the housing market is on the road to recovery. There are fewer foreclosure starts occurring. With the spike in short sale and deed in lieu of foreclosure approvals by the five major lenders, the number of foreclosure auctions is decreasing as well. However, these numbers also suggest that the market's complete recovery may still be years away due to the untouched foreclosure backlog.

According to the website, “lenders have created a mirage of limited inventory while veiling hundreds of thousands of shadow inventory homes. If lenders continue to hold the REO properties off market in an attempt to maintain low housing inventory, this will turn up the heat on home prices and bidding wars.”