Thomas Kelly explains the foreclosure process to those outside the banking industry by likening it to a tube.

"You get put in the tube when you're 90 days late, and you might come out the other end of the tube six months later," said Kelly, spokesman for JPMorgan Chase & Co.

What Kelly's analogy doesn't explain is how, for the past three years, thousands more Phoenix-area property owners have been entering the tube each month than coming out of it.

At present, the system is backed up with more than 45,000 "pending" foreclosures, up from about 2,300 in June 2006, according to a historical analysis by the Information Market, a Phoenix research firm.

Most experts expect pending foreclosures to increase even more before leveling off sometime within the next 12 months.

There has been much speculation among real-estate professionals about reasons for the apparent backlog of houses and condominiums headed toward foreclosure.

There's a widespread belief that banks are purposely limiting the flow of foreclosure homes onto the market, which helps prevent home prices from sliding even further but could prolong the market's long-term recovery.

Likewise, some say lenders are dragging their heels on repossessing and selling extravagant homes, and to a lesser extent commercial properties, including raw land, because the demand for big-ticket real estate is too low and because selling off large assets at sharply reduced prices could cause some smaller banks to fail.

Lenders have been relatively quiet about their strategies for working through pending foreclosures, which has only fueled various theories.

But Kelly said such theories give the banks too much credit.

"We've got such an enormous portfolio of homes to deal with, we don't have time to say, 'Let's do this with this one, and let's do that with that one,'" he said.

Monthly foreclosure totals have risen and fallen a number of times since the housing market peaked in 2006, although the general trend has been upward.

However, the number of pending foreclosures, properties on notice for a trustee sale but not yet sold, has increased steadily without exception since April 2006. In the past year, it has climbed by anywhere from 500 to 5,000 properties each month.

As of Friday, there were 45,709 total pending foreclosures in Maricopa County, according to the Information Market. Those are in addition to the roughly 73,000 foreclosures completed during the past three years.

Also as of Friday, the county was on track to reach 5,000 foreclosures by the end of this month, which would be the second-highest monthly total on record, having reached a high of 5,240 in February.

Even if 5,000 properties complete the foreclosure process this month, an even greater number will enter it.

As of Friday, lenders had served pre-foreclosure notices on 5,700 additional properties, a net increase of at least 700 in pending transactions for the month.

Actual foreclosures in the past three years total about 73,000, according to the data.

Some Valley foreclosures may be taking longer than the usual 91 days from notice to sale because the borrowers are attempting to work out a loan-modification or "short sale" agreement with the lender.

In Maricopa County, short sales have increased in the past year but still account for less than 5 percent of property sales.

Modifications help

Colleen Gunderson, Tempe-based Century 21 All Stars owner and designated broker, believes banks have intentionally slowed the release of foreclosure properties onto the market at the behest of the federal government, which provided many banks with bailout funds.

"There is a process in place to sort of warehouse these properties until a time when it's more beneficial to place them on the market," she said.

It's the right approach, Gunderson added, because dumping 45,000 foreclosed-on properties onto the market all at once would deliver the knockout punch to a real-estate economy already leaning against the ropes.

New, standardized loan-modification guidelines issued by the Obama administration in March appear to be doing a better job of keeping some borrowers out of foreclosure than modifications made in 2008, according to two federal bank regulators, but it's still too early to know for sure.

More than half of loan modifications negotiated before the Treasury Department launched its $75 million Making Home Affordable program in early March were back in default within six months, according to a study conducted by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

Those same officials said in May that the rate of re-default fell by about 12 percent among those borrowers whose monthly payments were reduced.

However, the number of loans headed toward foreclosure has risen significantly despite better modifications.

In March, the Investigative Reporting Workshop at American University in Washington, D.C., conducted a study of the nation's roughly 8,000 banks with online-news service msnbc.com and reported finding a 150 percent increase in loans at risk of foreclosure compared with a year earlier.

Kelly said job losses are one likely reason for the continued high volume of foreclosures, in addition to people walking away from mortgages even though the payments are affordable because they owe far more than the home is worth.

Commercial is next

Although most Valley foreclosures thus far have involved residential property, commercial-property owners and lenders are preparing for apartment, office and retail foreclosures to rise sky-high in the coming months.

Selling those properties back to the market could take years in some cases, analysts said, because there is little interest in new office and retail space, even at the low-rent end.

Craig Henig of commerical real estate brokerage CB Richard Ellis in Phoenix said banks aren't in any rush to foreclose on commercial real estate because it forces the lender to adjust the property's book value to today's considerably lower market price.

Significant write-downs on a few multimillion-dollar commercial loans could put a small or financially stressed bank out of business, he said.

"I don't know how they could sustain the amount of markdowns," Henig said.

However, Kelly said the holding costs associated with thousands of foreclosed-on properties outweigh any benefit the bank might realize from waiting to sell them.

He also noted that the value of commercial real estate and high-end homes is still on the decline, which means waiting is likely to cost lenders even more.

"The goal is to get that asset back earning money for you," he said.

Reach the reporter at 602-444-8681.