Lenders making a dent in massive shadow inventory

Banks trimmed 1.2 million troubled mortgages or foreclosed homes out of the massive shadow inventory hanging over the housing market in the first half of 2012, according to JPMorgan Chase research.

The progress could double by the end of the year, though more than four million loans and properties would remain. Still, that would be down from a peak of six million in 2010.

Estimates on the shadow inventory vary based on how delinquent a loan must be before researchers add it to the list. Chase estimates include loans that have gone at least 60 days without a payment. Still, the consensus is that banks are making progress, which should lead to improving house prices.

An uptick in home prices could then help solve the other major drag on housing: the amount of borrowers stuck making payments on a loan they owe more on than their house is worth.

Should prices increase another 10 percent, the 10.8 million underwater borrowers could drop to 9 million, Chase estimates.