An estimated 1.4 million borrowers have failed to pay their mortgages in more than a year, but continue to live in the properties, according to Lender Processing Services, which tracks mortgages on 40 million homes.

Under the new government regulations, it takes banks 14 months to evict nonpaying borrowers - longer in some states. Many of these people are gaming the system, said Ted Jadlos, a managing director at Lender Processing.

Also, banks aren't in a hurry because once they take possession of a property they must write down its value to reflect market price. Plus, unoccupied homes are more likely to fall into disrepair or be vandalized.

Some analysts predict that this shadow inventory will cause prices to slide further, but so far it's not happening.