The volume of the nation's shadow inventory is on the decline, but remains high as lenders and servicers continue to work through a backlog of properties, CoreLogic (CLGX) said. The research firm said during a webinar on fraud risk that distressed asset sales, such as short sales, remain a potential source of fraud.

Unrealized recoveries on suspicious short sale transactions can cost lenders as much as hundreds of millions per year.

“The overall suspicious short sale rate is 3.8% of all single-family residence short sale transactions through the second quarter of 2013," said Ed Gerding, fraud and risk strategist at CoreLogic.

Shadow inventory totaled approximately 2 million units valued at approximately $314 billion in April, down 18% when compared to April 2012.

“That was actually down from the previous year of $386 billion and then $320 billion in October 2012,” said Gerding. Gerding added that shadow inventory has experienced double-digit year-over-year declines for the past seven consecutive months.

Of the existing shadow inventory, 44% of the properties are located in four states: Florida, New York, Illinois and New Jersey. Florida came in fifth with 17% of the shadow inventory.

As of May of this year, the foreclosure inventory showed a 27% double-digit decline from a year ago, said Gerding, with seriously delinquent mortgages — those 90-plus days delinquent — at their lowest levels since 2008.

“We note that there were seven states that are showing year-over-year declines in foreclosure inventory of more than 40%,” said Gerding. California and Arizona reported year-over-year drops of more than 50%. Gerding went on to note that short sale transactions have steadily increased since 2006.

California, Florida, Nevada and Arizona remain the states with the highest single-family residence short sales and account for 45% of all short sale transactions so far in 2013.