REO / Foreclosure Supply Down?

[Danny Day]

I'm wondering how the supply of bank owned properties is going in your market.

Currently in Houston the supply is way down. We're seeing less than 5 months of inventory which is starting to look like a sellers market here.

Are the banks waiting to unload some assets any time soon? How is this affecting your market?

Thanks

[Chris Martin]

Fannie Mae and Freddie Mac are good barometers for national foreclosure trends. Fannie Mae, page 82 of their latest 10-Q says "...foreclosure levels were lower than what they otherwise would have been during the first nine months of 2011 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers, changes in state foreclosure laws, and new court rules and proceedings. Additionally, foreclosure levels were affected by our directive to servicers to delay foreclosure sales until the loan servicer verifies that the borrower is ineligible for a HAMP modification and that all other home retention and foreclosure prevention alternatives have been exhausted. The delay in potential foreclosures, as well as an increase in the number of dispositions of REO properties, has resulted in a decrease in the ending inventory of foreclosed properties since December 31, 2010."

Freddie Mac, page 79 of their latest 10-Q says "Our REO property inventory declined 17% from December 31, 2010 to September 30, 2011, primarily due to a decline in the volume of single-family foreclosures caused by delays in the foreclosure process, including delays related to concerns about the foreclosure process, combined with continued strong levels of REO disposition activity during the period."

Be patient though, since more distress is on the way. Freddie: "...we expect the volume of our REO acquisitions will likely remain elevated, in part due to the resumption earlier in the year of foreclosure activity by servicers following the suspensions over concerns about documentation practices. We have a large inventory of seriously delinquent loans in our single-family credit guarantee portfolio, many of which will likely complete the foreclosure process and transition to REO during the next few quarters as our servicers work through their foreclosure-related issues."

My final answer.