Bank Repossessions Hit New High for Second Month in a Row
Bank repossessions – the actual foreclosure on a home and conversion to an REO (Real Estate Owned) property – hit a record high in May 2010 for the second month in a row, according to foreclosure experts RealtyTrac. Lenders repossessed a total of 93,777 homes, a 1 percent jump from April and a 44 percent rise from May of last year.
At the same time, new foreclosure activity dropped slightly month-to-month (but was still up from May of last year). Experts, however, see that small decline as a sign that banks are too busy dealing with old foreclosures to begin new ones.
According to Rick Sharga, senior vice president of RealtyTrac, “…the lenders are focusing on processing the delinquent loans they already have rather than initiating new foreclosures. They’re managing inventory to prevent a free fall in home prices.”
Real estate analysts have long expected REO owners to be forced to finally deal with this “shadow inventory” of REO properties, which some estimate to be in the millions. Over 3 million homes are expected to receive foreclosure notices during 2010, up from 2009. In May, Nevada continued to have the highest foreclosure activity and Vermont the lowest of the 50 states.
How will the banks manage this giant backlog of REO homes? Bank of America is reportedly encouraging short sales and other foreclosure alternatives, but that still will not stave off the sheer volume of foreclosures coming through the pipeline.
“It won’t be enough to offset all the loans coming through foreclosure,” says Bob Caruso of Lender Processing Services. “The volume is still coming through so heavily that short sales will only be a small fraction of the loans coming through.”
In addition, the government’s Home Affordable Modification Program (HAMP), which was supposed to help homeowners avoid foreclosure and subsequent conversion to REO properties, has been shown to only postpone the inevitable. That will drive more foreclosures in the coming months. HAMP has also tightened up its criteria, making it more difficult for homeowners to participate, due to the high failure rate of the program to date.
All of the above data continues to confirm that REO listings will continue to be on the rise through throughout the rest of 2010, as well as 2011 and beyond. Almost half of all potential homebuyers are specifically interested in purchasing an REO home because of the value and REO sales are expected to be double what they were last year.
More and more REO professionals will continue to be in demand to handle these specialized property transactions in the months to come. Training to become an REO agent and learning how to get REO listings will be an excellent career choice as another recession currently threatens America in the coming months.
Frank Patrick is the founder of ASREOS (the American Society of REO Specialists), the first professional association for REO Agents created by REO professionals and contains numerous resources and tools to maximize REO opportunities and find REO listings – as well as the ability to interface with other REO Agents across the country in an exclusive forum.