REOs (bank-owned foreclosures) have returned in force just in time for the spring season and to benefit from prices that have been rising for a year or more. Banks are listing foreclosures, some of which have been in the works since the end of the robo-signing scandal.
As delinquency rates remain low, the new REOs are likely to be a temporary blip in the bar charts.
After reaching a trough in August of 2013 of 375,000 properties, the number of real estate owned (REO) properties increased 15 percent to 430,000 as of March 2014, reports Sam Khater of CoreLogic. The increase in REO properties was broad based, rising in 46 states. While the increase was moderate nationally, some states had large increases. Idaho led the way with the stock of REO properties nearly doubling between August 2013 and March 2014. Maryland had the 2nd largest increase in the number of REO properties, which increased 78 percent, followed by Nevada (up 70 percent), Oregon (up 47 percent) and North Dakota (up 42 percent).
The rise in REOs across most states reflects several inter-related factors, Khater reports. The “robo-signing” scandal in the fall of 2010 caused servicers to delay the foreclosure process, increasing foreclosure timelines. The number of REO properties had been increasing until September 2010 when the issue became public and after September the flow of completed foreclosure immediately fell by one-third in October 2010 and remained lower. That caused a rapid fall off in the number of REO properties until very late 2011 and early 2012 when the number REO properties began to rise again. Not surprisingly, the rise in the number of REO properties coincided with the National Mortgage Settlement, which was signed in February 2012 and provided more clarity and standards on foreclosure resolutions which led to the rise in REO properties.