Tuesday, November 22, 2011

FDIC-insured institutions’ 1-4 Family Real Estate Owned (REO) decreased in Q3

by Bill McBride on 11/22/2011 08:29:00 PM

The FDIC released the Quarterly Banking Profile today for Q3. The report showed that 1-4 family Real Estate Owned (REO) by FDIC insured institutions declined to $11.9 billion in Q3, from $12.1 billion in Q2 - and from a record $14.76 billion in Q3 2010.

As economist Tom Lawler has pointed out before, the FDIC does not collect data on the number of properties held by FDIC-insured institutions, instead they aggregate the carrying value of 1-4 family residential REO on FDIC-insured institutions’ balance sheets.

Using an average of $150,000 per unit would suggest the number of 1-4 family REOs declined from 80,597 in Q2 to 79,335 in Q3.

Here is a graph of the 1-4 family REO carrying value for FDIC insured institutions since Q1 2003.

FDIC insured Institutions REO Dollars Click on graph for larger image in new window.

The left scale is the dollars reported in the FDIC Quarterly Banking Profile, and the right scale is an estimate of REOs using an average of $150,000 per unit. Using this estimate for the average per REO gives 79.3 thousand REO at the end of Q3.

Note: FDIC insured institutions have other REO and this is just the 1-4 family residential REO (other REO includes Construction & Development, Multi-family, Commercial, Farm Land).

Of course this is just a small portion of the total 1-4 family REO. Here is a graph showing REO inventory for Fannie, Freddie, FHA1, Private Label Securities (PLS), and FDIC insured institutions. (economist Tom Lawler has provided some of this data).

Fannie Freddie FHA PLS FDIC insured REO InventoryThe Fannie, Freddie, FHA, PLS, FDIC REO decreased to about 460,000 in Q3 from just under 500,000 in Q2.

1 Note: FHA inventory is for August.

As Tom Lawler has noted: "This is NOT an estimate of total residential REO, as it excludes non-FHA government REO (VA, USDA, etc.), credit unions, finance companies, non-FDIC-insured banks and thrifts, and a few other lender categories." However this is the bulk of the 1-4 family REO - probably 90% or more. Rounding up the estimate (using 90%) suggests total REO is just around 510,000 in Q3.

Important: REO inventories have declined over the last year. This is a combination of more sales and fewer acquisitions due to the slowdown in the foreclosure process. There are many more foreclosures coming - see my post earlier this month Housing: REO and Mortgage Delinquencies.

All current Mortgage Delinquency and REO graphs.

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