Tuesday, February 14, 2012

FHA REO Inventory declines to four-year low in December

by Bill McBride on 2/14/2012 04:10:00 PM

From economist Tom Lawler:

FHA released the December Report to the FHA commissioner, and according to the report FHA’s SF REO inventory plunged to 32,170 at the end of December – the lowest REO property count since December 2007, and 47% lower than at the end of December 2010. Here is a table derived from the latest and past reports. I don’t rightly know what the “adjustments” category is, save that it is needed to make the report “stock/flow” consistent.

Monthly Report to FHA Commissioner
 SF REO Inventory (EOM)ConveyancesSalesAdjustments
Jun-1044,8508,4878,89341
Jul-1044,9448,3418,508261
Aug-1047,0079,8107,686-61
Sep-1051,48711,4117,439508
Oct-1054,6099,9087,289503
Nov-1055,4886,7525,817-56
Dec-1060,7397,7282,749272
Jan-1165,6397,7092,632-177
Feb-1168,8017,3834,2210
Mar-1168,9978,6478,728277
Apr-1165,0637,41011,37531
May-1159,4657,03212,65929
Jun-1153,1647,24013,60059
Jul-1148,5076,50911,379213
Aug-1144,7498,00511,701-62
Sep-1140,7196,56710,554-43
Oct-1137,9226,5419,883545
Nov-1135,1926,2129,178236
Dec-1132,1705,9978,800-219

The level of property conveyances is astonishingly low, especially given the rising level of seriously delinquent FHA-insured SF loans (711,082 at the end of December, up from 598,140 at the end of December 2010).

The report also showed a continuation of the recent downward trend in FHA loan modification activity.

It is not clear why both property conveyances AND loss mitigation activity slowed so dramatically in the latter part of last year, but the sharp slowdown in problem loan “resolutions” contributed to the significant rise in the number of seriously delinquent FHA-insured SF loans in the second half of last year.

FHA SF "Home Retention" Activity
 Forbearance AgreementsLoan ModificationsPartial ClaimsTotal "Loss Mitigation Activity"SDQ Loans
Dec-091,8408,51496811,322549,667
Jan-101,7669,31998612,071576,691
Feb-101,61811,35984613,823570,799
Mar-101,68614,6041,15817,448553,650
Apr-101,22811,5251,60314,356544,464
May-101,18912,0341,62114,844548,193
Jun-101,07417,0721,47919,625551,330
Jul-101,21219,0021,42121,635559,620
Aug-101,15216,0901,67618,918558,316
Sep-101,07015,6341,52018,224563,513
Oct-102,36112,6671,19416,222532,938
Nov-101,72014,8301,63118,181588,947
Dec-103,30118,0002,32823,629598,140
Jan-112,90512,0752,35217,332612,443
Feb-112,62810,4121,99115,031619,712
Mar-113,56212,7522,71419,028553,650
Apr-112,50313,5642,36618,433575,950
May-112,21111,9453,37717,533578,933
Jun-112,65513,3683,08219,105584,822
Jul-112,2598,0751,62911,963598,921
Aug-112,0689,9501,81513,833611,822
Sep-111,5817,3461,50110,428635,096
Oct-112,1097,1831,42610,718661,554
Nov-111,9957,5402,48712,022689,346
Dec-112,5375,5609769,073711,082


Fannie Freddie FHA REO Inventory Click on graph for larger image.

CR Note: This graph shows the REO inventory for the FHA through Q4 2011. There has been a sharp decline in REO inventory over the last year and FHA REO is at the lowest level since 2007.

Fannie and Freddie should report Q4 REO next week, and will probably report further declines in REO too.