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Sunday, March 11, 2012

Lawler: REO inventory of "the F's", PLS, and FDIC-insured institutions combined down about 21% last year

by Calculated Risk on 3/11/2012 06:05:00 PM

CR Note: On Friday I posted a graph of REO inventory (lender Real Estate Owned) for the Fs (Fannie, Freddie and the FHA). Economist Tom Lawler has added estimates for FDIC insured institutions and PLS (private label securities).

From Tom Lawler:

Below is a chart showing estimates of the SF REO inventory of the F’s, private-label ABS (from Barclays Capital), and FDIC-insured institutions. On the latter I have changed my estimation procedure. Rather than assume a constant carrying cost, I am assuming that the average carrying cost at FDIC insured institutions is 50% higher than the average for Fannie and Freddie. Both Fannie and Freddie’s average REO carrying costs have declined steadily over the past two years, and that’s probably true for banks as well.

Compared to the end of 2010, estimated REO inventories for the F’s, PLS, and FDIC-insured institutions combined at the end of 2011 were down about 21% to the lowest level since the end of 2007.

Fannie Freddie FHA PLS FDIC insured REO Inventory Click on graph for larger image in new window.

More CR: As Tom Lawler has noted before: "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 520,000 in Q4.

REO inventories have declined over the last year. This was a combination of more sales and fewer acquisitions due to the slowdown in the foreclosure process. However there are many more foreclosures coming and I expect the REO inventory to start increasing again.

Summary for Week ending March 9th
Schedule for Week of March 11th