US REO Inventory

Frannie Mae’s statement Friday on 1Q 2015 US REO inventory, “We continue to experience disproportionately higher credit losses and serious delinquency rates from single-family loans originated in 2005 through 2008 than from loans originated in other years. Single-family loans originated in 2005 through 2008 constituted 12 per cent of our single-family book of business as of March 31, 2015 but constituted 59 per cent of our seriously delinquent loans as of March 31, 2015 and drove 67 per cent of our credit losses in the first quarter of 2015.”
Freddie Mac’s statement, “Our single-family REO acquisitions in 1Q 2015 were highest in Florida, Illinois, Ohio, and Michigan, which collectively represented 38 per cent of total single-family REO acquisitions during that period, based on the number of properties, and comprised 38 per cent of our total single-family REO property inventory at March 31, 2015.”

“Our REO acquisition activity is disproportionately high for certain types of loans, including loans with certain higher-risk characteristics,” continued Freddie Mac. “For example, the percentage of interest-only and Alt-A loans in our single-family credit guarantee portfolio, based on UPB, was approximately 2 and 3 per cent, respectively, at March 31, 2015. The percentage of our REO acquisitions in the first quarter of 2015 that had been financed by either of these loan types represented approximately 20 per cent of our total REO acquisitions, based on loan amount prior to acquisition. In addition, loans from our 2005-2008 Legacy single-family book comprised approximately 71 per cent of our REO acquisition activity during 1Q 2015.

Real Estate Owned Inventory, US: 1Q 2015

Fannie and Freddie are still working through the backlog of loans made during the housing bubble, mostly in judicial foreclosure states.
REO inventory decreased in Q1 for both Fannie and Freddie, and combined inventory is down 30% year-over-year.   For Freddie, this is the lowest level of REO since Q2 2008.  For Fannie, this is the lowest level since Q3 2009.
Short term delinquencies are at normal levels, but there are still a fairly large number of properties in the foreclosure process with long time lines in judicial foreclosure states.