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Category Archive: ‘REOs’

Rent the REOs?

Hat tip to daytrip for sending this along, from the

The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.

While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.

Trimming the glut of unsold foreclosed homes on the market is “worth looking at,” said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.

Nationally, home prices in May were 7.4% lower than a year earlier, but after excluding distressed sales, prices fell just 0.4%, according to CoreLogic Inc. Foreclosures and other distressed sales now account for about 30% of homes sold each month and sales from government-related entities make up about one third of that number.

“Adding more stock simply increases that overhang. If that can be avoided, it should be,” says Jared Bernstein, an economist who left the White House in April and is now a senior fellow at the Center on Budget and Policy Priorities, a liberal think tank in Washington. Because rents are firming up, “this idea could have some legs,” he said.

Renting out homes could cover the costs of holding the properties until they can be resold once markets stabilize, potentially turning a profit for mortgage titans Fannie Mae and Freddie Mac or the Department of Housing and Urban Development, which handles foreclosures on loans backed by the Federal Housing Administration.

But scattered-site rental programs could require the government to become a national landlord, an area where the mortgage firms have little experience. They also pose accounting challenges that could produce big upfront losses.

One proposal winning support among some federal officials would sell thousands of foreclosed federal properties to private investors who agree to rent them.  Investors would rehab homes, run the leasing process, and contract with national property management firms to handle day-to-day tenant demands.

The government could keep a stake in the venture, modeled on loss-share transactions by the Federal Deposit Insurance Corp. Officials have received interest from around a half-dozen private investors, according to people familiar with the matter.

HUD owned about 69,000 homes at the end of April and sold 11,000 homes in that month. Fannie and Freddie held another 218,000 at the end of March.

Analysts at Credit Suisse estimate that reducing Fannie and Freddie’s foreclosed-property sales to around 30,000 each month, from the current rate of 50,000, would cut total distressed sales by one third and avoid a further 3% to 5% decline in home prices.

By flushing foreclosed properties onto markets with few traditional buyers, Fannie and Freddie are “undermining their own recovery,” says John Burns, the head of a homebuilding consulting firm in Irvine, Calif., who backs the public-private rental approach.

Posted by on Jul 22, 2011 in Real Estate Investing, REOs | 8 comments

Per Public Records

From the sales brochure: Scripps Investment and Loan Building is a 15,916-square foot office building on approximately one third of an acre located in the Village of La Jolla. The subject property boasts unobstructed ocean views in a location that would be considered, by most, to be one of the premier locations in the United States. Built in 1920, by Irving Gill, the architecture is unique and masterful.

This landmark three-story property has 44 executive office suites and collects additional income from the 30 space, secured, underground parking garage, which is located adjacent to the subject property. There are over 3,000 square feet of deck space of which 1,200 square feet is ocean view. The property also offers tenants five private decks and an elevator. Since 2002 the property has seen substantial capital improvements and an over one million dollar balcony upgrade.

La Jolla, California is located 15 minutes from downtown San Diego and is known for its wonderful beaches, cultural activities, fine restaurants and exclusive boutiques. La Jolla is known to be one of the most affluent communities in the United States yet it maintains a down to earth feel due to the beautiful natural scenery and the helpfulness of its residents.

Posted by on Mar 4, 2011 in Interesting Houses, REOs | 14 comments

SD Foreclosures Next 12 Months

These days, every time you read the news you’ll see another expert talking about the shadow inventory coming home to roost.  Depending on the guesser, there will be somewhere between 3 million and 8 million homes that get foreclosed in America over the next 1-10 years.  Can we narrow that down a bit?

The shadow inventory that is hardest to count are the borrowers who are not making their payments, but aren’t on the foreclosure rolls yet.  LPS came out with this chart (below), so let’s use their numbers and envision what would happen if banks/servicers change course, and ramp up the foreclosure machine:

The chart shows 17,800 defaults (today the NOD and NOT count is 14,435 on foreclosureradar), and 34,200 properties in San Diego County that are at least 90-days late, for a total of 52,000.  

How would it look in your area if EVERY ONE of these were foreclosed in next 12 months?

To estimate the total number of defaulters plus 90-day late borrowers for each area, let’s use the multiplier formula here: 17,800 x 2.92 = 52,000.

Let’s multiply 3x the current defaults in each area/zip code:

Area or Zip Code NODs/NOTs x 3 # of Homes 1 REO per # homes Foreclosed since 1/1/07
Spring Valley
West RB 92127
Chula Vista
Otay Mesa

El Cajon
RP 92129
Scripps Rch
Carmel Valley
Solana Bch
La Jolla
PB/MB 92109
Del Mar

If servicers crack down and foreclose on every 90-day late property, we’ll see one flipper or REO listing on virtually every block in areas like Spring Valley. But with all the foreclosure activity over the last few years, would it bother buyers to see 1 out of 40 or 50 homes getting foreclosed? I don’t think so, and this is probably the worst-case scenario over the next year.  The current SD default list is split 65% SFRs, and 35% condos/others, so spread it around as you visualize what might happen in your area over the next 12-18 months. 

In areas like Carmel Valley, where we’re estimating 237 SFRs and condos on the NOD/NOT/90-day list, it would bring relief to buyers starved for well-priced inventory.  We know some defaulters will get their loan mod or be short-sold, but if not, and 15-20 foreclosures per month came on the market, it wouldn’t overwhelm the market – 71 homes sold there last month.  Hopefully, it might scare some of the elective sellers back to the sidelines, to be replaced by bank-owned inventory.

In Carlsbad, if you divide the current NOD/NOT/90-day list by 12, it would mean roughly 56 REO or flipper listings per month, and 124 sold there in August.

We’ve expected that we’d be in a heavy bank-inventory environment by now, yet the ‘delay-and-pray’ strategy has been employed instead. If 30% to 50% of the for-sale inventory was well-priced bank deals (flippers are retail-plus) it could boost sales.  If servicers insist on the extend-and-pretend strategy, sales are going to slow down, unless elective sellers get more realistic.

Servicers, please foreclose on every defaulter in the next 12 months – homebuyers would appreciate the well-priced inventory!

Posted by on Sep 21, 2010 in Foreclosure Count, Foreclosures/REOs, Monthly Sales Count, North County Coastal, REO Counts, REO Inventory, REOs, Thinking of Buying? | 29 comments

REO Bulk Liquidations

From plus thanks to tj and the bear for sending the photo – let’s find a Blazer for sale!:

Mariner Real Estate Management (MREM), a real estate investment and management firm based in Kansas, closed a deal to acquire a $760 million portfolio of residential and commercial loans and REO properties from the Federal Deposit Insurance Corp. (FDIC).

MREM is part of Mariner Holdings, a $7 billion wealth and asset management company. The portfolio includes roughly 1,100 loans and properties from 20 banks the FDIC has taken into receivership. The properties are located across 24 states.

Earlier in August, the FDIC sold a similar $1.7 billion portfolio to PMO Loan Acquisition Venture, a partnership of other investment firms. If bank failures continue, the amount of REO held by the FDIC would increase. Those banks insured by the FDIC currently hold $49.2 billion worth of REO, a 45% increase from a year ago.

In this most recent deal, MREM acquired a 40% managing member interest for roughly $52 million in a company created by the FDIC to hold all of its loans and REO assets recovered from failed banks. The FDIC will keep the other 60% interest in the company.

MREM tapped Cohen Financial, based in Chicago, to handle the asset management services for the deal. Cohen provides loan servicing and asset management services to third parties.

“We are very pleased to partner with the FDIC on this important transaction,” said Marty Bicknell, CEO of Mariner, in a press statement. “Together with Cohen Financial, we can offer the FDIC the best asset management solutions for this portfolio.”

Tim Mazzetti, a partner and executive vice president at Cohen Financial said his company has been preparing for an opportunity like this for some time.  “We have been building out our platform over the past four years to be in a position to take on such a large and diversified pool of performing, sub- and nonperforming assets in an efficient and cost effective manner,” Mazzetti said.

Posted by on Sep 7, 2010 in REOs | 4 comments


The astute observers can pick out the suspicious deals from a mile away.  But how do they play into the decision-making on the street?  How can you capitalize on the extra knowledge?

If there was an area that had a bad comp but had more good comps and was generally free of foreclosure activity (i.e. older areas), you might want to try to leverage the shady comp to justify your lowball offer.  But beware in areas that are ripe for future foreclosures (i.e. tracts built at peak), because those short-sale and REO listings are likely to be listed at a price that considers all sales as normal:

Posted by on Jul 19, 2010 in Jim TV, REOs, Short Sales, Thinking of Buying? | 8 comments

B Average

The scorecards are out for Bank of America’s REO agents, and I got whacked again, achieving a score of 80, out of a possible 95, for the three closings between November and January.

My sales price-to-last BPO was 107%, so they deducted 5 points, and my average market time was 8 days when the goal for list date-to-accepted offer is 39 days for the state.  Ten points off for that sub-standard work.

But in spite of that performance, they keep me hanging around – perhaps they’ll need all hands on deck in the coming months?  The REO tsunami/trickle spewed another listing my way today, a condo in Oceanside worth about a buck and a half.  I expect more of the same – an overall increase REO listings coming to market, but none too special.

Posted by on Apr 21, 2010 in REOs | 18 comments

State Waives Tax on Debt Relief

Hat tip to Susie!  From the L.A. Times:

The measure, which is expected to be signed by Gov. Arnold Schwarzenegger, would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale.

Thousands of Californians whose homes were foreclosed on or sold at a loss would get tax relief under a measure approved Thursday by the state Legislature.

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.

Gov. Arnold Schwarzenegger said he would sign the measure, which would also provide about $60 million in tax credits to green-energy companies, when it reached his desk. Californians can already claim the tax breaks on federal returns. Lawmakers passed the measure in time for people to take advantage of it by the April 15 deadline for filing tax returns.

“The mortgage-debt tax relief provision in this bill will provide financial shelter for tens of thousands of Californians who have lost their hopes and dreams in the housing market crash, and it’s about time we gave these folks a helping hand,” said state Sen. Ron Calderon (D-Montebello).

The short-sale provision would mean about $34 million less in tax revenue for the state over three years, according to the Franchise Tax Board.

The “green” credits are a response to the federal American Recovery and Reinvestment Act, which provides grants to firms for power plants that produce renewable energy. The federal government does not tax the grant money. Under the bill approved Thursday, California would provide similar relief.

Other parts of the measure, SB 401 by Sen. Lois Wolk (D-Davis), were called tax increases by Republicans. Even though they supported the tax-relief element, several GOP members of the Senate and Assembly voted against the bill, which was opposed by the Howard Jarvis Taxpayers Assn.

The Republicans objected to a provision that would reduce deductions for charitable gifts, and to changes that would allow the state to tax more income earned by minor dependents.

The changes would also make it harder to qualify a home as a principal residence for purposes of escaping capital gains taxes when the property is sold, and some penalties and interest charges to corporations would be increased, according to Therese M. Twomey, a principal consultant for the Senate Republican Policy Office.

These changes would bring in more than $10 million in new revenue over five years, Twomey said.

“It’s an issue of fairness,” said Sen. George Runner (R-Lancaster). “You are giving money to one group of people and taking it away from another group of people.”

With the plunge in the real estate market, many Californians have found themselves owing much more on their mortgages than their homes are worth. Some have been foreclosed upon or asked their lender to approve a short sale, in which a home is sold for less than the debt, some of which is waived.

The amount waived has been considered taxable income under California law. The measure passed Thursday would eliminate that tax when a bank agrees to accept less than what is owed on a home.  The governor vetoed a similar bill last month because it included a provision, since removed, that would have increased penalties against businesses and wealthy individuals who abuse tax credits.

Posted by on Apr 9, 2010 in Bailout, REOs, Short Sales, Thinking of Buying? | 11 comments