Regional REO Trends

Are REOs returning to normal, rebounding or being repressed in

your market?

What We’ll Cover

• Three distinct regional REO patterns• REOs returning to normal• REOs rebounding• REOs repressed• How to identify which type of market you’re in

and what to expect in that market

REOs Returning to Normal• REO activity YTD in 2014 is at or below levels

from 2006 before housing bubble burst• No legislative or legal intervention creating

backlog of deferred REOs• Foreclosure timeline on the decline or flat• Low risk of another surge in REOs from

negative equity, NPL sales or other• Includes markets in MI, TX, GA

U.S. REO Snapshot

28 percent above pre-bubble norm

REO Return to Normal Case Study

53 percent below pre-

bubble norm

REOs Return to Normal Case StudyU.S. timeline up 10 percent from year ago while

Georgia timeline down 11 percent

from year ago

REO Return to Normal Case Study

24 consecutive months of YoY decreases in

foreclosure starts

REO Return to Normal Case StudyGeorgia had fifth

most FHA NPL sales in 2013, 5 percent of all

NPL sales nationwide

REOs Rebounding• REO activity YTD in 2014 above 2013• Most likely legislative or legal intervention

created an REO backlog now hitting market• Foreclosure timeline high, often rising• Includes markets in NY, MD, OR, CT, NJ• Rebound is temporary, but temporary can

mean multiple years

U.S. REO Snapshot

2014 average monthly REO 26 percent below

2013, 49 percent below 2012

REOs Rebounding Case Study

Avg monthly REO in 2014 up 22 percent from 2013, up 31

percent from 2012

REOs Rebounding Case Study

New York timeline down

10 percent from a year ago.

REOs Rebounding Case Study14 consecutive months of YoY

decreases in REO activity starting

in December 2010 followed by

20 out of 30 months with YoY

increases

What happened around

December 2010?

REOs Rebounding Case StudyLikely more REO increases coming thanks to 25 of last 29 months with increasing

foreclosure starts, although those increases

appear to be slowing.

REOs Rebounding Case Study

New York had third most FHA

NPL sales in 2013, 6 percent of all NPL sales

nationwide

REOs Repressed• REO activity YTD in 2014 below 2013 and 2012

levels but often above 2006 levels• Most likely legislative or legal intervention

created artificial drop in REOs• No long-term rebound in REO yet but may be

signs of recent increase• Foreclosure timeline high, often rising• Includes markets in CA, NV, FL, MA, IL

U.S. REO Snapshot

Overall U.S. numbers fit the REO repressed

pattern

REOs Repressed Case Study

At first glance pattern looks

fairly similar to a return-to-normal market pattern

REOs Repressed Case StudyBut recent monthly

numbers show first time in last four years with

four consecutive months with

annual percent increases in REO

activity

REOs Repressed Case Study

California timeline down 7

percent from year ago, but

likely will increase in Q3

REOs Repressed Case Study

• LA REO activity peaked in August 2008 at 6,576 in one month

• From then through December 2012 average annual decrease was 13 percent

• Decrease accelerated between January 2013 and March 2014 to 55 percent

• What happened in January 2013?

REOs Repressed Case Study

Good news is no clear sign of repressed

foreclosure starts … Yet

REOs Repressed Case Study• But digging into data reveals potential for

some latent foreclosure starts• Before HBOR took effect in January 2013,

foreclosure starts in LA decreased average 8 percent per month after peaking March 2009

• Since January 2013 average decrease has been 32 percent per month

REOs Repressed Case Study

26,642 NODs MIA. Where did

they go?

REOs Repressed Case Study

California had eighth most FHA

NPL sales in 2013, 4 percent of all NPL sales

nationwide

Return to normal in your market?• Are REO numbers at 10 percent or more above

their levels prior to 2007?• Has there been any legislation or court rulings

that have altered the foreclosure process?• Has there been a recent surge in REO activity?• Has there been a recent surge in defaults?• Is the average time to foreclose increasing?• Answer “no” to all of the above, and your

market is back to normal!

Rebounding REOs in your market?• Are monthly REO numbers up at least 10

percent YTD 2014 compared to 2013?• Has there been any legislation or court rulings

that altered the foreclosure process?• Answer “yes” to both these questions and you

are in an REO rebounding market.

Repressed REOs in your market?• Has there been a recent multi-month surge in

REOs or defaults (even if not up YTD)?• Are average foreclosure timelines continuing

to increase?• Has there been legislation or court rulings

altering the foreclosure process in the state?• Answer “yes” to all these questions and you

are probably in a Repressed REO market