Real Estate Market

Investors better than banks, Feds at shrinking distressed inventory

(8/19/2011) ERATE Exclusive - Investors earn a 'shout out' for moving properties, when banks and the Feds can't, don't or won't.

Federal agencies looking for ways to unload 250,000 distressed properties should look no further than accomplished, experienced, professional real estate investors.

A recent ForeclosureRadar report says market savvy investors, unencumbered by regulations and market hesitations, tend to move foreclosed properties "much faster" than lenders bogged down by self-wrought federal scrutiny and in-house incompetence.

"Our statistics clearly show that real estate investors continue to far outperform banks in dealing with distressed properties," says Sean O'Toole, CEO and Founder of ForeclosureRadar.

"Yet politicians and bureaucrats are putting pressure on banks to become landlords, which will hurt local economic activity, as fewer properties are made available to local investors, also impacting Realtors, contractors, and property managers; as well as to home buyers in need of affordable housing," O'Toole said.

Woo. Hoo. Give investors some. If that's what it takes.

Federal agencies are scrambling to come up with ways to get rid of some 250,000 federally-owned properties in various stages of distress.

The Federal Housing Finance Agency (FHFA), in conjunction with the U.S. Department of the Treasury and U.S. Department of Housing and Urban Development (HUD), has announced a "Request for Information: Enterprise/FHA REO Asset Disposition", seeking input from both the public and private sectors on options for moving off the books residential real estate owned (REO) properties held by Fannie Mae, Freddie Mac (GSE's or "Government Sponsored Enterprises") and the Federal Housing Administration(FHA).

Federal agencies own a quarter million properties with only about 70,000 of them currently listed for sale. Buyers have made offers on another 22,000 of them, but the bulk, about 158,000, are in limbo.

Luckily, federal agencies are looking hard at selling off pools of properties to investors who will turn the REOs into rental units or otherwise move the properties through the pipeline as they are doing in hard hit Las Vegas and Florida markets.

ForeclosureRadar, which monitors the West Coast's housing market, found that investors can often get the job done faster than banks.

"Banks in their so called 'amend and pretend' response to the crisis, have been far too willing to continue extending the maturity date on toxic debt, thereby holding onto the distressed note rather than taking the loss on a sale which would in turn require them to take a charge against capital," said Nancy Osborne, Chief Operating Officer of ERATE, a Santa Clara, CA-based financial information publisher and interest rate tracker.

• Arizona - In July, the time to resell foreclosures reached a new record at 166 days, up 4.4 percent from June. For investors it only took 96 days a 3 percent decline from June.

• California - Investors resold foreclosed properties in an average 131 days, almost half the 235 days time for banks.

• Nevada - Banks improved their foreclosure reselling time in July compared to June, with the average dropping 7.7 percent to 168 days, but investors still came out on top at 98 days.

• Oregon - Banks take, on average, three times longer to resell inventory than investors. Banks averages at 232 days to resell inventory, investors a speedy 76 days.

Who you gonna call?

"Until an orderly way to facilitate the write down process becomes available, such as reviving the old RTC model from the savings & loan crisis, the situation is likely to remain a Catch-22 for the banks," Osborne said. Refinance at Today's Low Rates!


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