Foreclosures and real estate--owned (REO) properties are the reality of the housing crisis. In 2011, nearly 2.7 million foreclosure filings were reported on more than 1.8 million U.S. properties, according to Irvine, California--based RealtyTrac Inc. And in the first quarter of 2012, foreclosure filings were reported on nearly 600,000 properties.
When compared with the past few years, these numbers show the controlled decline in volume. Foreclosure activity in 2011 was 33 percent below the 2009 total and 19 percent below the 2008 total.
While the volume has declined, there is still much concern among industry influencers as to what the future may bring. The continued rise in filings and delays in the foreclosure process are resulting in the proliferation of vacant properties throughout the nation. These vacancies are continuing to bring devastation to our neighborhoods, resulting in depressed housing values.
Since the housing crisis began, a number of moratoriums, loan modifications and other mitigation techniques have been introduced and have made some impact. The Home Affordable Modification Program (HAMP), Protecting Tenants at Foreclosure Act (PTFA), short sales and deed-in-lieu agreements have taken some properties off the market. But with unemployment still higher than usual and credit requirements still stringent, there are not enough qualified homeowners to absorb the inventory.
Given the inevitable increase in vacancies to come, the question becomes what else can we do to help communities--particularly low-and moderate-income communities, where foreclosed properties are most concentrated?
Furthermore, what can we do to help banks, servicers and the government-sponsored enterprises (GSEs) more efficiently manage foreclosed asset inventories and the backlog of properties still awaiting foreclosure?
The current administration is trying to solve these issues. To help, it proactively sought advice from the industry on how best to reduce the REO and foreclosed inventory last year. The Federal Housing Finance Agency (FHFA) issued a request for information in which it sought recommendations on how it might help address the current housing crisis.
The FHFA received more than 4,000 responses, with the majority of them favoring the implementation of a program that would turn vacant, foreclosed and REO properties into rental opportunities--an idea that is starting to become a reality.
In late 2011, the FHFA announced an REO-bulk sale...