November 7 2010 (Shirley Allen)

The combined REO (Real Estate Owned) inventory for Fannie Mae, Freddie Mac, and the Federal Housing Authority (FHA) increased by 24 percent at the end of the third quarter of 2010 compared to the second quarter of 2010. The REO inventory increased 92 percent compared to the third quarter of 2009 (year-over-year comparison).

The REO inventory for the three government –backed mortgage giants has increased sharply over the last year, from 153,007 at the end of the third quarter in 2009 to a record 293,171 at the end of the third quarter in 2010.

These are new records for Fannie Mae, Freddie Mac, and FHA REO inventory individually too, and inventory is expected to increase in the fourth quarter.

Remember this is just a portion of the total REO inventory. Private label securities and banks and thrifts also hold a substantial number of REOs.

Also from Freddie Mac:

“Given the large number of seriously delinquent loans in our single-family guaranty book of business and the large current and anticipated supply of single-family homes in the market, we expect it will take a number of years before our REO inventory approaches pre-2008 levels.”

And…

“Our expectation that the foreclosure pause will likely result in higher serious delinquency rates, longer foreclosure timelines, higher foreclosed property expenses, higher credit losses, higher credit-related expenses, and an increase in the number of REO properties we are unable to market for sale.”

Tags: freddie mac, fannie mae, FHA, REO, delinquent loans, foreclosures, reo inventory