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The Reasons Why We Do Not Have High REO Inventories

The business head lines today read, “US Labor Participation Rate at Lowest Level in 30 Years” or “US Labor Participation Rate at Lowest Rate Since Carter Administration” and yet, I am trying to figure out why my REO inventory this year has shrunk to pre 2007 bubble bursting levels. To make this point a little more pointed, let me share a little statistic from the Bureau of Labor Statistics. Our current unemployment rate is 7.3% and the last time we were at 7.3% was December of 2008. Now, think back to December of 2008, think of your REO inventory….are you at that level today? I would venture to say, likely not. Are you still confused as to what my point is? Well, let me say it this way. If you add in the participation rate with the unemployment numbers, you get a “real” unemployment number of 9.4% and the last time we were at 9.4% or higher was May of 2009 thru November 2010 so, think back to you REO inventory then….are you at those same levels today? Once again, I venture to say….likely not.

So, how is it that we have a “real” unemployment rate at or higher than the worse unemployment we have had accordingly to the Bureau of Labor Statistics in the past 4-5 years and yet, we don’t have a correlated REO inventory?

Well, I am no economist however, I have some speculative theories, let me share.

1. Obama Administration Homeowner Assistance Programs: Obama has directed HUD and the US Department of Treasury to stop the foreclosure crisis by implementing several foreclosure avoidance programs through joint department efforts like the Making Home Affordable programs. Do you know how many entitlement programs there are? Likely you don’t so, let me share…..
   1. HAMP (Home Affordable Modification Program)
   2. PRA (Principal Reduction Alternative)
   3. 2MP (Second Lien Modification Program)
   4. HARP (Home Affordable Refinance Program)
   5. FHA2LP (Treasury / FHA Second Lien Program)
   6. UP (Home Affordable Unemployment Program)
   7. EHLP (Emergency Homeowner’s Loan Program)
   8. FHA Forbearance
   9. HECM (Home Equity Conversion Mortgage)

So, you had no idea…did you? Granted, my blog isn’t long enough to go into details on each of these programs with you however, for more information you can call the NSC at 1-877-622-8525. The Obama administration has used all of these foreclosure avoidance strategies in a very similar way the Community Reinvestment Act set up , built up and ultimately collapsed our economy in 2007 with the bursting of the real estate bubble. Oooops, “did I say that?” HELL yes, I did.

That’s right, the reason we don’t have REO inventory as REO Professionals is because our President has decimated our industry by artificially and manipulatively used foreclosures as a political tool for re-election of himself and his party. Sadly, most of the American public don’t understand what this does to home values……so, let me explain. It artificially inflates home prices by restricting legitimate inventory from hitting the market place. It sets up our country for a 10(+) year trickling of these vacant, distressed, properties to the market place. Ok..sure, it can be argued that by doing this we are stabilizing the housing market and sure, I will relent and say….it does however, only for the short term. In fact, it makes things a little worse because, we end up sitting on inventory and God forbid, another economic crisis hits or the current one drags on for longer than expected and we end up with more and more and more and more water behind an aging, over burdened, crippled, dilapidated damn that is ready to blow.

Think of the housing crisis as a man mad lake with one side plugged up by a huge damn. Think of the water in the lake as all of the houses that are distressed, under water, risk of foreclosure. Right now, our lake is so full, we have foreclosures literally spilling over the top. Our economy…the damn, is barely holding and with a growing “Shadow” inventory of REO homes, high unemployment, high “real” unemployment and these continuing foreclosure avoidance / rescue programs……we will have a seriously problem, eventually.

Golden Rules on Achieving High Credit Scores

“We are glad you chose us as your lender.  As you know, your credit score is _______.”  For some people, filling in that blank might be nerve-racking.  For others, it might be a source of pride and personal accomplishment.  If you are working on your credit score, or simply want to know more about putting together a score that will make friends jealous and bankers swoon, read on.

Keep Your Available Limits Manageable

One of the top factors that affect a credit score is a person’s available credit.  This is simple to understand with some numbers.

• A person has one credit card to their name.  The available balance is $1,000.  At present, the person has charged a total of $200 on the card, leaving them with $800 available.  As a percentage, the person has 80% available credit.
• A different person has only one credit card, but their available limit is $300.  At present, the person has charged $100 on the card.  Their available limit is $200 or 67%.

Even though the second person in our example has a smaller outstanding balance, their available percentage is lower and their credit score will be lower.  The closer your available limit is to 100% the higher your score will be.

Pay On Time, Every Time

Without a doubt, the single biggest factor of a person’s credit score is whether or not they pay their obligations on time.  Paying all debts, regardless of the size, on time will do more to improve a person’s credit score than other tactics.

Keep Paid Off Credit Lines Open

Review the earlier example about available credit for a moment.  Suppose you have three credit cards but you only owe money on two of them.  Most people would be tempted to close out the one card in order to reduce temptation of charging too much.  However, closing down the account hurts in two ways.  First, it reduces your available credit limit.  Second, it wipes out the history you had with that account.  Both of these items will lower your score.

Strive to Have a Good Mix of Debt

In order to reach the magical number of 700 or more it is necessary to have a mix of debt that you are paying timely.  A modest automobile loan, one or two credit cards and a small unsecured loan are usually enough to provide someone with enough diversity to get a high score.  Having only one type of debt, regardless of the type of debt or how it is paid, will keep your scores in the 600 to 680 range.

Above all else, it is important to understand that building a strong credit score takes time.  It will not happen in a day, a week or even a month.  You will need to focus on the tips outlined above for a few months, maybe a year, in order to reach the pinnacle of credit scores.

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