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.

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  • The bottom line is this, politicians and politics can affect our business if we let them, People will always need housing it is a basic need, Even the occupied movement needed tents. I have been blessed with more inventory than ever, part of it in my market is because banks, asset management companies and outsourcers are making changes. Several of the "players" during the 2008-2010 tzunami are out of business. Ocwen and Altisource are almost monopolizing the REO industry, and to be successful you have to b Fannie, Freddie or HUD direct. Again all of that is done through personal relations and to keep a good work habit and high scores.

  • Christine LaQuang: "the other shoe dropping with a big, loud thump" --- there are a lot of knowledgeable, experienced people who have studied the tea leaves and think that is exactly what is going to happen in the not-too-distant future. Scary.

    Americans are stressed from what will be a near decade of serious economic downturn by the time January, 2017 gets here. Even then, the right free-enterpriser with a steel backbone and a gift for infusing optimism will have to take over to begin to undo the damage. See anyone who fits that description on the horizon?

  • So did I.  but unfortunately the presidents job creation or no job creation etc.... came in to topic and perhaps my defending him has pissed off some Rep ppl here.  But since some ppl are taking it to a personal level, i will remove myself from this feed as that was not the intention. I have to keep reming myself that freedom of speech is only accepted when ppl agree with you. Have a great nigh all.

  • Wow I thought we were discussing where the REOs are? 

    Lets face it our Forefathers who founded our country and wrote the constitution are probably rolling over in their graves. Politics is big business now. There are very few if any true Republican OR Democrats left today IMO. Just many self serving executives with great healthcare and great retirement benefits and a lot of self interested associates and backers. No one man, party or President can do anything with out a lot of individuals, organizations, and groups approving and or manipulating the individual's ideas, ideals or purpose .

    We all pay for health care now. Our taxes pay for all uninsured individuals. Every President since Roosevelt understood and wanted Heath care reform. We will have to have it in one form or another eventually. No matter how, when or who it is proposed by, there will be a lot of people who fight it. Health care reform is making people more responsible for their own healthcare needs and I for one think we need some form of it. JMO

     No  disrespect meant here to you Jesse, I am in the same alumni. As to the men and woman who grew up "poor" and embarrassed, it made many of us strong and determined. I was also one of them. I am glad I know what it is like to feel the sting of poverty. It made me reach for more for myself and my children. They have more and earn more and live better lives because of my experiences. My experiences also taught me value and a real understanding of what is truly important and what I REALLY need in life. This is a part of history. There are many before us who struggled and found  ways to create a better life. This story will repeat forever. It has happened forever no matter what party ran the country so to speak and it will continue. Progress requires suffering IMO. 

    To this REO mess we were discussing far as who did what. I am sure there are so many strong opinions on that there could be a whole discussion board dedicated to it.  

    Let's look at one portion that has been agreed on and apparently established here in this topic of discussion. The REOs seem to have a regional discrepancy. Some areas have too many and others not enough. This supports my opinion that the Asset holders themselves are controlling the releases. If it were a Government issue we would not see the discrepancies IMO. Every state has all the " work out" and relief programs mentioned. So it can not be those programs effecting the hold up of REOs . All the differences we see in the number of REOs  would not be there if Government policies and or programs were coming into play here. There is no doubt, as was stated, that these programs are flawed, cause needless delays, loss in values and do not  really work for most defaulted homeowners. So we can say that they are delaying the inevitable in many cases. But these programs are not effecting the REO release we were discussing. Over abundant in some states and few in others can not be caused by universal programs IMO. As in most cases universal programs lead to universal results. We definitely are not seeing that with REOS now. 

    Let's try and be respectful of all opinions here. None of us, really no Human being has the right answers for ALL of us. I hate to see any discussion turn to insults and belittling comments. It ceases to be interesting and certainly is not supportive of individual ideas and opinions, the unique concept of what our Country was founded on.    

  • Jesse, Very well written piece. Wholeheartedly agreed with your insights. I routinely come across properties that 'owners' had not made a single payments for years (2-3 years typical, 5 years the longest so far). As of today, there are only 30 (yes, THIRTY) SFHs AND CONDOs combined on market in my area vs. 500+ REOs 2009/10 at given time. I live and work in the Silicon Valley area- one of the highest-cost-of-living cities- where a typical starter 3 bed/2 bath, 40 year-old single story 1300 sq ft house would run 600K-700K or more (median price $681K US Census Bureau). 2 dual professional incomes would be stretching to sustain the mortgage of such median priced home + basic living expenses. Observed increasing # of owners taking advantage of the government's intervention in the foreclosure (or not) process-strategically or not.  The current white hot RE market is largely a result of on-going market manipulation. I have been waiting for the other shoe to drop with a big loud thump but do not think it would ever come to that date as long as the market isn't given a chance to play out as a free enterprise.

    Christine T. LeQuang, MBA, ABR®
    RDCPro™ REO Default Certified Professional®
    DREO™  REO Specialist
    Certified HAFA Specialist®
    CDPE-Certified Distressed Property Expert®
    SFR-Short Sales & Foreclosure Resource Certified®
    Keller Williams Realty-San Jose  Top Agent 2012
    Keller Williams Realty-Top 25 Northern CA & Hawaii Region 5/2012
  • "FAUX News" --- just the use of that tired old tripe tells you all you need to know about the defensiveness of those who use it. LOL

    Please, enlighten us, Vivian, on just how GW Bush caused high unemployment. Under President Bush, unemployment was at one time 4.6%, not only considered "full employment" but also half the real unemployment rate that Obama has 6 months in to his second term. And please address just what specific actions Obama has put forward that have proven to increase employment in the private sector. We all know he's exploded the size of government employees, but I'm talking about jobs that actually CONTRIBUTE to the productiveness of this economy, not those that inhibit it.

    As for foreign policy, I'm not sure I know what a "fake war" is. I remember a real war waged in Afghanistan after 9-11. Then I remember a real war authorized in Congress (with MANY Democrat votes in favor) for invasion of Iraq to find WMD, which included those capable of delivering massive chemical attacks. I remember, in the months leading up to the Iraq invasion, satellite photos of Iraqi military convoys of long, flatbed trucks heading northwest toward the border. And now President Obama is ready to go to war with Syria (guess what country lies to its southeast?), whether or not Congress authorizes it, because it has used WMD (gasp! (literally)) against its own people.

    So after all these long 10 years of MSNBC falsely claiming that "Bush lied", now they're in the tough position of having to admit Assad got the chemical weapons (WMD) from Saddam or admitting the possibility that it's the Al Queada-backed rebels who used them and that's who Obama wants to support with his missile strikes. Awkward!

  • Hey Vivian,

    The Kool-Aid must be good because, if you read further that .5% drop in unemployment, it was attributed to less people in the workforce. In other words, less people participating or even looking for a job because, they gave up hope and therefore, unemployment falls......what a joke! Stop reading headlines, stop regurgitating Obama talking points or progressive agendas and really dig deeper. You will find that both parties got us where we are today.


  • Any time politicians (either side) get involved in the economy in any way for political gain there is usually a long term negative impact.  No one looks after our money/finances like we should be doing if we are responsible individuals.  Giving people loans that could not afford them did not help them long term.  I agree with a prior posters statement.  Improve conditions for companies to employ others and get out of the way if the government really wants to help.

    I go into houses daily that have been destroyed due to neglect.  The people the government intended to help have moved on due to the condition of the property.  Some of the homes are 50% of the value they were just a few years ago.  We the working taxpayer are going to pay for this at some time and point.  To few were actually helped by the easy money lending policies long term.  A good job on the other hand would have been real help.  

    My first home loan was at 13% because I had great credit.  The real estate market in the area I work was better then (1985) than it is today because there were jobs available.  I can't see staying afloat in this business if interest rates go back to 10% unless something changes. 

  • The President and his party are NOT helping. If they wanted to help, they'd be doing something to help employment, which is the quickest, most effective way to clear the housing mess and get America back on solid footing. Instead, they've done everything they can to hinder small businesses, reward their crony corporate campaign donors with taxpayer bailout money (google how many have taken tens of millions just months before filing bankruptcy and stiffing the taxpayers), and passing Obamacare against the wishes of 60% of Americans and setting up a whole new massive economic crisis.

    There were historic models for ways to get out of the 2008 CRA-instigated economic crash. They could have formed Resolution Trust Corporation II, but they didn't. They could have made examples of crooked politicians like Barney Frank and Chris Dodd and sent them to jail (google Frank's crooked boyfriend at Fannie Mae and Dodd's sweetheart loan with Countrywide), but they didn't. For that matter, Democrats, during the 2008 campaign, could have asked probing questions of Obama's own sweetheart deal on his Hyde Park house with imprisoned crook Tony Rezko, but they didn't.

    And as long as we're talking about what happened before Obama was in office, let's talk about his push for lenders to make sub-prime loans to people who had poor credit, both as an agitator for ACORN and as a private attorney. Of the 186 clients Obama sued on behalf of, most have declared bankruptcy or have lost their homes in foreclosure. Only 19 of those 186 currently still own their homes and are in good credit standing. And now, Obama is pushing for the same practices that got us here in the first place.

  • Hi Vivian,

    Let's dissect the issues you bring up because, I feel they are fair and should be addressed.

    1. You said, "No one has decimated our industry, our industry of Real Estate is still alive. REO's are not 100% of what Realtors do."

    My Reply: To say our industry has not been decimated is to have your head in the sand like an ostrich. Have you heard of the 2007 real estate crisis? Were you living in the United States of America in 2007? Maybe you are trying to revise history and pretend 2007 didn’t happen? I don’t know but, I am not sure what you believe happened in 2007 with the crash of the real estate market but, I assure you, we aren’t going to agree based on your statement above.


    2. You said, “Let’s not forget what the President’s role is, to Help our COUNTRY and it’s PEOPLE.”

    My Reply: Once again, I think this is something that you and I are not going to agree on because, I do not believe it’s the Presidents “role” to help the people of this country. In fact, I believe it’s this big government mentality that has crippled this country and progressively and systematically degraded the foundations of our republic so that we can transition to a more European modern day socialist government which punishes individualism, creativity, independence and rewards dependency and entitlement. I don’t need my President to stand in the way of private sector, free market liberties with socialist, progressive entitlement programs that do nothing but play a political purpose for re-election. I don’t want a nation of Obama phone using, dope smoking surfers, planned parenthood supporting, well-fare filet mignon eating slackers who believe they represent the 99% when they don’t work, don’t pay bills but, find time to have a not so peaceful sit in down in the business district downtown.


    3. You said, “There is no shame in providing assistance to those who really need it”

    My Reply: You obviously have never been on well-fare yourself because, as a child who lived in shelters for 2 (+) years of my life. As a child who spent most of my childhood getting clothes from local church clothing closets and at the age of 7 realizing my mother didn’t even have enough money to shop at Goodwill. As a child who was so embarrassed and teased at school for not being able to have nice clothes or because I was on the free lunch program. As a child who hated every damn time my mother sent me into the convenient store with a 1 dollar food stamp to buy a single piece of .05 cent gum so she could use the remaining .95 cents she collected to buy her a pack of cigarettes….HELL YEAH IT WAS SHAMEFUL! In fact, that is the freaking problem with people in this day and age, it’s not shameful enough! We have made it too freaking easy to be a well-fare nation. It’s that shame I felt, it’s that embarrassment I felt, it’s that heart ache I felt that made me stand up, put on my big boy underwear and say, I REFUSE TO BE POOR, I REFUSE TO BE ENTITLED, I REFUSE TO BE ANYTHING LESS THAN WHAT MY CREATOR INTENDED FOR ME…AND THAT IS NOTHING LESS OF AWESOME!


    4. You said, “even if it makes a dent in your wallet or mine”

    Screw a dent…’s now a crash and of such great significance that we could actually collapse our republic with debt. So, from your statement above and the overall tenor of your reply…..let’s through the baby out with the bath water and give everyone everything they could ever want or need??? Well, I want a Rolls for my birthday in March however, here is the difference between me and others. Even if it was offered to me…for free, I WOULD DECLINE IT AND SAY, NO THANKS, I CAN’T AFFORD IT!


    5. You said, “We shouldn’t let ourselves get cold about this topic and certainly not hypocritical

    Now, I found something we can agree on. I agree.


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