What’s influencing the increase in REO acquisitions?

HousingWire recently spoke with Michael Chew, SVP of Fulfillment, Asset/Rental Management at Consolidated Analytics, about REO assets, the economic factors influencing the increase in REO acquisitions and how technology can help with REO asset management.

HousingWire: According to ATTOM Data Solutions‘ latest foreclosure market report, bank repossessions climbed 9% in the first half of 2023 compared to the first half of 2022. What economic factors are influencing the increase in REO acquisitions?

Michael Chew: First, consider the first half of 2022; some areas were still dealing with or just coming out of pandemic-related foreclosure moratoriums and restrictions. Economic factors aside, the 9% jump in repossessions makes sense.

As for economic factors, several indicators lead me to believe there will be an ongoing increase in REO acquisitions. With inflation, we have seen a decrease in overall household real income. This reduction in real income has contributed to credit card debt reaching an all-time high in the United States, with more than $1 trillion owed. Auto loan defaults are at their highest levels in 15 years, with approximately 20% of auto loans being upside down.

While credit cards and auto loans aren’t directly related to mortgages, they comprise segments within the three main consumer debt categories. Conventional wisdom would dictate that the third category, mortgages, will follow if two of the three are negatively impacted. The good news for homeowners is that home values in most areas remain stable, and inventory levels for homebuyers are still low. 

HW: What does the current market and demand for REO assets look like?

MC: The demand for REO assets remains strong, with inflows and overall REO inventory levels remaining significantly less than post-Q1 2020 inventories.

What I see impacting the influx of REO are third-party sales at foreclosure. Over the past 18 months, speaking with my colleagues about REO inflow projections, all have shared that third-party sales account for 40-70% of the potential REO inventory, depending on the client. The inventory that does make it to REO remains in high demand. My average days on the market remain low, with multiple offers on most assets. We also see investor demand remain strong and an uptick in owner-occupied purchases. 

HW: Foreclosure moratoriums and legislation were top-of-mind during COVID-19. How has the foreclosure-related regulatory landscape changed since 2020 and 2021?

MC: It was a slow process in most areas after the pandemic-related foreclosure moratoriums. By September 2021, however, there was still much foreclosure reluctance. While some foreclosure moratoriums had been lifted, others had been extended or modified. The exact timeline and details varied by jurisdiction.

Today, there is much more collaboration with servicers, regulatory bodies and professional associations to provide thoughtful solutions and make policy that exhausts all options before foreclosure.

HW: What role can technology and analytics play in the REO asset management space?

MC: Technology and analytics are essential in today’s REO asset management space. Technology has evolved significantly since I started in REO 15 years ago, from the marketing strategy to closing and all milestones in between. I recall going from paper files to a technology platform designed for end-to-end management of the asset.

Today, we have advanced analytics that can help REO asset managers make informed decisions about pricing, marketing strategies and property disposition, along with predictive modeling designed to estimate the likelihood of a property being sold, the expected time on the market and the potential sale price.

These technologies extend to our vendors in the field. Property preservation tools like remote monitoring and mobile apps are used to keep track of property conditions, schedule maintenance tasks, and ensure that properties remain in marketable condition.

Marketing and sales tools that create virtual tours, high-quality photos and detailed property listings that can be easily accessed by potential buyers online. Along with digital transactions that automate the entire sales process, from contract signing to closing, improving efficiency, reducing paperwork and speeding up the overall transaction timeline.

To learn more, visit consolidatedanalytics.com.

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