In releasing its third-quarter results, Freddie reported that it sold nearly 22,700 foreclosed properties during the period, booking $49 million in income. A year ago, the secondary market giant reported $221 million of REO expenses in 3Q.
This improvement “shows the strength of the housing recovery and the efficiency of Freddie’s HomeSteps operation,” said Freddie spokesman Brad German
During the first nine months of the year Freddie’s HomeSteps REO operation recorded $92 million in expenses. (In 1Q it lost $171 million on REO but booked a $30 million gain in 2Q.) The turnaround stands out compared to the same period in 2011 when Freddie recorded $505 million of expenses on REO.
Prior to 2012, REO sales produced positive income for Freddie in only two quarters.
As of Sept. 30, the GSE owned 51,100 REO properties (including six multifamily units) after adding 20,300 newly foreclosed properties during the third quarter. Freddie expects to have elevated REO sales for some time due to an overhang of $66 billion in seriously delinquent loans in its portfolio.
The government controlled mortgage giant has developed a new REO financing option for both homebuyers and investors and is testing the program in Florida and Georgia. “We expect to expand this program nationally in 2013 and we believe it will help reduce our REO inventory in the future,” the GSE said in a press statement.
During the summer, Freddie also implemented a “streamlined bulk sales process” and expects to see more bulk sales going forward. However, “the volume our bulk sales is likely to remain modest relative to individual property sales,” the company said.