Foreclosures Ignite More Creative Collaborations
Creative collaboration is the name of the game going forward.
Foreclosures “likely to remain a significant challenge” for the coming 18 to 24 months are pressing the mortgage industry to come up with new collaborations, technology and strategies “to keep up.” And one way to do that is by facilitating REO sales for socially motivated buyers.
In his presentation to the Vacant Property, Strategies for Neighborhood Stabilization Summit organized by the Federal Reserve Banks of Boston and Cleveland and the Federal Reserve Board, Craig Nickerson, president of the National Community Stabilization Trust, stated that it is imminent to maximize the use of available resources.
Short- and long-term challenges at hand require the industry focus to move from “obligating NSP funding quickly, to using limited public funding in more creative ways,” building property acquisition and disposition infrastructure for the long run.
Necessary changes include what insiders call “reverse inquiries” in the REO demand side.
It means providing an REO match for the buyer or investor, which may be about to change is the process of buying and selling REOs. If until now most federal fund grantees would rely on the new REO supply, which would bring to the marketplace large numbers of properties available for sale by large financial institutions.
Technology has facilitated the process for grantees and other housing providers who now can shop more strategically and “pinpoint specific” REO properties instead of waiting for the more traditional properties to become available for purchase.
This strategy allows grantees “to identify strategically important vacant properties” in a neighborhood of their interest. Then, the buyer tracks down the loan servicer or REO holders in collaboration with the National Community Stabilization Trust, based on in-house trustee resources, or wider industry databases from MERS, Frist American CoreLogic and RealtyTrac.
Nickerson says the demand-side approach is the new frontier of property purchases especially in the REO marketplace. The REO match process makes possible to conduct “reverse inquiry” for socially motivated buyers. It is a way to counteract REO inventory concerns.
Data suggest existing property sales remain problematic. Hanley Wood Market Intelligence reported that existing home inventory is now currently at an all-time high due to a plunge in sales activity in July.
At the current sales pace, there is a 12.5-month supply of existing homes on the market compared to 8.9 months in June. Coupled with signs of a broad economic “slowdown for the remainder of 2010 and possibly into 2011,” hopes to see the beginning of an economic recovery in 2010 are no longer there.
The National Community Stabilization Trust is looking to bring into the future lessons learned in the recent past.
Nickerson says it is safe to assume based on evidence to date that “the accelerated learning curve of the past 18 months” will place both property sellers and NSP buyers in a stronger and much more productive position in the future.
The role of the National Community Stabilization Trust in that marketplace is to ensure that “a predictable, transparent high volume of property traffic” goes to local buyers.
For local entities it means maintaining their focus on geographic target markets, research what is available there and undertake “thoughtful property acquisition and disposition” strategies that will ultimately help stabilize distressed neighborhoods.
REO sales are expected to get a boost also thanks to the April 2010 expansion of the definition of what is a foreclosed and abandoned property eligible for NSP assistance.
For example, it now includes loans at least 60 days delinquent if the owner has been notified, or loans on which the foreclosure proceedings were completed along with the transfer of title to an intermediary, or considering abandoned a property where the owner has not made mortgage or tax payments for at least 90 days. Grantees can use federal funds against a significantly larger pool of distressed properties, he said, since it mitigates the volume challenge for many localities. Another benefit is that of facilitating short sales and sales of properties with negative equity through incentives for loan-value buyers.