Banks ‘bulging’ with inventories of foreclosed homes

FAIR OAKS
May 14, 2009 12:01am

The nation’s banks need cash and their bulging portfolios of “hidden” foreclosures are one ticket to help them get it, if they price it right, says a foreclosure expert.

Forget the headlines that scream “Foreclosures Soar,” says Alexis McGee, president of Foreclosures.com Inc. of Fair Oaks.

“The real news is many of these banks need to raise capital and whether they announce plans to do so through common stock offerings (Wells Fargo, Capital One Financial, U.S. Bancorp, KeyCorp, and BB&T Corp. already have) or not, that can translate to incredible deals for consumers on bank-owned foreclosure inventory,” says Ms. McGee.

Just over one million homes were lost to foreclosure last year with this year on track to hit 1.2 million, she notes.

“This isn’t a pipedream amid a recession with 8.9 percent national unemployment and foreclosures at all-time highs,” says Ms. McGee. “This is reality as tax incentives beckon, and affordability is at 38-year highs, housing supplies tighten, and markets bottom. Now is the time for homebuyers and investors to press capital-hungry banks to unload their ‘phantom’ REO inventory.”

“Phantom” inventory is the bulging portfolios of non-performing assets, REO (lender-repossessed foreclose properties) that are not for sale on the nation’s Multiple Listing Service, she says.

Currently only about 30 percent of all bank REO’s are listed for sale in the MLS.

“This is a staggering low number,” says Ms. McGee. “That leaves 70 percent of lender-owned REO’s that no one knows about potentially available for sale. Despite their need for more capital to shore up financial reserves against future losses, many banks continue to hold back these foreclosed homes to sell later to prevent flooding markets and depressing prices.”