One thing is clear: The REO supply is rising again after dropping in 2009.Though the foreclosure process remains very slow, the REO ("Real Estate Owned") supply is rising again because banks now have had time to determine that many homeowners don’t qualify for loan modifications. That means more foreclosures are proceeding.

For those trying to figure out how much further U.S. house prices could fall, it would help to know how many more foreclosed homes banks need to sell.Alas, no one has found a way to track precisely how many of those properties are owned by banks, the U.S. Department of Housing and Urban Development (which ends up with homes when FHA-insured loans go bad) and mortgage investors, including securitization trusts and the government-controlled mortgage firms Fannie Mae and Freddie Mac. All of these entities report data on their holdings of foreclosed homes – known in the trade as REO, short for “real estate owned” – but they do so in their own disparate ways.The accompanying chart shows three laudable attempts to track the REO inventory.
By James R. Hagerty, March 19, 2010 WSJ

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