REOs up 45% YoY

There are three stages to foreclosure:

1) Notice of default. (NOD) The bank says "hey, you, you quit paying us three months ago!"

2) Notice of Trustee Sale. (NTS) The bank says "hey, you, you quit paying us nine months ago, we're going to have to take back your house"

Banks have been chugging along filing NODs and NTSs, but have stopped short of actually taking possession of houses. Instead, they have let non-performing assets sit on their books with both fingers crossed, hoping by some miracle that their borrowers would cure. It's easier than acknowledging a loss their own stupidity, I suppose.

3) Real Estate Owned (REO). The bank actually takes possession of the house and evicts the squatting defaulters who had been occupying it RENT FREE for the past 9 months at least. Turns out the delay between stage 1 and stage 3 has been several years in 25% of cases. Banks had been purposefully holding back inventory from hitting the market.

April REO activity is up 45% over last year. REO activity is at a record high, up only 1% from last month, but none the less, at unprecedentedly high levels. This increase in REO activity is occurring even as NOD and NTS activity is slowing.

This link, of course, comes from CalculatedRisk.