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What’s Up With HUD’s REO Sales?

Courtesy of Bruce Krasting

David Rosenberg at Gluskin Scheff commented today about possible problems at FHA:

FHA … THE NEXT SHOE TO DROP?
We have a contact in the mortgage business who took a good hard look at the delinquency data from the FHA, along with loss severities. There is a very good
chance that in the near future we will see the FHA insurance fund go negative.

You don’t have to have ‘a friend in town’ to get this insight. You just have to go to the HUD website for their REO sales. The number of HUD homes for sale is staggering. There are 50 pages of listings in just Ohio alone. HUD’s chief, Shuan Donovan was in Cincinnati recently. He wrote a blog about his trip:

“Yesterday, I had the opportunity to travel to Cincinnati, Ohio for the one year anniversary of the American Recovery and Reinvestment Act of 2009”…”What I saw in Cincinnati yesterday is just one example of the economic recovery America is beginning to experience.”

By my count the FHA is listing 500 homes for sale in Ohio. You have to wonder what Mr. Donovan is selling here. This American recovery he is talking about is being tripped up by the FHA’s REO sales.

It is both interesting and easy to look at the HUD properties for sale. I would encourage readers to take a gander. HUD is in every state. The HUD website takes you to this page where you can select the state you live in.

From this you are directed to a number of “independent” property management companies that all have contracts with HUD to dispose of the REO. The names of these third party companies are: Pyramid, HVH, HMB,Inc., Southwest Alliance, Citiside, Home Source, MCH, NHMS and Best Assets. A total of nine.

The individual web sites for these RE companies provide you with options to look at homes. Some of the Web sites are remarkably similar. Possibly this is just a coincidence. My guess is that all of these ‘independents’ are intertwined. Consider these:

Or these:

 

 
 

The Web site for NHMS looks similar to many of the others. Dig a little deeper and you find that NHMS is a sister company to Precient. This is yet another web site peddling government owned REO. They have the contract to sell what the FDIC is trying to offload.

So where do all these dots lead?  A fellow by the Name of Arthur Torano.
 

There is big money to be made offloading government owned REO. To make money you must make sales. To make sales you must be the price leader in any neighborhood. There is a built in incentive to push broad RE prices lower. A questionable national policy.


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