REO

In its latest reading on home values, Lender Processing Services, Inc. (LPS) reported strong price gains in March and increases in every state and metro the data provider tracks. In dollar terms, the LPS Home Price Index (HPI) averaged $213,000 in March. The figure represents a 1.4 percent increase from February and a 7.6 percent improvement from March 2012. From January of this year to March, prices have climbed 2.9 percent.

Among the available foreclosure prevention tools, short sales are becoming the weapon of choice for servicers while the use of loan modifications has slowed, data from Fitch Ratings revealed. For example, among bank servicers, the percentage of resolutions in the loan modification category decreased to 26 percent in the last half of 2012 from 57 percent in the first half of 2010, according to Fitch's latest quarterly index. Meanwhile, short sales showed significant increases over the last couple of years. In 2012, short sales represented 51 percent of resolutions for bank servicers, up from a low of 20 percent in 2010.

Home prices posted their strongest yearly gain in almost seven years in March, with both the 10- and 20-city indices seeing double-digit gains, according to the Case-Shiller Home Price Indices released Tuesday. The national index, reported quarterly, was up 10.2 percent. From February to March, prices increased in 15 of the 20 cities surveyed, falling in two and staying flat in the remaining three. Month-over-month, the 10- and 20-city indices improved 1.4 percent in March, the fastest gain for each index since last July. The national index advanced 1.2 percent for the quarter.

In April, the share of sales involving foreclosures and short sales maintained their downward path, falling to the lowest level since 2009, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking survey. Using a three-month moving average, the survey found distressed sales accounted for 33 percent of home purchases in April, a decrease from 35.6 percent in March and 43.6 percent in April 2012. As expected, investor activity also slowed during the same time period.

Existing-home sales rose 0.6 percent in April to an annual sales rate of 4.97 million, the highest level since November 2009, the National Association of Realtors reported Wednesday. The median price of an existing single-family home jumped $8,900 in the month to $192,800, the highest since August 2008. The inventory of homes for sale rose to 2.16 million--its highest level since last September. The supply of homes for sale rose to 5.2 months, the highest since October. Inventory has been a persistent concern to NAR, which says the low supply of homes for sale has reduced the number of transactions.

Last year, some analysts were speculating the large supply of REOs and shadow inventory would keep the market depressed, but instead, the market is dealing with a lack of inventory available for sale, ProTeck Valuation Services noted in its May Home Value Forecast (HVF). ""[I]n reality the shortage of housing inventory has led buyers to bid more competitively against one another leading to significant home price increases and tighter housing conditions,"" said Tom O'Grady, CEO of Pro Teck.

The national mortgage delinquency rate might be ""stubbornly high,"" according to TransUnion, but the delinquency rate would actually reflect normal levels seen 10 years ago if cure or foreclosure timelines were shortened. According to TransUnion, the first quarter national mortgage delinquency rate (60-plus delinquencies) was 4.56 percent, which is more than double the pre-crisis norm. However, when aging, 180-plus delinquencies were taken out of the equation, a new TransUnion analysis found the delinquency rate would actually be around 1 percent.

The available supply of foreclosures and short sales previously stunted the recovery for new home sales, according to CoreLogic's May MarketPulse report. Though, now that the supply of distressed homes and existing-homes for sale has fallen, there's more room for the new home sales market to expand. Citing data from the Census Bureau, CoreLogic reported new home sales have increased 19 percent from a year ago in March. Most new home sales are also concentrated in hard-hit suburban metro areas, which bring an economic stimulus to areas devastated by the housing recession.

Most mortgage fraud takes place in the short sale and REO space, according to Rob Hagberg, associate director of fraud investigations at Freddie Mac. ""This area is ripe with fraud,"" he said during a webinar hosted by CoreLogic. While servicers and others in the industry have adapted to some fraud schemes and put measures in place to detect and prevent fraud, schemes continue to evolve as fraudsters find new ways to manipulate sales. Both short sale and REO fraud often require fraudsters to convince servicers a home is worth less than it actually is.

LRC Asset Management, a majority-owned company of Loan Resolution Corporation (LRC), has made available a groundbreaking program that targets fraud and reduces REO timelines to less than 180 days. RealtyRecon significantly lowers code violations by verifying occupancy for REOs and provides weekly inspections from agents who work with the program.