Experts predict that increases in foreclosure and REO inflow will come from government-insured loans, according to the Auction.com 2020 Default Servicing Industry Insights. The majority of servicers Auction.com surveyed expect foreclosure and REO inflow to increase in five of seven U.S. regions. According to the report, 89% said they expect government-insured foreclosure and REO inflow to increase in 2020, the highest among four product types provided as options in the survey.
The majority of survey respondents said they expect foreclosure and REO inflow to increase in 2020 in five of seven U.S. regions provided as options in the survey. The only two exceptions were the Central and North Central regions. Respondents were split evenly between increased inflow and decreased inflow in both these regions.
“Most in the default servicing industry expect government-insured loans to be the primary source of increased foreclosure inflow in 2020, even in the absence of a widespread recession or housing downturn,” said Jesse Roth, SVP of Strategic Partnerships and Business Development with Auction.com. “That’s a rational conclusion given the rising risk profile of FHA-backed loans originated in the last five years.”
Auction.com also found that 41%of survey respondents said they plan to price assets brought to foreclosure auction more aggressively to sell to third-party buyers as the result of market conditions in 2020. Another 41% said they plan little or no change to foreclosure auction pricing, and 18% said they plan to price less aggressively to sell to third parties.
Properties that sell to third-party buyers at the foreclosure sale deliver the highest execution relative to the seller's credit bid at the foreclosure sale, according to an Auction.com analysis of more than 23,000 properties brought to foreclosure auction in Q2 2018.
“Auction.com clients who sell to third-party buyers at foreclosure auction avoid the significant costs and risks that come with holding a property as REO, and they realize higher price execution relative to other disposition methods thanks to the broad pool of informed and technology-empowered buyers we attract to our auction events,” said Ali Haralson, Chief Business Development Officer, Auction.com.