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Fitch Report: New REO Inventory on the Rise

With a recession looming, mortgage servicers have not stopped working with struggling homeowners in the post-COVID-19 era to avoid defaults where possible. However, as post-moratorium data begins to flow in, Fitch Ratings reports that new REO inventory -- properties in the 1-179 day category -- have increased by 14.5%, reflecting the uptick in active foreclosure filings in 4Q22.

“While loan portfolio delinquencies for Fitch-rated bank and non-bank servicers were stable for the third consecutive quarter, the impact of four consecutive quarters of new foreclosure filings post-moratoria is now being felt in new REO volume,” said Fitch Director Richard Koch. 

Bankruptcy and foreclosure filings and 60-90+ day delinquencies showed no significant change quarter over quarter for bank servicers, while non-bank servicers reported a 1% increase in new foreclosure filings. 

On the topic of loan modifications, banks and non-bank servicers reported a small decrease in loan mods quarter over quarter to 31% from 35% and 17% from 20%, respectively. Active forbearance plans for banks and non-banks reflected an increase quarter over quarter to 37% from 35% and 42% from 40%, respectively. 

“The increase in forbearance applications may be attributable to the CARES Act extension through 1Q23,” Fitch said. “Other exit strategies, such as short sales, deferments and deed-in-lieu of foreclosure account for 29% of monthly loss mitigation workout volume for non-bank servicers, an increase of 7% from the previous quarter while bank servicers reported it unchanged at 2%.” 

Among other data reported by Fitch, bank servicers reported a decrease in full-time employees for the third quarter with an average reduction of 10.5% from last quarter while non-bank servicers upstaffed by about 5% on average from the previous quarter. 

Click here to view Fitch’s report. 

About Author: Kyle G. Horst

Kyle G. Horst is a reporter for DS News and MReport. A graduate of the University of Texas at Tyler, he has worked for a number of daily, weekly, and monthly publications in South Dakota and Texas. With more than 10 years of experience in community journalism, he has won a number of state, national, and international awards for his writing and photography including best newspaper design by the Associated Press Managing Editors Group and the international iPhone photographer of the year by the iPhone Photography Awards. He most recently worked as editor of Community Impact Newspaper covering a number of Dallas-Ft. Worth communities on a hyperlocal level. Contact Kyle G. at [email protected].

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