Report: FHA Fails to Get Top Dollar for Its REOs
July 24, 2013
The Federal Housing Administration is lagging in its performance in selling its REO inventory compared to mortgage giants Freddie Mac and Fannie Mae, according to a new report by the Government Accountability Office. The GAO analyzed more than 400,000 repossessed homes that the FHA sold from 2007 to 2012.
The GAO report also says that Fannie Mae and Freddie Mac did a better job at getting higher returns for its REOs and have been selling them faster than the FHA. On average, the FHA took about 340 days to sell its REOs compared to 200 days by Fannie and Freddie, according to the report.
While the mortgage giants and the FHA use a similar method to dispose of REOs, the report noted some shortcomings of the FHA in the marketing of its REOs. For example, the report notes that the FHA does not repair its properties to make the homes more marketable. The FHA also does not incorporate information from multiple sources to determine its list prices for the homes or take into market conditions when it reduces its prices. Instead, the FHA relies on one appraisal to set its initial list price for the home. It then reduces the list price, if needed, by set amounts.
Source: “GAO report suggests FHA leaving REO money on the table,” Inman News (July 23, 2013) and GAO
Updated: June 20, 2018