by Calculated Risk on 2/14/2012 04:10:00 PM

From economist Tom Lawler:

FHA released the December Report to the FHA commissioner, and according to the report FHA’s SF REO inventory plunged to 32,170 at the end of December – the lowest REO property count since December 2007, and 47% lower than at the end of December 2010. Here is a table derived from the latest and past reports. I don’t rightly know what the “adjustments” category is, save that it is needed to make the report “stock/flow” consistent.

Monthly Report to FHA Commissioner
	SF REO Inventory (EOM)	Conveyances	Sales	Adjustments
Jun-10	44,850	8,487	8,893	41
Jul-10	44,944	8,341	8,508	261
Aug-10	47,007	9,810	7,686	-61
Sep-10	51,487	11,411	7,439	508
Oct-10	54,609	9,908	7,289	503
Nov-10	55,488	6,752	5,817	-56
Dec-10	60,739	7,728	2,749	272
Jan-11	65,639	7,709	2,632	-177
Feb-11	68,801	7,383	4,221	0
Mar-11	68,997	8,647	8,728	277
Apr-11	65,063	7,410	11,375	31
May-11	59,465	7,032	12,659	29
Jun-11	53,164	7,240	13,600	59
Jul-11	48,507	6,509	11,379	213
Aug-11	44,749	8,005	11,701	-62
Sep-11	40,719	6,567	10,554	-43
Oct-11	37,922	6,541	9,883	545
Nov-11	35,192	6,212	9,178	236
Dec-11	32,170	5,997	8,800	-219

The level of property conveyances is astonishingly low, especially given the rising level of seriously delinquent FHA-insured SF loans (711,082 at the end of December, up from 598,140 at the end of December 2010).

The report also showed a continuation of the recent downward trend in FHA loan modification activity.

It is not clear why both property conveyances AND loss mitigation activity slowed so dramatically in the latter part of last year, but the sharp slowdown in problem loan “resolutions” contributed to the significant rise in the number of seriously delinquent FHA-insured SF loans in the second half of last year.

FHA SF "Home Retention" Activity
	Forbearance Agreements	Loan Modifications	Partial Claims	Total "Loss Mitigation Activity"	SDQ Loans
Dec-09	1,840	8,514	968	11,322	549,667
Jan-10	1,766	9,319	986	12,071	576,691
Feb-10	1,618	11,359	846	13,823	570,799
Mar-10	1,686	14,604	1,158	17,448	553,650
Apr-10	1,228	11,525	1,603	14,356	544,464
May-10	1,189	12,034	1,621	14,844	548,193
Jun-10	1,074	17,072	1,479	19,625	551,330
Jul-10	1,212	19,002	1,421	21,635	559,620
Aug-10	1,152	16,090	1,676	18,918	558,316
Sep-10	1,070	15,634	1,520	18,224	563,513
Oct-10	2,361	12,667	1,194	16,222	532,938
Nov-10	1,720	14,830	1,631	18,181	588,947
Dec-10	3,301	18,000	2,328	23,629	598,140
Jan-11	2,905	12,075	2,352	17,332	612,443
Feb-11	2,628	10,412	1,991	15,031	619,712
Mar-11	3,562	12,752	2,714	19,028	553,650
Apr-11	2,503	13,564	2,366	18,433	575,950
May-11	2,211	11,945	3,377	17,533	578,933
Jun-11	2,655	13,368	3,082	19,105	584,822
Jul-11	2,259	8,075	1,629	11,963	598,921
Aug-11	2,068	9,950	1,815	13,833	611,822
Sep-11	1,581	7,346	1,501	10,428	635,096
Oct-11	2,109	7,183	1,426	10,718	661,554
Nov-11	1,995	7,540	2,487	12,022	689,346
Dec-11	2,537	5,560	976	9,073	711,082

Click on graph for larger image.

CR Note: This graph shows the REO inventory for the FHA through Q4 2011. There has been a sharp decline in REO inventory over the last year and FHA REO is at the lowest level since 2007.

Fannie and Freddie should report Q4 REO next week, and will probably report further declines in REO too.