Fitch Ratings analysts reported that a typical foreclosed home will spend eight months in REO before being resold.
Lender Processing Services estimate that more than 2 million of these properties are somewhere in the foreclosure process with many more coming. Fitch statest that the majority of the backlog could take as long as two years to clear, and the current foreclosure timeline can last more than 12 months, before the time the property will spend in REO.
Bulk sales will be a key part of the housing market for the next few years, accoridng to analysts. Freddie Mac & Fannie Mae currently own half of these properties and the Federal Housing Agency is working on new ways to sell these homes.
What remains unknown however, is the effect. New rental programs could also be in the mix.
Fitch states that it's possible that a rapid disposition of these homes at discounted prices could significantly impact the national market. It will still take years to unload this high number of REOs, regardless of whatever new plan the Federal Housing Agency comes up with.
Fitch believes that the Federal Housing Agency will choose a program that leads to measured sales or sales to investors that hold and rent out the properties for some term.
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