This allows banks to transfer what used to be a 100% loss off the books into a parking entity at an agreed value. The intent was to avoid the illogical accounting rule that cratered S&Ls in 1987 who had to recognize the non-performing loan as 100% loss, when there was real estate with real value as security.

Inside the third party entity, often owned by the bank under a trust, the loans over these properties can be converted to a temporary rental agreement with the borrower in place as tenant, or park and await the inevitable market rebound, do a work-out, do a later refi when market improves or most critical, keep good properties off the market knowing that within 24 months these will be back in the market at at least loan value or more.

The side story is that often the best properties are not available as REOs or foreclosed inventory. When they are they have already been picked over by bulk REO buyers and wholesalers.
This is happening all over the country and allows a staged return to inventory, if ever.

The foreclosure numbers, although personal tragedies for those involved, remain less than a rounding error. 94.6% of all mortgages are current. Less than 2% are delinquent to the point of NOD and foreclosure.

For the last five months in the West and SE, inventories (by MLS thus 65% market sample) are contracting, pending sales rising and sale price per square foot coming off replacement value.) The leading edge of the market reached bottom Q’1 2008 are the precursors for recovery are strongly in place. More credit is becoming available so the mortgage spiggot is being turned back on.

What a wonderful country. Plan, Work, Smile and torque off a liberal.

Best: Andrew Waite