Bank Repo Homes
There are strong substantiated rumours going around that the lenders are sitting on bank repo homes and not selling them. Analysts have found a considerable gap between the numbers not sold at the foreclosure auction and taken by the banks with the number of bank repo homes that have been listed for sale in the market.
This poses the pertinent question as to why these bank repo homes are not being sold but kept back in the wings of the real estate stage. There are several reasons for this according to observers.
There is the pig-in-the-python theory. It means that the snake takes a long time to digest the pig. It is the same with lenders. They need time to absorb the huge number of bank repo homes they have swallowed. Rick Sharga of RealtyTrac says, "The system is overwhelmed by the volume. In a normal market, there are 160,000 (foreclosures for sale nationwide) over the course of a year. Right now, there are about 80,000 every month."
Another theory may be dubbed accounting-sleight-of-hand. The lenders postpone sale of bank repo homes so that their actual amount of loss is covered up. The banks are in great stress and they are worried about not showing up the full volume of their losses on the balance sheets.
Another obvious reason is checking-free-fall. It is a masterful piece of strategy to hold back the bank repo homes. If all rush into the market then prices will tumble with lightning speed.
These shadow bank repo homes are darkening the clouds. But there is yet another type of property in trouble. These are not bank repo homes but residential units undergoing foreclosure but the process being intentionally delayed by the bank. For the above three reasons the banks are dragging their feet and playing hide and seek with the borrowers.
Economist Patrick Newport of Global Insight, Massachusetts, said, "The problem is that no one knows how extensive (the shadow inventory) is. It's a wild card. If it's a really big number, you'll see prices drop a lot more and deeper problems for the financial system."
Statistics show that a mere 65.5% of all the bank repo homes in the Bay Area in 18 months that ended on 31st January 2009 had been sold by the middle of March.
While the government at all levels from local to state and federal are desperately trying to come to grips with the foreclosure problem the banks are developing newer strategies to make profit while the people weep.