Repos

By Repos is meant the houses that have been repossessed by the banks after completing the foreclosure process. At the end of foreclosure, whether judicial or non-judicial the houses in question are put up for auction. If suitable buyers are not found then the banks take back the houses and these are known as repos or repossessed houses or homes. Most of the repos are residential units.

To realize unpaid dues, banks have always resorted to foreclosure but in the present mood of the economy buyers are not available and hence there is a staggering increase in the number of repos. There are so many that the banks are offering heavy discounts but even then buyers are not coming forward.

With the market being flooded with repos and more foreclosed units waiting in the wings there is more supply than demand. The banks reeling under the credit crunch are tightening lending practices. Without availing of loans buyers cannot purchase houses even if these are cheap.

Another reason for repos not selling is the spiralling unemployment. Without money for bare existence how can the ordinary American buy repos? The irony is that unless the repos are snapped up by buyers the banks will not regain their health and start lending again. It is thus a vicious circle.

The banks are losing and collapsing like nine pins. Foreclosures are costly and then after having won and taken possession of the house the banks are finding that the value of property has fallen sharply. It costs a lot not only to repair the repo homes but also to maintain these. More and more municipalities and county authorities are making stringent laws to see that banks look after the repos. If not the banks are being heavily penalized.

The increase in repos is a direct result of the foreclosure crisis that started with the sub-prime mortgages. It is feared that in 2009 there will be more repos as the time has come for other exotic loans like ARM to start hiking interest rates. It will lead to more defaults, foreclosures and repos.

The government has stepped in not to allow the situation to drift. Lenders, servicers and borrowers are given cash and other benefits to see that the repos once more become homes. The local authorities are purchasing these repos, fixing them and selling them to those with low or middle income. The money is being funded by various programmes undertaken by the federal government.