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» VISIT US ONLINE @ DSNEWS.COM Compiled by the DS News Staff FIVE MINUTES WITH CHIEF CUSTOMER OFFICER FOR NATIONSTAR MORTGAGE Dana Dillard PAGE 27 INSIDE THE JOURNAL // MOVERS & SHAKERS // ON THE WEB // THE APP SPECTRUM FHA'S REO DISPOSITION STRATEGY WEAK COMPARED TO GSES According to the Government Accountability Office (GAO), the Federal Housing Administration's (FHA) inventory of REOs grew from approximately 25,000 in 2007 to a peak of more than 65,000 by the end of 2011. A GAO study revealed FHA takes about 340 days to dispose of its REOs after foreclosure, which is more than 60 percent longer than the GSEs' average of 200 days. Additionally, FHA's returns on REOs were found to be smaller. To determine the agency's combined returns, GAO researchers measured net execution rate, calculated by dividing net sales proceeds by property values. Overall, FHA's returns were about 4 to 6 percentage points below Fannie Mae's and Freddie Mac's returns. "[I]f FHA's execution rate and disposition time frame had equaled those of the enterprises in 2011, it could have increased its proceeds by as much as $400 million and decreased its holding costs … by up to $600 million for the year," the GAO concluded. Unlike the GSEs, FHA does not repair properties to increase their marketability, according to the GAO. The agency also doesn't consider information from multiple sources to set list prices and does not "consistently" factor in market conditions when reducing prices, the GAO said. FHA has not updated its REO disposition handbook since 1994, despite the fact that the agency implemented a different program and contractor structure in 2010. The agency lacks a uniform system for evaluating contractor performance whereas the GSEs have a scorecard to assess contractor performance, and FHA's incentive structure for contractors is not in compliance with federal contracting rules. "Without implementing more effective activities to evaluate contractor performance and ensure compliance with program requirements, FHA's REO properties may continue to remain on the market longer and sell for lower prices than properties held by the enterprises," the GAO stated. In addition, while other entities inspect between 7 and 40 percent of their REO properties annually, FHA's goal is to inspect 2 to 6 percent each year. The GAO also recommended the agency ensure listing brokers are local and have "adequate" knowledge of the market. From January 2007 to June 2012, FHA disposed of more than 400,000 REO properties. A look at facts you didn't know you couldn't live without Issuance of agency and non-agency mortgage-related securities grew 18.6% to $576 billion from Q1 2012 to Q1 2013, with almost all of the increase from non-agency activity, according to SIFMA. top10 Take a look inside the numbers data b i t s LARGEST ANNUAL HOME PRICE GAINS* U.S. Metro YoY Change* Oakland, California34.2% Sacramento, California32.6% Las Vegas, Nevada30.8% Phoenix, Arizona23.8% Orange County, California23.1% Bakersfield, California22.7% Riverside-San Bernardino, California22.5% San Jose, California22.3% Warren-Troy-Farmington Hills, Michigan 21.4% Detroit, Michigan20.9% SMALLEST ANNUAL HOME PRICE GAINS* U.S. Metro YoY Change* Albuquerque, New Mexico2.3% Allentown, Pennsylvania-New Jersey2.1% New Haven, Connecticut2.1% Long Island, New York1.3% Baton Rouge, Louisiana1.0% Hartford, Connecticut0.9% Rochester, New York0.9% Little Rock, Arkansas0.3% El Paso, Texas0.2% Philadelphia, Pennsylvania -0.0% *Based on price change in June 2013 as compared to June 2012, among nation's 100 largest metros. None of the metros in the study saw prices decline. Source: Trulia.com Nationally, housing was 61% "back to normal" in May, according to Trulia's Housing Barometer that measures recovery based on housing starts, existing-home sales, and delinquency+foreclosure rates. 9