AgentIndustry News

More loan servicers resorting to auctions

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Six out of 10 loan servicers are resorting to auctioning off real-estate owned properties, despite evidence that they may see bigger losses than if foreclosed homes are marketed and sold in a more traditional fashion, according to a report by Fitch Ratings. Inventories of real-estate owned (REO) properties more than quadrupled from the end of 2005 to the end of 2007, Fitch analysts said. To get properties off their books and reduce long-term carrying costs, more servicers are resorting to auctions, the report found. "Fitch believes that the use of auctions will continue to increase as servicers are faced with growing REO inventories and increasing loss severities," the report said. Although loss severities are typically higher when properties are auctioned off instead of listed and marketed to home buyers, there may be cases when taking an up-front loss at an auction is preferable to taking the time to market a property, the report concluded. Auctions can be the b...