Massachusetts Banks’ OREO Balances Jump by 34%
May 24th, 2007 . by Brecht PalomboWhat is OREO?
OREO, also known as REO, stands for “Other Real Estate Owned”. Banks generally acquire OREO through the foreclosure process. OREO is not something a bank wants to have on it’s books. Once a bank owns real estate, generally speaking, it is a liability and it is something the bank aims to rid itself of.
The Stats
From March of 2005 to December of 2006 Massachusetts banks have seen a rapid increase in the amount of REO they’re holding. In fact, according to the data provided by the FDIC website , Massachusetts banks have acquired 34%, or, more than one-third, more real estate through foreclosure. The numbers available for the whole of the state are only as recent as the December quarterlies and you can bet that when March 2007 numbers become available we’ll see even more on the books.
Interestingly, while residential REO balances are growing dramatically, commercial REO balances in Massachusetts are trending down. This, I think is further evidence of the strange economic forces that are currently at work and the large amounts of private capital chasing returns.
What Does This Mean to Me?
Does this wave of REO mean a bonanza for investors? Not so far. There is a lot of money chasing returns out there right now and banks aren’t exactly giving it away. As REO portfolios grow you should expect to see more ‘deals’.
