FHA Mandates Reporting Former REO Status for HECM Purchase Transactions

Starting this week, Federal Housing Administration lenders will be required to note and record when a mortgage transaction has been previously sold as Real Estate Owned property, including Home Equity Conversion Mortgage for Purchase transactions that involve former REOs.

“Effective Saturday January 14, 2012 lenders will be required to indicate whether a purchase transaction was previously sold as a Real Estate Owned (REO) property and if so, a previous REO case number will be required at case number assignment in FHA Connection,” the Department of Housing and Urban Development notice states.

Because an assigned HECM loan can become a REO property, the rule applies for those reverse mortgage loans, FHA confirmed to RMD.


A surge in the REO market following a wave of foreclosures has led to an uptick in distressed sales, which continue to hinder a housing recovery.

“Distressed sales continue to put downward pressure on prices, and is a factor that must be addressed in 2012 for a housing recover to be a reality,” said CoreLogic Chief Economist Mark Fleming in the most recent housing report from the housing data and analytics provider.

Written by Elizabeth Ecker

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  • With so much inventory on hand, years of pent up supply, and the trend in losses for the last three years, predictions of losses in value bottoming this calendar year look specious.

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