HPI is an awful predictor of REO Sales Price but we have BPOs

Not as exciting as today’s solar eclipse, but our 108,000+ BPOs can surely help you analyze those delinquent pipelines properly.

We conducted this analysis back in July 2015 using CoreLogic’s HPI and concluded that on average, the actual REO sales price was 41.5% lower than what a HPI estimate would had predicted. Two years later, we use Zillow’s Home Value Index with 32,247 REO sales from the past year and reach the same conclusion:

On average, actual REO sales price is 41.2% lower than what a HPI estimate predicts.

Obviously, a HPI-adjusted appraisal must be haircut as both CoreLogic and Zillow do not provide a distressed home price index and distressed properties do sell for much less. The correct haircut is key to building an accurate model and we will show you how that can be adjusted for different states, property values, vintages and pool types.

Fortunately, we can do much better! We have over 108,000 updated valuations (BPOs or appraisals) directly from the servicers, which covers 38% of all seriously delinquent loans, with 91% of all seriously delinquent loans serviced by Ocwen and 63% of all seriously delinquent loans serviced by Nationstar. Our analysis and the examples that follow will show that these updated valuations are the best estimate of sales price.

Availability of BPOs/Appraisals (less than 2 years old) for 1st Liens

As of July 2017 Remittance