You want REOs?  Fannie Mae and Freddie Mac have got ‘em.  According to the Chicago Tribune:

Fannie Mae [largest U.S. mortgage finance company] and Freddie Mac, the country’s second-biggest mortgage finance company, together owned a record $6.9 billion of foreclosed homes on March 31, compared with $8.56 billion held by all 8,500 U.S. commercial banks and savings and loans. Foreclosed houses sell at an average discount of about 20 percent, according to economists Ethan Harris and Michelle Meyer at New York-based Lehman Brothers Holdings Inc. At that rate, the two mortgage companies stand to lose $1.39 billion on the foreclosed houses they currently own.

"It’s a no-win for the housing market," said Ron Peltier, chief executive officer of Berkshire Hathaway Inc.’s HomeServices of America Inc., the second-largest U.S. residential real estate brokerage. "Where there are pockets of distressed real estate, it does have an adverse effect on the surrounding properties."

Both companies were chartered by Congress and bundle home loans into securities to sell to investors and use cash from the sales to fund mortgage lenders. Together, they own or guarantee about half of the $12 trillion of mortgages in the U.S.

I was curious where the greatest growth in REOs was occurring, so I pulled out some numbers I had for this post in January 2007.  At that time I counted all the REOs listed on Fannie Mae’s website by state. I went back to the website yesterday to see how the numbers compared.  Total properties went from 9007 to 20628 nineteen months later: [I didn't look at figures for Freddie Mac]

 Looking strictly at the increase in numbers, California is first, followed by Georgia, Florida and Michigan. You can see from the chart that some states have relatively small numbers, so their large percentage gains have little significance. Five states [and territories] showed a slight decrease in REOs. Most states [and territories] however, showed significant increases.

The Tribune stated:

As home prices decline, unsold properties are a problem for creditors like Fannie Mae because taxes, insurance and repairs drain their cash. Fannie Mae acquired twice as many homes through foreclosure as it sold in the first quarter, regulatory filings show, and late payments on its home loans—a harbinger of foreclosures—almost doubled in the past year.

"Progress on this is probably one of, if not the single most important economic process right now," said Moshe Orenbuch, managing director of equity research at Credit Suisse Group AG in New York. "With prices decreasing, it’s better to get rid of houses quickly."
 

It doesn’t look like that’s happening.