I think it does have to do with trying to control the number of REOs hitting the market at once. However, at some point, the banks are not going to have a choice.
They are required to cut their losses on non- and sub-performing assets and, as most bankers will tell you, banks do not like being in the real estate business. As the number of REO properties pile up on individual balance sheets, the banks will realize that they have no choice but to bite the bullet and dump their REO portfolio.
I think there will be at least one bank that will take the lead and be the first to “fire sale” their REO portfolio and that would potentially trigger the rest.
When you look at the numbers, you are seeing tens of thousands of properties throughout the State of California that are going back to the bank. At some point, these properties will have to be unloaded by the banks. The question is when, and how, and what effect this will have on pricing.