[Updates total REO remaining]

The government significantly reduced its inventory of foreclosed homes in 2011.

Fannie Mae, Freddie Mac and the Department of Housing and Urban Development held roughly 212,000 REO properties as of Dec. 31, down 28% from the 296,000 at the end of 2010, according to an analysis of their collective financial statements.

HUD made the biggest dent last year with its portfolio of foreclosed Federal Housing Administration properties. However it holds the fewest amount of REO among the three. Its inventory totaled more than 32,000 at the end of December, down 47% from the more than 62,000 it held one year prior.

Fannie reduced its inventory to more than 118,000, down 27% from roughly 162,000 at the end of 2010.

Freddie, which reported its earnings Friday, cut its REO inventory to 60,500, down 16% from more than 72,000 the year before.

Servicers halted the foreclosure process in many areas of the country last year as it sorted out mishandled documentation, investigations and settlement negotiations. The entire process was revamped under federal consent orders signed in April and through a $25 billion agreement with state attorneys general to be finalized this week.

Rebooting the process may take much of 2012 as well, according to Freddie. And delinquencies remain elevated at all three Fannie, Freddie and HUD.

The serious delinquency rate at Fannie dropped to 3.91% from 4.45% over 2011. The Freddie serious delinquency rate declined as well to 3.58% from 3.84%.

Seriously delinquent FHA loans under HUD increased 19% over last year to more than 711,000 mortgages. The FHA default rate stood at 9.6% at the end of December.

"We expect the pace of our REO acquisitions will continue to be affected by delays in the foreclosure process in 2012, but the volume will likely remain elevated due to the company's large inventory of seriously delinquent loans that will likely complete the foreclosure process and transition to REO during 2012," Freddie disclosed in its financial filing Friday.

Freddie said the average holding period for resold REO was 197 days in 2011, up from 155 the year before.

Still, the GSEs sold REO at a record pace in 2011. Combined, both sold more than 353,000 previously foreclosed property for the year.

At Freddie, two-thirds of its 110,000 sales went to owner-occupants. The Federal Housing Finance Agency launched a pilot program in February that could boost more sales to investors this year.