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We thought the August blip of increased NOD filings might be a one-time event, but it looks like the servicers are keeping up the pace.  Hopefully it’ll translate into more trustee sales:

Unfortunately, we know that a surge of NODs and about $4 will get you a cup of coffee, but at least the cancellations are moderating – though they are the dominant number:

From HW:

Freddie Mac vendors sold fewer REO properties in the third quarter than they did earlier in the year as nonperforming loans continue to climb.

More than 25,300 repossessed homes held by Freddie Mac sold in the third quarter, down 13.5% from the nearly 30,000 in the previous three months. It was also a 17% decline from the record-setting 31,600 sold in the first quarter.

At the same time Freddie unloaded the 25,300 REO, it repossessed another 24,300 homes back into the inventory. At the end of the quarter, Freddie held 60,000 REO on its books, which has been trimmed — as new foreclosures are completed — from 75,000 one year ago.

If the current trend holds, and the GSE reduces a net 1,000 REO from its inventory every quarter, it would take 60 quarters to unload its entire inventory — roughly 15 years.

Meanwhile, nonperforming assets continue to mount. These troubled mortgages totaled $127.9 billion, or 6.6% of its total mortgage portfolio, in the third quarter. That’s up 3.2% from the previous quarter.

To help manage the still mounting problem holding back housing and as an extension the overall economy, the Obama administration and the Federal Housing Finance Agency began asking market participants for ideas on selling these properties in bulk and even possibly renting them.

Before a House subcommittee Thursday, FHFA Acting Director Edward DeMarco reiterated that such a strategy will not be implemented nationwide but on a local level.

“We are not looking to develop a single, national program for REO disposition. We are most interested in proposals tailored to the needs and economic conditions of local communities,” DeMarco said. “We received nearly 4,000 responses to the RFI and are reviewing the submissions.”

Someone asked, “JtR, why do you keep posting stories about the can-kicking programs being employed by the government?”

The answer is because the media and government keep insisting that we can’t handle a flood of foreclosures, and that together, they’ll do whatever is necessary to protect from what they think is certain peril. The media is complicit in this charade, because they won’t search out the truth – that the majority of people in this country pay their bills, and are tired of the coddling. 

It is important information for those potential sellers and buyers who are waiting for “the mess to be over” before proceeding.  If the government/media/banks are going to do whatever is necessary to drag this “mess” out for years, participants should devise their strategies accordingly.

Another reminder, from HW:

The housing market faces several more years with 800,000 to 1 million new foreclosed properties per year, according to Rick Sharga, an executive vice president with Carrington Mortgage Services.

Sharga recently left RealtyTrac, where he helped build a network that tracked foreclosure filings across the country. Recently, analysts at Bank of America Merill Lynch estimated REO sales would peak until 2013 when nearly 1.5 million properties would be sold.

According to RealtyTrac, there have been 8.9 million homes lost to foreclosure since 2007, the height of the credit crisis.

Sharga said based on lender behavior, he doesn’t see a spike happening, rather a slow, steady burn in order to spare home prices from further reductions. Today, roughly 4 million homes sell per year. If 1.5 million REO sold, that would be almost 40% of the market, which would be double the current market share of these properties.

“I think it’s less likely that we’re going to see a ‘peak’ year in REO sales that looks dramatically different than what we’ve been seeing over the past few years. This is partly due to relatively weak demand, partly due to what I’d call ‘inventory control’ being executed by the lenders and servicers, and partly due to the fact that foreclosure processing, evictions and redemption periods have all become extended, and often appear to be in a state of flux,” Sharga said.

The largest delay came when servicers were found to be improperly foreclosing on homeowners last year. RealtyTrac said the delays, investigations and ongoing attorneys general settlement talks pushed more than 1 million foreclosures that were supposed to occur in 2011 to 2012.

According to Lender Processing Services, mortgages facing foreclosure are delinquent an average of 611 days. Once a foreclosure is initiated, Sharga said it can take as long as 400 days to complete. So, he said, a loan entering foreclosure in December 2011 won’t hit the market as an REO until January or February 2013.

“Sales volume will be high in 2012, 2013 and probably 2014 as well,” Sharga said. “But it still seems more probable that we’ll see consistently high – yet closely managed – numbers of these sales over several years than it is that we’ll see a huge spike followed by a precipitous drop.”

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So I guess we can expect 1,000,000 or so foreclosures per year across the country until done, with no flood of trustee sales on the horizon. Combine those with the baby-boomer liquidation, which is already underway, and we can expect a steady stream of “under-improved” properties coming to market – which will keep a throttle on prices.

In October, there were 771 properties foreclosed in San Diego County, which was very similar to September’s 755.  In NSDCC there were 28 SFRs foreclosed, continuing the usual average of one a day – it’s a little too uniform, isn’t it? 

For those hoping for more well-priced new listings, it is a frustrating wait.  Here are three of the best foreclosed in October:

In August we saw a spike in NODs, mostly due to Bank of America’s increased output.

It was mentioned here that last month’s NODs appeared to be slowing.  But I just figured out that the NOD reporting by foreclosureradar.com runs about 10 days behind – even though they report the results of trustee sales the same day.  Here are the September NODs - and it appears that we’re back to “normal”, after the August bump that was driven mostly by Bank of America. (revised from earlier today)

Of course it doesn’t mean much unless they are going to actually foreclose on defaulters, which lags behind by at least four months.  Lately, the completed trustee sales aren’t on the rise:

Hopefully we’ll be in for a big spring kick, led by BofA!

Yesterday’s graphs from foreclosureradar weren’t the most recent; but these are the latest available.  I think we’ll see an increase in NODs for the 3Q11 – those totals should be out soon:

The banks are giving plenty of latitude these days:

The cancellations look like they are getting back to “normal” on the quarterly chart:

But over the last few weeks, it looks like cancellations, and 3rd-party buys, have been bouncing around lately:

Hat tip to those who sent in this article from YahooFinance, but scroll down to see local impact:

As the foreclosure backlog continues to build up, delinquent borrowers are spending even more time in their homes without making mortgage payments.

Once borrowers start missing payments, they spend an average of a year and nine months, or 611 days, in foreclosure before banks repossess their homes, according to LPS Mortgage Monitor. That’s more than twice as long as three years ago, when the average was 251 days. Earlier his year, the average was 523 days.

“The number of defaults in the pipeline has been huge and we had more problem loans than ever before,” said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks.

With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside.  “It’s like your boat has all these holes in it and is taking in water. You have to plug up the worst holes first,” said Belcher.

The bottlenecks are particularly severe in judicial states where the foreclosures are processed through the courts, he said. In non-judicial states, where trustees handle the cases, the average foreclosure is six months shorter.

Fannie Mae and Freddie Mac, which account for the majority of all mortgage lending these days, have been actively lobbying their industry partners — the servicers and attorneys who handle the foreclosure process — to either quickly get paperwork filed and push defaults through the system or put borrowers into a foreclosure prevention program, said Belcher.

The industry has gotten better at dealing with the deluge; it has hired staff and refined procedures to improve efficiency. But a return to more normal processing times will take time given the enormous backlog.

There were more than 4 million homes either in foreclosure or 90 days or more late with payments in August. Many of the new delinquencies are actually repeats: About 75% of the borrowers who fell a month behind in payments in August had missed payments before and then caught up — only to fall behind again.

On the plus side, the percentage of new seriously delinquent loans (90 days or more behind on payments) whose borrowers were up-to-date on payments just six months earlier has dropped to 1.4% from a peak of 2.9% in early 2009.

Many of those borrowers suffered through severe financial reversals, such as a job loss. Foreclosure and unemployment rates generally move in lockstep with each other.

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On August 3, 2010, we ran this post which counted the bank-owned properties in SD County.

Here are the counts of SFRs and condos in SD County, owned by Fannie and Freddie:

It looks pretty orderly to me, for a county with over 3 million people. 

The media insists on including the most dramatic quotes they can find, scaring people into making crazy decisions – like renting REOs, instead of selling them.

The banks, servicers, NAR, etc. keep standing by hoping somebody else comes up with a solution, other than doing what it right – which is to ramp up the foreclosures, and resolve this mess!

Here is the same chart with percentage change over the last year:

We have heard that Fannie Mae is cutting back on their REO outsourcers.  From HW:

Treasury Secretary Timothy Geithner said the Obama administration is working on a plan to make it easier for Americans to refinance underwater mortgages and to turn REOs into rentals. The secretary said it’s likely the administration will move on this plan within the next few weeks.

Geithner made that assertion when quizzed by members of the House Financial Services Committee Thursday.

“We expect to move forward in the next couple of weeks with the Federal Housing Finance Agency to make it easier for Americans to refinance even if they are somewhat underwater,” Geithner told lawmakers. Geithner was short on details, but said some type of large plan to turn REOs into rentals is also on the table.

“We are trying to get this huge amount of vacant property on the market, and in the hands of people who can rent,” the Treasury secretary said.

The House Financial Committee’s Q&A with Geithner focused on housing at several key points.

One lawmaker pushed Geithner on why the white paper released by the Treasury on GSE reform in February had yet to make it into some type of final proposal.

Geithner assured lawmakers those discussions are ongoing and that the European debt crisis and other immediate fiscal concerns delayed the rollout of a final GSE reform plan, but assured the committee the Treasury continues to work on those proposals.

Geithner took heat from Democratic Congressman Luis Gutierrez (D-Ill.) who said he voted for the Home Affordable Modification Program, or HAMP, to help more homeowners stay in their properties, but ended up disappointed when only a slice of the $50 billion allocated for HAMP was spent to save distressed homeowners.

Geithner said the administration was prevented  from reaching a large segment of distressed borrowers because a large number  of  underwater mortgages are ineligible for HAMP due to excessive debt levels or the fact they are classified as jumbos or loans on second homes.

“We are still looking for ways to expand the reach of these programs,” Geithner said. He told lawmakers the administration wants to propose a plan where Congress would allocate more funds to the Department of Housing and Urban Development to send resources to communities weighed down by foreclosures.

The mainstream media and blogs were buzzing this week about the big increase in BofA’s NOD filings last month.

Let’s examine the local NOD and NOTS counts to see if the foreclosure waters are rising. These are the monthly totals of notices/sales for all property types in SD County filed by all lenders, with BofA’s total right below (and NSDCC counts for SFRs only):

Looking at September’s month-to-date totals, the new-notice issuance is cooling off already. It doesn’t really matter how many notices they file, unless they actually start forclosing on people. We’ll keep an eye on them.

Whatever happened to investigative reporting? 

Today’s story on cnbc.com about rising delinquencies includes the same lightweight quotes from another ivory-tower guy, and if you just read the headline it sounds like the sky is falling again. In the text it says that the second-quarter delinquency rate increased 0.12% from the previous quarter, but is still down 1.41% from the same period a year ago. 0.12% – that’s it?

They never bother with two important points:

1.  The servicers tell you that you need to go delinquent if you want to loan-mod or short-sell.

2.  The servicers may be carefully regulating the flow of who gets reported as delinquent.

If the policy is to keep kicking the can down the road, it doesn’t matter why or how many people go delinquent, because the servicers can just drip them out as needed.  But it would be nice if the MSM can look into it a little further than just including this opinion (not fact) from the article:

The data suggest that persistently high U.S. unemployment rate is making it harder for people to keep up on their mortgage payments, and offer a grim outlook for a housing sector.

“Mortgage loans that are one payment, or 30 days, past due are very much driven by changes in the labor market, and the increase in these delinquencies clearly reflects the deterioration we saw in the labor market during the second quarter,” Brinkmann said.

We need that guy from Yahoo Sports to cover housing!

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Are delinquencies turning into SFR defaults around North San Diego County’s Coastal region?  On a quarterly basis, it looks like more of the same – they are foreclosing on roughly one SFR per day between Carlsbad and La Jolla:

Here’s how it looks on a monthly graph:

We got excited in 1Q11 thinking that the servicers were increasing the foreclosure rate, only to be disappointed in 2Q11. It looks too uniform and regulated to me.

The number of SFRs foreclosed between Jan. 1 and August 10th in 92130:

2010:  22

2011:  23