bubbleinfo.com

Unfortunately we don’t know enough about the homeowners on the foreclosure rolls, other than they aren’t making their payments.  If the government can help them get a loan modification that’ll stick, or they can bargain for a short sale, then we won’t see them on the court house steps in the near future.

How many defaulters could end up on the open market?

Here are the number of SFRs that have a NOD or NOTS filed, the combined number of detached short sales on the MLS (ACT+CONT), and the year-to-date results of the trustee sales conducted:

There are 900 properties on the f-list (366+534), and with only 278 of them actively engaged in trying to sell, it leaves roughly 622 houses in question (though there are probably short sale listings that aren’t in default yet).

Will they get a satisfactory loan modification? Or will they be the short-sale or foreclosure candidates over the next few months? Or live under the radar until forced to move?

There have been 252 closed MLS sales, year-to-date, so if all 622 went up for sale over the next few months, I think the market could absorb them.

Jinx wondered if pricing was going to be flat for a while, and I think it’ll depend on the area in question.  Some neighborhoods may look like they are going up in value, and others down.

The low-inventory conditions makes it harder to track the actual trends – either there aren’t enough comps to support a case either way, or the few comps are masking the real story.  Plus the shadow inventory of defaulters is haunting the market – will there be a flood of REOs one day, or not?

Let’s highlight a few areas where buyers should proceed with caution.

The mid-Carlsbad market has shadow inventory of a different nature – new product waiting in the wings.  Currently there are 150-200 homes underway around the Poinsettia/El Camino Real area, plus Robertson Ranch will add over 1,000 homes once it is built out – that’s a lot of Mello-Roos!

Two weeks in a row with a surfboard in a Porsche – will that be the new ice-cream truck?  A bubbleinfo t-shirt to the first person to name that band!

Pardee has removed Shaw Lorenz from their website, and staffers made it sound like they have postponed construction plans for now:

Julie brought up the mark-to-market accounting requirement for banks.

I don’t think the banks worry much about marking to market.  Of the 43 Countrywide/B of A listings I’ve sold, I can’t think of one of the foreclosed mortgages that was actually owned by them.  CFC was selling their paper on Wall Street as private-label MBS, and those owners may have some requirement – but B of A is just the servicer on the majority of CFC paper.

Without the accounting requirements, the servicers might keep kicking down the road forever the 17,247 San Diego County properties in default.

Here is another example of can-kicking.  The FDIC just agreed to sell two portfolios of loans with a combined unpaid balance of $3.05 billion to Lennar Corporation.

MIAMI, Feb. 10 /PRNewswire-FirstCall/ — Lennar Corporation, one of the nation’s largest homebuilders, today announced the closing of two structured transactions with the Federal Deposit Insurance Corporation (“FDIC”).

The transactions represent the purchase of two portfolios of loans with a combined unpaid balance of $3.05 billion.  A subsidiary of Lennar, Rialto Capital Advisors, will conduct the day-to-day management and workout of the portfolios. Lennar acquired indirectly 40% managing member interests in the limited liability companies created to hold the loans for approximately $243 million (net of working capital and transaction costs), including up to $5 million to be contributed by the Rialto management team.  The FDIC is retaining the remaining 60% equity interest and is providing $627 million of non-recourse financing at 0% interest for 7 years. The transactions include approximately 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships.

My point is that here are another 5,500 loans that should be foreclosed on, but instead they are being shuffled off for additional processing.

For those of us who are seeking more REO inventory, it appears that we may be in for a long wait.

Another round of postponements today, but hopefully this youtube will keep you in the hunt: 

I think this shows the ineffectiveness of loan modifications.  Since last November the government has enacted the biggest loan-mod program in the history of the world, and yet there were only 51 additional cancellations Y-O-Y?

From the U-T:

Foreclosure sales have been canceled at an increasing rate as loan modifications take hold, according to ForeclosureRadar, a Stockton-area data company that monitors California’s distressed housing market.

For San Diego County, the daily cancellation count increased nearly a third, from 34 in October to 45 last month. There were 741 cancellations in October and 824 in November. In November 2008, there were 773 cancellations.

Meanwhile, 1,283 foreclosures became final last month, down from 1,346 in October and up from 1,115 in November last year.

“We’re probably going to see a wave of cancellations rather than a wave of foreclosures as some have been predicting,” said Sean O’Toole, founder and CEO of ForeclosureRadar.

Statewide, the daily cancellation rate rose 40 percent, based on a total of 8,741 in October and 10,469 last month. November 2008’s figure was 8,302. The daily rate is pegged to the varying number of business days in each month.

Peter Dennehy, senior vice president of Sullivan Group Real Estate Advisors in San Diego, said fewer foreclosures would improve the housing market, at least in the short term.

“We’d have a healthier housing market if we had a better economy and better job prospects and if people are actually able to pay their mortgages,” he said. “It’s not one thing or the other.”

While foreclosures typically carry low prices, Dennehy said first-time buyers often cannot compete against investors or get loans for as-is properties that banks will not pay to repair.

“What we really want to see is normal people buying and selling homes at all levels of the market,” he said.

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From the latimes.com:

A supply of 1.7 million homes headed for sale because of foreclosure or delinquency looms over the nation’s housing market, which could dampen progress toward recovery should the Obama administration fail in its efforts to aid struggling homeowners, researchers said.

A variety of measures to keep discounted bank-owned properties off the market — including moratoriums on foreclosures by major lenders and federal initiatives aimed at keeping people in their homes with mortgage payments they can afford — has helped increase a backlog of so-called shadow inventory 55% in the year ended Sept. 30, according to a report released Thursday by First American CoreLogic, a Santa Ana-based real estate research firm.

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From bloomberg.com, hat tip PH!

Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12% of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3% on loans less than $250,000 and 7.4% on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7% a year earlier.

 As defaults on the biggest mortgages rise, borrowers such as Steve Holzknecht, 53, are turning to short sales to exit loans that now are larger than the market value of the house. Last month he cut the asking price for his 7,280-square-foot home in Kirkland, Washington, by $550,000 to $1.25 million, lower than the balances of his two mortgages.  Holzknecht, the former owner of Four Suns Inc., a Seattle luxury homebuilder that went out of business two months ago, constructed the Craftsman-style home in 2000. He declined to identify his lenders or the amount he owes.

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December 15, 2009 – ForeclosureRadar.com, the only website that tracks every California foreclosure and provides daily auction updates, issued its monthly California Foreclosure Report for November 2009. Despite apparent headline month-over-month declines in foreclosure activity, the real story requires looking at changes in the average daily activity. November had only 18 days on which filings could be recorded or trustee sales held because of fewer days in the month, Veterans Day and the Thanksgiving Holiday, while October had 22 recording days, and 21 trustee sale days.

After adjusting for this difference in days we find little month-over-month change in the statistics, with the exception of Notices of Trustee Sale which declined 13.4 percent, Cancellations, which rose 40.0 percent, and Sales to 3rd Parties, which rose 8.0 percent on a daily average basis.

“We’ve been waiting to see some impact from the Home Affordable Modification Program,” says Sean O’Toole, Founder and CEO of ForeclosureRadar.com. “The 40 percent increase in cancellations this month is likely just the beginning of what we expect will be a wave of cancellations under this program”.

Despite the significant drop in filings of new Notices of Trustee Sale, and an increase in the number of Cancellations, the number of foreclosures Scheduled for Sale still rose.  The simple reality is that homeowners are continuing to enter foreclosure faster than they are coming out.  This will likely continue until we see meaningful progress on loan modifications, or the often predicted “foreclosure wave” finally occurs.