bubbleinfo.com

From HW:

Notices of default, the first step in the California foreclosure process, dropped 17.5% in the fourth from the year before, but the decline may not have come from borrowers improving their financial situation, real estate data provider DataQuick said.

Lenders recorded 69,799 NODs at California county offices in the fourth quarter, down from more than 84,000 in the fourth quarter of 2009 and the lowest level since the second quarter of 2007.

“We don’t know how much of the decline is due to less household financial distress, and how much is due to shifts in lender and servicer foreclosure policies,” DataQuick President John Walsh said. “The level of default activity would certainly be higher if it weren’t for alternative strategies such as short sales, or even lengthening grace periods.”

More than half of the homes in California that received an NOD in the last 18 months have been foreclosed on or sold through a short sale. The status of the other half isn’t clear, DataQuick said, but they should be in the modification or short sale process.

“The institutions that hold these loans in their portfolios will do whatever it takes to lessen their losses, including waiting,” Walsh said. “An additional factor is all the turbulence when it comes to the formalities of the foreclosure process.”

From Diana Olick at cnbc.com:

I have argued many times that just because a loan is underwater (value of loan is higher than value of home) it doesn’t necessarily mean that the borrower will stop making timely payments.

Yes, the incentive to abandon the home is there, but for most homeowners, their home is their community, their daily life, and not just an investment. Most probably think the value will come back over time, and unless they desperately need to move, they have no reason to stop paying.

Amherst analysts disagree with me. “Borrower equity status is the single most important predictor of success,” they claim. To explain their premise, they use two definitions of performing loans: A “successful” loan is one that is always performing, re-performing or voluntarily prepaid. A “clean success” takes out the re-performing loans. Here’s what they found:

For loans with equity, 88.9% were successful after 2 years, and 84.4% represented a clean success.

For loans with CLTV >120, only 53.6% of loans were successful and only 40.9% represented a clean success.

We talk a lot about the shadow inventory of foreclosed properties overhanging the market and weighing down inventories, but the inventory of potential new defaults is clearly high; that potential, even with steady economic recovery, exists and must be factored into the equation.

The latest home price reports are not good, and even though sales appear to be bottoming in some markets, prices always lag. Also, many of the sales are foreclosures (around 30 percent), so that knocks the price recovery premise on its head as well.

I checked the tax rolls by owner name to find the detached properties currently owned by lenders – there were only 1,991 of them, which is about how many detached properties sell every month.

Don’t be alarmed, the pushpins are the size of a city block until you zoom in – and you can select ‘satellite’ or ‘hybrid’ versions in the top-right corner.  Scroll around and notice how few are in the North SD County Coastal region:

An excerpt and graph from Calculated Risk, click here for the full article:

This graph from CoreLogic shows the breakdown of “shadow inventory” by category.

For this report, they estimate the number of 90+ day delinquencies, foreclosures and REOs not currently listed for sale.  CoreLogic estimates the “shadow inventory” (by this method) at about 2.1 million units, and when combined with the visible 4.2 million, the total national inventory is about 200,000 higher than last October’s 6.1 million properties:

JtR: The plague has spread thanks to the servicers telling borrowers that they have to be delinquent to be considered for a loan mod – they are pushing people into default.  

Even borrowers with good intentions may come to enjoy not making payments, and the inevitable delays and frustrations cause them to give up altogether – once a borrower with any hardship goes six to twelve months without making payments, it has to be addicting.  I’m surprised the group (in red above) has been shrinking lately!

Bank of America hasn’t started up their foreclosure machine yet – here are the number of San Diego County properties they have foreclosed on recently:

September: 259

October: 56

November: 1

You can see below that the REO results were building some momemtum between June and September, only to have the robosigningforeclosuregate be the latest excuse to slow down the pace:

The stats look similar across the state – flippers were cooling off because the prices were getting too high, and banks/servicers were taking back an increasing load of properties between June and September. Here are the California results:

Will they devise a new crisis every time they start taking back too many REOs?

Reader “positive” said that ‘ghostfaceinvestah’, an MBS-trader who comments on Calculated Risk, trusts that LPS accurately reports the mortgage delinquencies and defaults data (I had mentioned my skepticism – Mark E., what do you think about LPS?). 

I did email LPS this morning to inquire about getting delinquency counts by zip code, but no response yet.  I asked others the same question a few months ago, and corelogic wanted $25,000 per month, and Experian never responded.

If LPS is the best resource, let’s examine their latest report, as seen in the REC:

According to Jacksonville-based Lender Processing Services’ (NYSE: LPS) latest First Look Mortgage Report, mortgage performance statistics derived from their database of nearly 40 million mortgage loans showed an acceleration of U.S. home loan delinquencies entering the foreclosure process in August 2010.

“The fact that we’re seeing foreclosure inventories rising is more a factor of process than increasing deterioration,” explains Herb Blecher, Senior Vice President of LPS Applied Analytics, “Loans that have been delinquent for a historically long period of time are just now beginning to move through the pipeline. As of July 2010, the average length of time a loan in foreclosure had been delinquent was nearly 470 days.”

Blecher further commented, “Now, after the intensive efforts of the last year or two, remaining home retention options appear to be exhausted and servicers are beginning to process more of these seriously delinquent loans.”

Orlando Realtor Tonya Giddens commented, “Given this country’s continued high unemployment rates coupled with the growing number of strategic defaults by families in many U.S. cities with negative home equity, these growing foreclosure numbers don’t surprise me anymore.”

LPS Report Highlights:

• Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 9.22%
• Month-over-month change in delinquency rate:  -1.0%
• Year-over-year change in delinquency rate:  -5.1%
• Total U.S foreclosure pre-sale inventory rate:  3.80%
• Month-over-month change in foreclosure presale inventory rate:  1.5%
• Year-over-year change in foreclosure presale inventory rate:  4.9%
• Number of properties that are 30 or more days past due, not in foreclosure: (A) 4,947,000
• Number of properties that are 90 or more days delinquent, not in foreclosure: 2,374,000
• Number of properties in foreclosure pre-sale inventory: (B) 2,038,000
• Number of properties that are 30 or more days delinquent or in foreclosure:  (A+B) 6,985,000
• States with highest percentage of non-current* loans: FL, NV, MS, GA, IL
• States with the lowest percentage of non-current* loans: MT, WY, AK, SD, ND

*Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state.

Hat tip to kwaping for sending this along, from the U-T:

The developer of downtown San Diego’s largest residential highrise said today that it is giving up on trying to sell any of the 679 condos and is returning deposits to dozens of buyers who had been awaiting the close of escrow.

“We’re not able to meet the Fannie Mae or Freddie MAC or FHA requirements in this marketplace because we can’t get enough sales,” said Randy Klapstein, CEO of Pointe of View, developer of Vantage Pointe, which completed construction last year in the midst of the economic downturn.

“We’re not getting the traction we’d hoped for, and we don’t want our customers to stay in limbo, so it’s best to move on.”

It is now likely the East Village condo project will remain a rental complex for the foreseeable future, said Klapstein, noting that there are now roughly 200 renters, about a dozen of whom are buyers who were waiting for the sales contracts to be finalized.

“At this point, we’re going to continue renting,” Klapstein said.

Over the last several months, the Pointe of View loan has been marketed for sale, but no deal has been finalized yet. When asked whether it was possible that the condo project might be sold, Klapstein would only say, “It’s always a possibility.”

The developer is in the process of returning deposits to buyers, and purchasers who are living in the complex as renters have the option of remaining or working with the Pointe of View sales team to find a condo to purchase elsewhere in downtown, said Klapstein.

We noted how people still say that the banks are sitting on loads of shadow inventory, when, from the street view, it appears that servicers are getting them to market as fast as they can process ‘em.

Commentors pointed the shadow to those delinquent borrowers who haven’t been foreclosed yet. 

How many borrowers are in default, and where?

There are 9,666 SFRs and 3,975 condos on the NOD and NOT lists, for a total of 13,641 homes that are actively in the foreclosure process in San Diego County.  Here is a breakdown of the number of properties on the NOD and NOT lists, the number of homes with and without a mortgage (per city-data.com), and the percentage of defaults-per-mortgaged home in these areas:

According to the NY Fed, here are the 90-day mortgage delinquencies per county, as of 1Q10:

There are 362,087 homes that have a mortgage in San Diego County (per city-data.com), so roughly 30,053 haven’t been making their payment for at least 90 days.  If we subtract the 13,641 on the foreclosure lists, that makes 16,412 who are delinquent for 90 days or more, but not served yet. 

Sounds about right.

If you multiplied the current number in default in your area by 2.2, you’d have the approximate count of those that are 90-day delinquent. Let’s mention that the servicers insist that borrowers be delinquent to be considered for a short sale or loan mod, so I’m not surprised at the numbers.

Readers regularly send in articles for us to examine here – keep them coming!

Tom sent in an article from realestatechannel.com that was also referenced in a mortgage blogger’s post which Gordon sent in, looking for thoughts - thanks to the both of you! 

Both articles used this chart from RealtyTrac:

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At first glance it appears that there must be a wide-spread conspiracy between banks to withhold their foreclosed properties from the open market, in order save the world from total collapse.  When you read the two articles linked above, that’s the impression the authors got from the chart.

COMMENTS:

1.  Two years ago I paid to advertise on RealtyTrac, hoping to cause their members to utilize my services.  As inquiries came in about properties marked as being in foreclosure on the RealtyTrac website, I noticed that there were many houses which had sold 6+ months prior, and others that had multiple entries. 

When asked, a RealtyTrac employee confirmed that they receive their data from multiple sources, and they don’t screen it for accuracy.  I quit advertising, and haven’t trusted their data since.

2.   Readers gravitate to the sky-is-falling, tabloid-style soundbites. People think that there are conspiracies in play, and they want the dirt on them.

Yet authors, bloggers, etc. are struggling to get the truth on what’s really happening with foreclosures, and the real estate market in general.  As a result, stories are written based on questionable data or theories/hunches hoping to appeal to the readers’ desires, but who knows how close they are?

3.  San Diego is not on this chart, and I don’t know anything about the markets that are mentioned.  But I did research on our bank-owned properties, based on the owners listed on the tax rolls for SFR and condo properties in San Diego County:

We know that California is a tenant-friendly state with regards to eviction, so I’m going to cut the banks some slack during the first three months of REO ownership.  Once they get the occupants out, it still takes time to assess the value, complete repairs, and general processing.

Let’s look at REOs owned since before May, 2010 that aren’t on the open market – if there are a bulk of those, then the conspiracy would be clearer.

A review of the individual properties owned by Bank of America revealed the following:

1. Nine of the 102 were owned in trust for an individual, not a foreclosure – leaving 93 REOs.

2. Twenty-five of the properties were former Barratt homes that BofA is in the process of selling.

3. That leaves only 68 individual BofA REOs in the county.  Of those, only seven had been foreclosed prior to May, 2010, and how many of those were probably tenant-occupied?  To me, it doesn’t look like BofA is trying to withhold properties.

How about Fannie Mae?

I checked the first 50 properties from the alphabetical list of Fannie REOs that were foreclosed on prior to May, 2010.  Forty of the fifty had made it to the open market.  Not as proficient as BofA, but they are probably less nimble about the evictions too.

It makes for a sexy story to say that the banks have this huge shadow inventory of homes waiting off-market, but until somebody besides RealtyTrac verifies it without a doubt, I’m going to be skeptical, at least with bank-owned properties in San Diego County.

Today’s LPS report noted a rise in mortgage delinquencies, and once the mainstream media got ahold of it, you would have thought that the sky was falling.  They are drooling for bad housing news, and are quickly jump to many generalized conclusions.

Why is anybody surprised to hear that 7.3 million mortgages are delinquent when virtually every lender in the country tells you that you have to miss payments before they’ll talk to you about your options?  You never hear that mentioned on the TV news.

What happens to all of these delinquencies?

Let’s examine the actual events, and how they affect our area specifically.

Here are the trustee-sale results of the big three servicers, ReconTrust (BofA), California Recon (Chase), and Ndex of all property types around San Diego County over the last four weeks:

There have been 1,061 trustee sales that were resolved over the last four weeks, but when 79% of them are being cancelled, the threat of the foreclosure tsunami sure seems manageable.

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The quarterly foreclosure stats are out for SD County:

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Cancellations have been soaring. If we saw a bunch of them being successfully short-sold on the MLS, it would give hope that the servicers might be getting more proficient in their processing. The cancelled trustee sales that weren’t on the MLS are probably the loan modifications.

Here is a review of 50 cancelled trustee sales of SFRs in the North SD County Coastal region only:

On MLS: 20

Not on MLS: 30

Only four of the 20 on the MLS were active listings, the rest had found buyers, and 12 had already closed escrow.  Don’t the other 30 have to be loan modders?  Why else would the servicer cancel the trustee sale? 

There are only 372 North SD County Coastal SFRs on the current foreclosure auction list (revised from yesterday). Over the last 30 days, there have been only 15 SFRs in NSDCC that have had their trustee sale actually happen, and 89 cancellations. Very frustrating for those ready, willing, and able to buy at the court house steps.

The point? When you hear any national housing news, make sure to cull it down to your local area.