More Intel

Here is more from our trustee-sale investigation. 

When the trustee sale has no bidders, and the property goes ‘back to bene’, how does the bank perform in the open market?  This is a review of the sixty Bank of America and forty of the Wells Fargo REO sales since September 1st:

When was the house purchased by the former owner?

2002 or before:  24 

2003:  8 

2004:  20 

2005:  17 

2006:  20 

2007:  11 

There are a number of long-time homeowners who are now renting or staying with family (more than half owned for at least 5 years!).


Was it a purchase or refinance mortgage that was foreclosed?

Purchase:  42 

Refinance:  58

Whether they knew it or not, 42% of the buyers were speculators.  When things didn’t work out, they weren’t willing, or able, to endure.


Of the 42 purchase loans that got foreclosed, when did they buy?

2004:  5

2005:  13

2006:  16


Those who purchased in 2004 and 2005 could have refinanced by fogging a mirror in 2006, but didn’t.  Were they already underwater?


Opening Bid vs. Eventual REO Sales Price

Sold REO for at least $100K more than OB: 5

Sold REO for $50,000 to $100,000 more than OB:  18

Sold REO within $50,000 of OB:  62

Sold REO for $50,000 to $100,000 less than OB:  5

Sold REO for at least $100,000 under OB:  10

Generally they are getting the opening bids pretty close to retail value.  But if you are really good at flipping, there is excess opportunity if 23% of the ‘back-to-bene’ properties are selling for at least $50,000 more than the price you could have paid on the court house steps.  Note that 15% sold for at least $50,000 under OB price too.


Only six of the 100 were in our stretch from Carlsbad to La Jolla, and only two of those were houses (both in Carlsbad).  There were a lot of condos and Chula Vista properties!


The Future of MBS?

So the government says that they are going to stop buying mortgage-backed securities sometime inthe first quarter of 2010. 

Then what?

Let’s consider what the Fed’s influence has been – are rates artificially low currently?

The historic rule-of-thumb has been that you could count on conforming mortgage rates to be approximately 1.75% above the 10-year treasury yield.  The chart below shows that in recent months we’re about back to the norm:


Friday 10-year yield was 3.356% + 1.75% = 5.106%, which is about where conforming mortgage rates are too, or slightly lower, so the Fed’s help is keeping rates in line with historic spreads. 

Jumbo rates were usually about a half-point above conforming rates.  On Bank of America’s website today, their 30-year fixed jumbo rate is 5.50% with 0.75% points.

When it comes to the mortgage industry, you can predict the future with great certainty.  Once we get into 2010 and the Fed’s MBS pullback is all over the news, lenders will seize the opportunity to bump mortgage rates at least a half-point, if not more, regardless of the ten-year yield.  Look at the history – it’s just like gasoline prices, they prey on the fear created in the headlines.

If conforming rates end up in the 5.5% to 6.5% range, the homebuyers will likely tolerate it, especially if prices ease up a bit.  Throw in the housing tax-credit and buyers will forge ahead during the first four months of 2010.

But who is going to fund these loans without a guaranteed secondary market?

Apparently our usual suspects; B of A, WFB, JPMChase, etc., are willing to fund jumbo loans and keep them in their portfolio today at 5.50% with 20% to 30% down payments.  Wouldn’t they be willing to fund conforming loan amounts with those terms too?  Probably, especially if they could get rates into the mid-6’s without the ten-year yield going up much.

The conspiracists will figure that the Fed will be back-door funding a portion of the business anyway, backstopping the whole business all along.

Would there be a market for MBS yields around 6%?  

I’m not sure, but I wouldn’t be surprised if Angelo’s private-label MBS machine gets cranked up again.   But this time they should do it right.

Sell private mortgage-backed securities on Wall Street or elsewhere with full transparency.  Pool the loans with identical terms, and rank/rate accordingly.  

Would there be investors interested in buying a  batch of mortgages that had 20% down payments, full-doc qualifying and FICOs over 720 if they could get a yield in the high-5-percent range?  Let’s break them up into safer 30% and 40% down payments, for a slightly lower yield.

What do you think mortgage rates would need to be to attract an ample pool of investors?


Let’s catch up on some of the properties featured here in the past, leaving out the house numbers to protect the innocent:

anzaAnza REO, Vista, 92084

2 br/2 ba + extras, 1,492 sf on tax rolls

SP: $470,000 10/04

LP: $132,900  10/09

SP: $163,000  10/09 all-cash

65% below previous SP




harborscHarbor REO, Vista, 92081

3 br/2.5 ba,  1,535 sf

SP: $456,000 5/07

LP: $386,400 10/09

LP: $349,900 – nine days after lowering the price to $349,900, it was marked pending (still is).  The same model closed for $371,500 two weeks ago.

If it closes at $345,000, it’ll be 24% below previous sales price.



allesAllesandro Trail, Vista 92084

4 br/3 ba,  3,110 sf

SP: $370,000 10/2000

LP: $499,000  9/09

SP: $487,500 11/09

An unfortunate occurance here – my seller had decided to cancel the listing and not move.  But a couple of weeks later he passed away of a heart attack.  His estranged wife re-listed, and somehow I was able to re-generate some enthusiasm from a previously interested buyer without having to dump on price.



mangoMango REO, Del Mar 92014

4 br/2.5 ba,  2,646  sf

Loan amount = $996,000, foreclosed 1/09

LP: $629,900  10/09

SP: $705,268  11/09 cash

Our tour of this house is towards the end of this video:



seabSeabright REO, Solana Bch, 92075

4 br/3 ba,  2,370 sf

SP: $930,000  6/04

LP: $899,900 10/09 PEND after 24 DOM

This didn’t take long to find a buyer, and probably didn’t have to discount much from the list price.  Not much drop off from previous SP either.



span baySpanish REO, Encinitas 92024

4 br/5 ba,  4,237 sf

SP: $1,535,500  8/04

LP: $ 989,100  10/09

Still not pending due to unresolved dispute with next-door neighbor who wants to buy property, and is threatening to sue over the right-of-access over the shared driveway to get bank to sell to him instead of the highest bidder.



lagolLago Lindo REO, RSF 92067

4 br/5.5 ba, 4,654 sf

SP: $2,875,000  5/07

LP: $1,879,000 10/09

Yesterday it fell out of escrow for the second time, but you wouldn’t know it because the LA puts it back to CONT, instead of ACT. 

They are attempting to re-ignite urgency among the previous offerees before putting it back on the open market.  They are hoping to keep some urgency alive with the previous offerees, giving them a private shot at buying.  If you throw it back to ACT, all offerees think there must be a problem, and want to hold back.



I am a proponent of realtors getting the word out, yet very few are willing to publish data or opinions to help consumers.  I don’t know if it’s because local agents live in Kris Berg’s shadow at her witty http://sandiegohomeblog.com/ or because agents generally have nothing to say?

But I support the agents who do blog – because consumers deserve more information, and every opinion is worth considering.

A few years back, Schahrzad Berkland, aka ‘powayseller’, a very vocal bear on the blogs, became a realtor.  Out of her commitment to help buyers and sellers, she runs her own blog:  http://www.californiahousingforecast.com/ 

I’ve been encouraging her to do more videos:

She has experienced how the homebuyers’ want and need for buying a house has been much stronger than she expected. We noted how hard it is to find the right house, at the right price – and how that difficulty makes buyers more determined, and more anxious. It takes everyone working together patiently to make smart, logical decisions.

Trustee Sale Today

This property in Bonsall is on the court house steps today. 

Here is the MLS description from when it sold for $490,000 in 2002:

Working horse ranch, huge corral, 2 stalls w/shelter plus extra second corral and miles of trails nearby.  Open floor plan that is mostly single level with a few steps up and down.  Large balcony off home with spa.  Land is fenced, mostly usuable – small fruit orchard.  No garage but 900sf pad.

And it features my favorite street sign in the beginning!

In The Hunt

You’ve probably been able to follow where the blog is going – the all-out battle for product. 

If you’re a realtor and can’t figure out how to bring fresh inventory to your buyers, what good are you?  Anybody can monitor redfin or sdlookup, can you duke it out in the streets?  Are you fighting to win, or just trying to hang on?

The video library is growing, and we’ll preview snippets all along the way:


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