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:
| Servicer | REO | 3rd | Canc |
| ReconTr | 103 | 13 | 187 |
| CalifRec | 10 | 31 | 544 |
| Ndex | 43 | 23 | 107 |
| Totals | 156 | 67 | 838 |
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.
Thank you Jim. The situation is similar where I live. And different parts of the county are…different. Surprise!
I always appreciate your smarts, Jim.
JtR,
Sadly, my observations in LA coincide with yours in SD. June saw a tsunami alright, but it was a tsunami of cancelled trustee sales, mostly from loan mod extend and pretend garbage, with a few shortsales thrown in. Cancellations in June outpaced actual sales (either back to bene or 3rd party) by about 3 to 1! Going into June it had been roughly 1:1. JPMorgan/Chase/WaMu was the single biggest contributor to the huge swell of cancellations. They appear to be willing to cancel for almost any reason, whether it’sa trial mod, the borrower’s agreement to put the house on the market (usually at stupid high pricing sufficient to pay off the 1st and 2nd which were based on 2006-2007 Kool Aid prices).
My best guess is that this huge wave of cancellations due to mods will be temporary and probably done by August. So watch the July and August numbers closely. BofA/Recontrust still appears to be ramping up the number of trustee sales on the calendar, so unless they start raising the ration of cancellataions to sales, the total number of sales will eventually grow. Others (e.g. Aurora) also seem to be increasing the number of opening bids on scheduled trustee sales, which normally means most of those sales will proceed.
Labor Day to Thanksgiving is going to be the moment of truth for alot of SoCal RE numbers, I think.
What about bankruptcy proceedings rather than loan modders? Or does entering bankruptcy not actually stay the execution of the trustee sale?
The servicers have been postponing the bankruptcy cases, instead of cancelling.
There are loads of them too. Because the BK buys you six more months of delay, I’d guess that we’ll see many more, especially on the higher end.
“Labor Day to Thanksgiving is going to be the moment of truth for alot of SoCal RE numbers, I think.”
… Labor Day to Thanksgiving of what year ?
Scooter, I like your thinking. I meant this year, but given the history of SoCal real estate bottoms covering 3-4 years and given the current Japan 1989 approach to bubble assets, it could be the same or worse in 2011, 2012, 2103 . . .
Secured creditors such as 1st mortgage lenders can relatively easily apply to the bankruptcy court for permission to proceed with foreclosure (technically it’s called motion for relief from the automatic stay). Whenever the loan is underwater, these motions are routinely granted. Why servicers and lenders don’t seek relief more often is anyone’s guess, but fits with their general foot dragging to deal with these nonperforming loans.