If the top-20 servicers are turning over their distressed loans at a 3.9% clip, that’s a 25-month supply on average (and a boatload of free rent!). From HW:
Carrington Mortgage Services liquidates distressed loans faster than any other subprime servicer, according to a report from Deutsche Bank.
Analysts modeled liquidation speeds of servicers across four different loan categories using the Conditional Liquidation Rate since April 2010.
The CLR is a model that includes the amount of liquidated loans divided by the aggregated balance of all outstanding mortgages in either 60-day delinquency or worse. That includes 90-day delinquency, foreclosure and REO.
Record-high distressed housing inventory has attracted a lot of investor attention to servicers’ loss-mitigation strategy. With the government’s Home Affordable Modification Program and the Home Affordable Foreclosure Alternatives program reducing principal, interest and even short selling a home, investors are making adjustments based on the speeds these loans are worked out.
For subprime mortgages, Carrington is the fastest servicer to liquidate loans in the distressed pipeline. Homecomings Financial and HomEq, which was recently bought by Ocwen, made up the top-three.
According to Deutsche, Carrington, which rents out its REO properties, has traditionally been the slowest to liquidate these loans. But as of August 2010, the REO rate at Carrington reached 21.9% compared to 3.9% for the rest of the top-20.
Wilshire Credit Corp. used to hold the fastest liquidation speeds, but it is slowest since April. The serious delinquency rate on the Wilshire portfolio has increased to 65% compared to 40.7% for the rest of the subprime servicers. This, according to Deutsche, could be because the recent merger of the Bank of America and Wilshire servicing platforms.
BofA, and its acquired Countrywide operation, were among the slowest in each category.
Another reason why additional REO listings could ignite sales is because they tend to have recent money invested in them. The former owners didn’t get to the finish line on this one, but close enough when you include an attractive price too:
I try not to over-promote myself here, but this testimonial describes the intended experience:
I’ll let you in on a secret:
There is but one Realtor in SD County: His name is JIM. The rest of them are in the game because JIM has only so much time.
Jim has recently been instrumental in securing our new home in La Jolla. Although, in theory out of his area of primary interest – Jim not only took us in, but was able to handle and meet our our requirements way better than the majority of “realtors” who “specialize” in that area of town. He helped us stay away from the homes that to an inexperienced eye looked appealing, and we surely took advantage of his expertise in assessing the quality and value of each and every home we had seen.
The first offer we gave was accepted, in spite of the multiple-offer bidding war!
Jim’s team, led by his wife – Donna, took exceptional care of us during the closing process: super diligent and efficient – in a way we did not think was possible. We’re beyond satisfied.
Finally, a word of warning: Jim is all business . If you’re looking for an agent that’s funny all the time and you want to socialize with – that ain’t Jim. Jim is serious and completely focused on his job. However, he will surprise you by cracking jokes here and there – when the time is right. And Jim’s timing – about everything – in our experience, was just PERFECT.
Bank of America converted 3,559 trial mods into permanent status through the Home Affordable Modification Program in August, down 18.6% from the 4,300 done July and less than half the amount done in June.
BofA has totaled 79,859 permanent HAMP mods through August since the program launched in March 2009. It has modified more than 680,000 through HAMP and its own programs since January 2008.
The Treasury Department launched HAMP in March 2009 to provide servicers an incentive to modify the mortgage. Those servicers have completed 434,716 through July.
“Our HAMP results in recent months show a reduced number of customers starting new trial modifications, due mainly to the implementation of a full documentation requirement,” said Rebecca Mairone, default servicing executive of Bank of America Home Loans. “As a result, we are seeing a smaller increase in completed HAMP modifications month-over-month at this time.”
In November 2009, BofA reported just 98 permanent modifications after more than nine months in the program. Since then, both BofA and the Treasury have adjusted guidelines to collect modification documents before putting the homeowner into a trial modification.
The entire August HAMP report is scheduled for released later this week.
These days, every time you read the news you’ll see another expert talking about the shadow inventory coming home to roost. Depending on the guesser, there will be somewhere between 3 million and 8 million homes that get foreclosed in America over the next 1-10 years. Can we narrow that down a bit?
The shadow inventory that is hardest to count are the borrowers who are not making their payments, but aren’t on the foreclosure rolls yet. LPS came out with this chart (below), so let’s use their numbers and envision what would happen if banks/servicers change course, and ramp up the foreclosure machine:
The chart shows 17,800 defaults (today the NOD and NOT count is 14,435 on foreclosureradar), and 34,200 properties in San Diego County that are at least 90-days late, for a total of 52,000.
How would it look in your area if EVERY ONE of these were foreclosed in next 12 months?
To estimate the total number of defaulters plus 90-day late borrowers for each area, let’s use the multiplier formula here: 17,800 x 2.92 = 52,000.
Let’s multiply 3x the current defaults in each area/zip code:
Area or Zip Code
NODs/NOTs x 3
# of Homes
1 REO per # homes
Foreclosed since 1/1/07
Spring Valley
783
9,368
12
1,777
West RB 92127
378
7,140
19
506
Chula Vista
3,051
59,529
20
6,675
Otay Mesa
825
17,197
21
1,807
Encanto
780
17,869
23
1,675
Escondido
1,605
44,964
28
3,934
El Cajon
1,068
35,173
33
2,652
Oceanside
1,698
59,498
35
3,962
RP 92129
348
15,109
43
487
Scripps Rch
222
10,521
47
288
Carmel Valley
237
11,304
48
291
Carlsbad
672
33,717
50
987
RSF
63
3,517
56
71
Cardiff
78
4,544
58
58
Encinitas
303
19,138
63
305
Solana Bch
81
6,072
75
102
La Jolla
246
19,529
79
257
PB/MB 92109
261
26,105
100
285
Del Mar
66
6,714
102
78
If servicers crack down and foreclose on every 90-day late property, we’ll see one flipper or REO listing on virtually every block in areas like Spring Valley. But with all the foreclosure activity over the last few years, would it bother buyers to see 1 out of 40 or 50 homes getting foreclosed? I don’t think so, and this is probably the worst-case scenario over the next year. The current SD default list is split 65% SFRs, and 35% condos/others, so spread it around as you visualize what might happen in your area over the next 12-18 months.
In areas like Carmel Valley, where we’re estimating 237 SFRs and condos on the NOD/NOT/90-day list, it would bring relief to buyers starved for well-priced inventory. We know some defaulters will get their loan mod or be short-sold, but if not, and 15-20 foreclosures per month came on the market, it wouldn’t overwhelm the market – 71 homes sold there last month. Hopefully, it might scare some of the elective sellers back to the sidelines, to be replaced by bank-owned inventory.
In Carlsbad, if you divide the current NOD/NOT/90-day list by 12, it would mean roughly 56 REO or flipper listings per month, and 124 sold there in August.
We’ve expected that we’d be in a heavy bank-inventory environment by now, yet the ‘delay-and-pray’ strategy has been employed instead. If 30% to 50% of the for-sale inventory was well-priced bank deals (flippers are retail-plus) it could boost sales. If servicers insist on the extend-and-pretend strategy, sales are going to slow down, unless elective sellers get more realistic.
Servicers, please foreclose on every defaulter in the next 12 months – homebuyers would appreciate the well-priced inventory!
We toured the Spacestation in CV, which showed the potential of contemporary architecture, but left us hanging – and hoping for better examples.
The Division Knoll Residence in Big Sur, California was designed by Sagan Piechota Architecture.
Elemental in nature – walls of glass, floors of stone, supports of concrete, a roof of copper – “it’s not really about the architecture itself, but more about the architecture as a vessel for looking at the view,” says Daniel Piechota.
Because of the simplicity of materials, it’s almost an invisible structure. There are certain angles where you’re pretty much looking through the house, and you almost don’t see it.
Typical these days – lots of lookers, and about $4, will get you a cup of coffee. This 10,022sf house was foreclosed, and listed by Union Bank for $2,599,000, which was about half of the former owner’s previous list price. The dump on price created a stir, but how many buyers are there for a super-custom contemporary? The bank has requested cash offers only, and at least two have been submitted:
There is some short-term predictability to real estate.
Because foreclosures have a minimum 111-day notice period before becoming a trustee-sale candidate, we can check the foreclosure rolls and recent trends to anticipate the possible REO activity coming for the North SD County Coastal region.
Here is the historical pace of SFR trustee sales in NSDCC that went back-to-bene:
Year
REOs
Avg-per-Mo.
2007
137
11.4
2008
257
21.4
2009
284
23.7
2010 YTD
201
23.7
Here’s a chart below of the recent monthly totals – though the categories aren’t directly related, it can give you a feel for the current trends. It looks like fairly steady production, with some uptick lately – maybe some mid-summer banker vacations slowed things down a bit?
Month
Back-to-Bene
New REO listings on MLS
MLS REO listings closed
Apr
22
18
14
May
35
15
23
Jun
12
17
19
Jul
17
22
11
Aug
24
23
16
Sep MTD
18
11
3
Totals
128
106
86
Mo. Avg.
24
19
16
The number of SFRs with active notices:
NOD = 253 (54% received their first notice in the last 60 days)
NOT = 365 (Only 28% received their original NOT notice in last 60 days)
Total = 618
The loan-modification candidates are among the 618, so we may not see them come to market for a while, if at all (some will stick). If half of the 618 defaulters actually hit the court house steps, and wound up going back-to-bene, it would mean that the current count would take about a year to liquidate – which seems like the same pace we’ll been seeing. It would take a change in the ‘delay-and-pray’ tactics being employed by servicers to change the course.
There have also been 553 cancellations this year too, which you would think were due to successful short sales. But in the MLS there have only been 151 short sales closed, and another 125 currently marked contingent or pending – which is only half of the cancellation total (though not every agent marks their listing in the ‘sales restrictions’ box, the MLS criteria used to count here). The banks/servicers might be letting a couple of hundred people float around for now?
REO listings vs Other detached listings that have closed since April 1st:
Category
REO
Other
# of closings
86 (7%)
1,182 (93%)
Avg SP
$895,126
$1,091,991
Avg SP:LP
99%
96%
Avg $-per-sf
$302/sf
$383/sf
Avg DOM
41 days
67 days
Trying to gauge how many buyers are left isn’t easy. But if banks/servicers decide to rush the exits, they would provide welcome relief for those trying to find attractively-priced inventory, and put a little pressure on the elective sellers who are currently happy to ignore 7% of the market. If the REOs doubled or tripled in North SD County Coastal, it would likely shake things up, with the biggest impact being on the elective sellers who wouldn’t be getting as lucky as they are now.
Today is a busy day for the jimjamalama, but in the works, at nct’s request, is a forward-looking post trying to predict the short-term future (still looking for a crystal ball).
In the meantime, here’s a video with local flavor:
Carrington Mortgage Services liquidates distressed loans faster than any other subprime servicer, according to a report from Deutsche Bank.
