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!
I think the red group has been shrinking because of completed loan mods and short sales. But most likely the majority of the loan mods will need to be dealt with again in the future, either through a short sale or FC.
Thanks JtR for the confirmation that there really IS significant shadow inventory that is REO but NOT on the market currently. Sometime back, a poster here said that they didn’t think banks were foreclosing and not putting those properties on the market. It just didn’t jive with what I saw on RealtyTrac. Now…if there was just some way to compell the banks to put those properties on the market!
Required reading.
Executive Summary: Evidence has surfaced in court that failure to convey the note from the bank to the mortgage-backed securities trusts was not an unusual, freak occurrence, but established practice at Countrywide (and, likely, just about everywhere else). That means the MBSs are in fact backed by nothing (making them fraudulent), and holders of same can go after the sponsoring banks for 100 cents on the dollar, as well as possible interest and penalties.
Ewhac – I think you are the first person who has made a clear distinction between the MBS troubles and the homeowner’s liability per the loan, etc.
W/O being versed in the technicalities of law, etc, it appears to me that by unwinding the transactions one stinky layer at a time there will ultimately end up with a loan and trust deed/mtg owned by someone early on in the process(or their trustee, etc). It doesn’t magically disappear, just people own it who didn’t think they still owned it, albeit there are a lot of moving parts to unwind.
How someone could think it ends up being a free house is representative of the crazy times we’re in, but not of reality.
Agreed. Clearly someone has standing to foreclose. Money is still owed; the question now is, to whom?
The implications of the above article are that, once all the layers are peeled off and the notes are finally matched up with their true holders, the holding entity may be a heap of powder leftover after it pays out all the put-backs.
The other solution is for the banks to locate the original notes and deliver them to the MBS trusts (as they were supposed to in the first place). However, this may also prove problematic for two reasons. One: In Countrywide’s case, this is not possible, as they destroyed all of them, keeping only digital images. It is unclear whether the E-SIGN Act passed in 2000 would be allowed to cover this. And two: Some banks may have ended up selling more MBSs than could be said to actually exist.
Just a graphic analysis shows the (3) groups trending together. Then the big bump and drop in red which means something is out whack. My guess is a much smaller number of the red will actually go to market.
Don’t count on the supply going up, and what does come onto the market will be the usual trash or scooped by cash buyers/flippers.
Also, watch how fast and hard elective sales disappear and inventory tighten in the next few months.
I’ve read my share about it, but like clearfund am no lawyer. But it seems like the investors would be first in line at the settlement trough, once the government bails out the bankers again.
I think if people end up with a free house, it’ll be because the debt converts to unsecured, which doesn’t change much for the credit-worthy.
But those who declare BK might get a free house?
More on the smoking gun. The “DocX document fabrication price sheet” may have been old news:
http://www.housingwire.com/2010/11/22/a-crime-of-omission-the-case-of-the-docx-pricing-sheet
produce the note? Doubt it. The shredding parties at Countrywide put an end to that notion a long long time ago.
Jim the Realtor wrote:
I don’t know the law in California, but in other states it take up to 10 years before the owner can claim the unsecured home.
Anyone a lawyer?