Hopefully this is a sign that a bank is going to take the lead and test my theory that more foreclosures will stimulate the market – thanks to Gordon for sending this along from www.cnbc.com:
Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months, well over 200 percent more month-to-month.
Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity, and his research points to Bank of America as the primary driver. I contacted a Bank of America spokesman, who responded:
“It appears the numbers you noted to me this afternoon generally track with our own numbers for key categories. It should be noted it’s driven more in key states like California and Nevada than overall, and certainly the progress we’re seeing is limited to non-judicial states. Judicial states continue to move very slowly, with key states like New Jersey only beginning to start processing foreclosures again this month.”
The foreclosure numbers are down very slightly year-over-year, but only because August 2010 was one of the highest foreclosure months on record, and of course was just before the “robo-signing” scandal was uncovered. Delays in processing have artificially lowered the foreclosure numbers over the past year, so this new surge is likely addressing loans that have been long delinquent, but unaddressed.
In other words, the foreclosure pipeline is filling again.
RealtyTrac, a widely followed foreclosure sale and data site, is also confirming a surge in overall notices of default in its August numbers, to be released later this week. They do not cite Bank of America specifically, which bought Countrywide Financial, taking on millions of troubled loans.
“We’ve been seeing REO [bank-owned property] sales, and processing of loans through foreclosure. This increase may simply be the lenders and servicers starting the next cycle. August traditionally is a high month for foreclosure actions, so part of the increase might be seasonal,” says RealtyTrac’s Rick Sharga. “Could be any number of reasons – but with 3.5 million delinquent loans, this had to happen sooner or later.”
The question of course is, is this a one month catch-up purge or will it continue at high levels for a while? And if the latter, will other banks follow suit quickly? Because if other banks see Bank of America pushing more loans to foreclosure, which will inevitably means more properties heading out for sale, they may want to get in before that glut of properties pushes prices down even further.
“This proves once again that “credit” as measured by legal defaults and foreclosures is not necessarily about borrowers missing payments, rather about what the servicers chose to do about it,” notes Hanson.
NOD counts for BofA’s ReconTrust:
| Month | SD County All Prop | NSDCC SFRs |
| Jun 2011 | ||
| Jul 2011 | ||
| Aug 2011 |
Holy cow – here we go!?!
From foreclosureradar.com:
Foreclosure filings and sales increase throughout most of our coverage are in August. Foreclosure starts jumped significantly, reversing what had been a declining trend over the past several months. Investors bought more properties on the courthouse steps in August than in July everywhere except in Washington. The number of properties Sold Back to Bank jumped significantly in Oregon, and also rose in California and Nevada.
Foreclosure starts (the first notice filed, either a Notice of Default or Notice of Trustee Sale depending on the state) rose in every state. This appears to have been primarily driven by Bank of America and related entities, where we saw an overall 116 percent increase from July to August. Wells Fargo and US Bank also saw an increases in foreclosure start filings, while filings by JP Morgan Chase and Citibank were essentially flat.
“Bank of America appears to be primarily responsible for the surge in foreclosure starts this month,” says Sean O’Toole, Founder and CEO of ForeclosureRadar.com. “Since their average time to foreclose has recently increased to more than a year, it is unclear that these foreclosure starts will lead to an increase in foreclosure sales anytime soon.”
California
Notice of Default filings increased 69.5 percent to the highest level in a year. Notice of Trustee Sale filings were up more moderately, rising 6.0 percent month-over-month, but down 23.6 percent year-over-year. Cancellations were nearly flat, up just 1.9 percent from July. Activity on the courthouse steps increased in August. Properties Sold Back to Bank (REO) increased 12.3 percent from the prior month. Properties Sold to 3rd Parties rose 9.9 percent month-over-month, and 10.8 percent year-over-year. Time to Foreclose increased to 333 days in August, which is 49 days longer than a year ago.
Are they trying to get everything lined up for the 2012 spring/summer buying season?
I almost made a post about this over the weekend. It doesn’t matter which administration comes in 2012 (obama II or anyone else) but there is going to be complete liquidation of this “problem”.
People in power (both public and pivate) are done with dealing with this. They can point to “programs” they initiated when confronted later on when challenged on the issues. This is how all problems are solved politically. A big fuss, then a quiet fizzle.
Thanks for all the info, Jim. It was eventual that they’d get around to doing something w/all the delinquencies. I’m just surprised it took this long.
There’s been reports that BofA needs capital, somewhere around 30 billion. They just took 5 billion from Buffett on terms that were very favorable to Buffett. Maybe capital constraints are forcing them into this action. It has been a bearish theory that the banks would postpone as long as they could and not make a move until they were forced too. Maybe that forced too time is now, at least for BofA. If it is that might mean the other banks follow, as the first one out of the gate is going to get the best liquidation prices.
Agreed that this will be interesting. Things are about to get even more difficult for organic sellers.
I saw this on CR. Nice to see confirmation here….
So, how does this affect the prediction of the bottom in December 2012 😉
I said December 2011 – puts me right on track if they are getting ready for the 2012 selling season, which it appears they are!
But like Rob Dawg said on that CR post (that beat me by 3 hours!), it may not show up in the Case-Shiller Index.
It’ll depend on who gets foreclosed – are they going to concentrate on the lowest-losers, to minimize losses? if so, they’ll be foreclosing on the long-time owners who refinanced, not the peak-buyers who are really buried. If they don’t care and throw everything in the mix, the Case-Shiller could show more declines, and perhaps steeper declines, while the actual market is improving.
Great… Right after I buy.
lol Shadash … at least you didn’t buy 2 years ago.
Great for me because I haven’t bought yet and the spring of 2012 is my projected time frame.
Hang in there shadash, here’s my theory:
They have to start filing NODs just to get those denied out of loan-mod purgatory.
Once borrowers have missed several payments and then get denied, they are supposed to go to the next step – short sale. But it is voluntary, and outside the control of the lender. I bet plenty of those denied, who are now ticked off after several appeals, just never get around to short-selling.
The bank is forced to file the NOD just to get them to budge. But it’s only going to get them to the next level – short-selling.
Next year will be the year of the short-sale, for real this time.
But let’s say the senior staffers at Bofa have heard of this blogger guy down San Diego way who keeps saying foreclosures would be good for the market – and they explore it further. What would they find?
Currently they would find that the cupboards are bare. There is no inventory of decent homes at reasonable prices. Everything for sale is either not decent, or OPT.
It is a perfect marketplace, virtually free of any barriers, with plenty of mortgage money at the lowest rates ever. As a result, those homes not selling have to be over-priced, but the sellers must be elective enough (not motivated) that they won’t lower their price.
A perfect climate to upload as many properties as they can, as fast as they can, at retail or slightly under – and see how fast the market scoops them up.
@shadash
Not to sound trite but a good deal is a state of mind. You can always second guess any decision you have made. However, a HOME is a lifestyle choice first and – with a little time and good fortune – an investment second.
@9 I know what you mean.
it’ll be great if a glut of properties hits the market, but with the banks running the show (and unfortunately the govt might get involved again when free renters start screaming about losing their homes), i’ll believe it when i see it
More foreclosures would increase sales? Prices go up? JtR, are you kidding – everyone knows foreclosures tank home values.
Hang with me.
Let’s say they are serious, and it ends up being a race to the exits between several banks. They start denying short sales, and go straight to foreclosure, which only takes 111 days, start-to-finish.
If they time it right, they’ll have a virtually-dry market the day after the Super Bowl, February 6th – and begin the flood of REO listings. But a “flood” would only need to be an initial 100 or so for the whole county, and then 50-100 per week after that for 3-4 months, to get the buzz going.
For a county that closed 2,929 detached and attached sales in March, 2011, an influx of 400-500 reasonably-priced REO listings in February wouldn’t tip over the boat – instead it would get everyone attention.
1. The mooches with big egos would be grabbing everything in sight, just so they can tell their friends and family that they got their piece of the All-American Foreclosure Bust of All-Time.
2. The first-timers, previously trounced in bidding wars over the last couple of years, would be plunking down their 3.5% and FHA-financing whatever was leftover.
3. Those who have waited patiently due to the persistent government gimmickry, can finally breathe a sigh of relief knowing their path was prudent. Those who are older, knowing the clock/calendar was ticking, would give themselves permission to proceed.
Because the initial “flood” of REOs was priced slightly under retail, and were vacant and ready to close, they would be well-received. In the beginning, the banks would be afraid of pushing too many out, but would find that the more they release, the more they get gobbled up – because the frenzy would be on to get a bank deal at all-time low rates. The stock market would be a mess due to Europe imploding, and political campaigning would be in full swing – promising the moon. This frenzy would break out under the radar.
I’ll give you two historical moments to use as comparisons.
1. In April 2008 when I first became an REO listing agent for BofA, they were dumping the subprime-loan properties at full speed in Oceanside. As fast as we could list them, they were flying off the shelf in frenzied bidding wars like I never saw in 2003-2004. Sure they were cheap, but they were ugly – but they all sold for retail-plus. Think if they did that in higher-quality neighborhoods where more owner-occupants would join in?
2. In 2003 we saw how this county can get whipped up in a frenzy. Nobody cared about price, the only thing that mattered was buying something, anything. If a frenzy broke out to half of what it was then, it would still be powerful, and take on a life of its own.
This county is crazy about real estate, and with prices at 30% off and all-time low rates, the pent-up demand would finally appear.
I know the first dig will be about jobs, jobs, jobs. But the segment of the population that would be buying is less than 5% of the total. There are plenty of buyers left.
You heard it here first.
Agree. 4% mortgages and houses priced cheaper than you can build ’em. Gonna be a frenzy.
Too bad they will all be in places other than here.
At least we would clear out all the negative people though.
Check out the listing price drops in Solana. Plenty of stuff under $800k in the northeast tract, and some nice stuff under a million west of I-5.
Just to be clear. Even now that I’ve bought a house I still think banks should drop the deadbeats and foreclose on everything in site.
I’d much rather live by hard working families than deadbeats. “Homeowners” who know they’re never going to be able to pay the mortgage don’t put the money in to maintain their properties. This as much as lower comps brings down the value of properties.
Yawn.
Having watched BoA/Countrywide and JPMChase/Wamu crank up the NOD machines before over the past 2.5 years, I can say that NODs are irrelevant. The eventual NTS and what happens on auction day is all that matters, and if past behavior is any guide, most of these NODs will not become NTS, and even if they do, the NTS will be continually postponed and eventually cancelled for 98% of these NODs. And lets not forget that even if they’ve changed their approach on how to handle the garbage in the pipeline, the borrowers can still file BK and delay any sale for 6-12 months minimum.
So wake me when the daily or monthly number of auctions quadruples. Until then, it’s just BS.
I’m with you – here’s the first half of the theory from yesterday:
They have to start filing NODs just to get those denied out of loan-mod purgatory.
Once borrowers have missed several payments and then get denied, they are supposed to go to the next step – short sale. But it is voluntary, and outside the control of the lender. I bet plenty of those denied, who are now ticked off after several appeals, just never get around to short-selling.
The bank is forced to file the NOD just to get them to budge. But it’s only going to get them to the next level – short-selling.
Next year will be the year of the short-sale, for real this time.
But let’s say the senior staffers at Bofa have heard of this blogger guy down San Diego way who keeps saying foreclosures would be good for the market – and they explore it further. What would they find?
Currently they would find that the cupboards are bare. There is no inventory of decent homes at reasonable prices. Everything for sale is either not decent, or OPT.
It is a perfect marketplace, virtually free of any barriers, with plenty of mortgage money at the lowest rates ever. As a result, those homes not selling have to be over-priced, but the sellers must be elective enough (not motivated) that they won’t lower their price.
A perfect climate to upload as many properties as they can, as fast as they can, at retail or slightly under – and see how fast the market scoops them up.
I saw your note about Gordon and asked Dad if that was him. yeppers. Glad to see you appreciate him too. He’s a brilliant guy that should start his own blog. Wish he would.