Hat tip to HW for publishing this story, but I’m not sure that they or Barclays grasp the full meaning – that banks are deliberately letting defaulters live for free…..for years.
Loans serviced by Bank of America tend to remain in the 90-plus-delinquency state for significantly longer than loans serviced by other big banks, analysts at Barclays Capital find. The length of time that a loan is in the 90-plus delinquency bucket, they say, is driven by the credit quality of the borrower, its geographic location, and especially, by the servicer processing the loan.
A disproportionate share of BofA mortgages in the 90+ days delinquent bucket — 62% — are there for more than three years. That’s biggest among Too Big to Fails.
“We believe that this is partly driven by the more intense media scrutiny and government pressure being applied to BofA with respect to its foreclosure practices, given its history of servicing lapses,” Barclays says.
Over the past few years, BofA has likely exhausted all other avenues of resolution (loan modifications, short sales, deeds-in-lieu of foreclosure, etc.) before proceeding with moving a borrower into foreclosure. The bank implemented a temporary foreclosure moratorium across the country in late 2010.
Or is it more likely that BoA is still dealing with the long, radioactive half-life of their Countrywide portfolio?
In an environment where Fannie, Freddie, FHA, and every major lender says that they can respond to a short-sale request within 30 days, them letting the free rent run for 3+ years sounds like a deliberate strategy.
I think it has more to do with mark-to market accounting and solvency.
Seems like some pressure from shareholders should come into play at some point, eh ?
No shareholders don’t want to recognize those losses, mark to mark eliminated having to do so. Zombie bank if they had to mark those properties where they really are valued.
Just think of all the Boomers that are living for free and all the young people that can’t buy a house.
“Architects of grandeur are often the master builders of disillusionment.”
Bryant McGill
it’s partly as long as the loan requires special servicing, the bank can just extract fees from the pool and partly the banks seek to avoid recognizing losses on the rest of the portfolio
Well, in my neighborhood in TO, I know at least two properties where the owners vacated the house but 6 months later they are still not foreclosed. They are still in NOD and the auction date keeps getting pushed back by a month. The bank goes and inspects the property every month (there is a sheet on the front door that displays the date the bank went through the monthly inspection).
There was actually an article in VC Star, about banks are now purposely delaying foreclosures hoping the house prices will start increasing. I also heard the same from an uncle who works for the banks.