What You Resist, Persists

Hat tip to those who sent in this article from YahooFinance, but scroll down to see local impact:

As the foreclosure backlog continues to build up, delinquent borrowers are spending even more time in their homes without making mortgage payments.

Once borrowers start missing payments, they spend an average of a year and nine months, or 611 days, in foreclosure before banks repossess their homes, according to LPS Mortgage Monitor. That’s more than twice as long as three years ago, when the average was 251 days. Earlier his year, the average was 523 days.

“The number of defaults in the pipeline has been huge and we had more problem loans than ever before,” said Herb Belcher, who supervises analytics for Lender Processing Services (LPS), which provides mortgage industry information and analytics to big banks.

With so many bad loans, servicers have had to prioritize which ones they can deal with and which ones to push aside.  “It’s like your boat has all these holes in it and is taking in water. You have to plug up the worst holes first,” said Belcher.

The bottlenecks are particularly severe in judicial states where the foreclosures are processed through the courts, he said. In non-judicial states, where trustees handle the cases, the average foreclosure is six months shorter.

Fannie Mae and Freddie Mac, which account for the majority of all mortgage lending these days, have been actively lobbying their industry partners — the servicers and attorneys who handle the foreclosure process — to either quickly get paperwork filed and push defaults through the system or put borrowers into a foreclosure prevention program, said Belcher.

The industry has gotten better at dealing with the deluge; it has hired staff and refined procedures to improve efficiency. But a return to more normal processing times will take time given the enormous backlog.

There were more than 4 million homes either in foreclosure or 90 days or more late with payments in August. Many of the new delinquencies are actually repeats: About 75% of the borrowers who fell a month behind in payments in August had missed payments before and then caught up — only to fall behind again.

On the plus side, the percentage of new seriously delinquent loans (90 days or more behind on payments) whose borrowers were up-to-date on payments just six months earlier has dropped to 1.4% from a peak of 2.9% in early 2009.

Many of those borrowers suffered through severe financial reversals, such as a job loss. Foreclosure and unemployment rates generally move in lockstep with each other.



On August 3, 2010, we ran this post which counted the bank-owned properties in SD County.

Here are the counts of SFRs and condos in SD County, owned by Fannie and Freddie:

It looks pretty orderly to me, for a county with over 3 million people. 

The media insists on including the most dramatic quotes they can find, scaring people into making crazy decisions – like renting REOs, instead of selling them.

The banks, servicers, NAR, etc. keep standing by hoping somebody else comes up with a solution, other than doing what it right – which is to ramp up the foreclosures, and resolve this mess!

San Diego County Average Free Rent, days (in green)

Here is the same chart with percentage change over the last year:

San Diego County Average Free Rent, days (in green)

Timmy Says Refi/Rent

We have heard that Fannie Mae is cutting back on their REO outsourcers.  From HW:

Treasury Secretary Timothy Geithner said the Obama administration is working on a plan to make it easier for Americans to refinance underwater mortgages and to turn REOs into rentals. The secretary said it’s likely the administration will move on this plan within the next few weeks.

Geithner made that assertion when quizzed by members of the House Financial Services Committee Thursday.

“We expect to move forward in the next couple of weeks with the Federal Housing Finance Agency to make it easier for Americans to refinance even if they are somewhat underwater,” Geithner told lawmakers. Geithner was short on details, but said some type of large plan to turn REOs into rentals is also on the table.

“We are trying to get this huge amount of vacant property on the market, and in the hands of people who can rent,” the Treasury secretary said.

The House Financial Committee’s Q&A with Geithner focused on housing at several key points.

One lawmaker pushed Geithner on why the white paper released by the Treasury on GSE reform in February had yet to make it into some type of final proposal.

Geithner assured lawmakers those discussions are ongoing and that the European debt crisis and other immediate fiscal concerns delayed the rollout of a final GSE reform plan, but assured the committee the Treasury continues to work on those proposals.

Geithner took heat from Democratic Congressman Luis Gutierrez (D-Ill.) who said he voted for the Home Affordable Modification Program, or HAMP, to help more homeowners stay in their properties, but ended up disappointed when only a slice of the $50 billion allocated for HAMP was spent to save distressed homeowners.

Geithner said the administration was prevented  from reaching a large segment of distressed borrowers because a large number  of  underwater mortgages are ineligible for HAMP due to excessive debt levels or the fact they are classified as jumbos or loans on second homes.

“We are still looking for ways to expand the reach of these programs,” Geithner said. He told lawmakers the administration wants to propose a plan where Congress would allocate more funds to the Department of Housing and Urban Development to send resources to communities weighed down by foreclosures.

BofA’s NOD Increase in August

The mainstream media and blogs were buzzing this week about the big increase in BofA’s NOD filings last month.

Let’s examine the local NOD and NOTS counts to see if the foreclosure waters are rising. These are the monthly totals of notices/sales for all property types in SD County filed by all lenders, with BofA’s total right below (and NSDCC counts for SFRs only):

REO Owner Aug. 2010 Oct. 2011
NOD Filings May June July Aug Sept
SD County-All
SD County-BofA
NOTS Filings May June July Aug Sept
SD County-All
SD County-BofA
Trustee Sales May June July Aug Sept
SD County-All
SD County-BofA

Looking at September’s month-to-date totals, the new-notice issuance is cooling off already. It doesn’t really matter how many notices they file, unless they actually start forclosing on people. We’ll keep an eye on them.

Delinquencies and Defaults

Whatever happened to investigative reporting? 

Today’s story on cnbc.com about rising delinquencies includes the same lightweight quotes from another ivory-tower guy, and if you just read the headline it sounds like the sky is falling again. In the text it says that the second-quarter delinquency rate increased 0.12% from the previous quarter, but is still down 1.41% from the same period a year ago. 0.12% – that’s it?

They never bother with two important points:

1.  The servicers tell you that you need to go delinquent if you want to loan-mod or short-sell.

2.  The servicers may be carefully regulating the flow of who gets reported as delinquent.

If the policy is to keep kicking the can down the road, it doesn’t matter why or how many people go delinquent, because the servicers can just drip them out as needed.  But it would be nice if the MSM can look into it a little further than just including this opinion (not fact) from the article:

The data suggest that persistently high U.S. unemployment rate is making it harder for people to keep up on their mortgage payments, and offer a grim outlook for a housing sector.

“Mortgage loans that are one payment, or 30 days, past due are very much driven by changes in the labor market, and the increase in these delinquencies clearly reflects the deterioration we saw in the labor market during the second quarter,” Brinkmann said.

We need that guy from Yahoo Sports to cover housing!



Are delinquencies turning into SFR defaults around North San Diego County’s Coastal region?  On a quarterly basis, it looks like more of the same – they are foreclosing on roughly one SFR per day between Carlsbad and La Jolla:

Quarter NODs Trustee Sales
2Q10 269
3Q10 245
4Q10 238
1Q11 225
2Q11 202

Here’s how it looks on a monthly graph:

We got excited in 1Q11 thinking that the servicers were increasing the foreclosure rate, only to be disappointed in 2Q11. It looks too uniform and regulated to me.

NSDCC Distressed-Market Share

We tend to spend a lot of time on short sales and foreclosures, what percentage of the market are distressed sales in the North San Diego County Coastal region (La Jolla to Carlsbad)?

The REO and short-sale MLS detached listings that have closed escrow equal 19% of the overall market, year-to-date.

The 2011 year-to-date breakdown of closed sales, and avg. cost-per-sf:

2011 REOs Shorts Others
Jan 17/$270 18/$311 114/$389
Feb 19/$285 23/$307 124/$403
Mar 20/$293 29/$307 189/$389
Apr 16/$284 19/$277 199/$389
May 26/$292 17/$269 200/$404
Jun 15/$343 16/$304 218/$382
Jul 16/$272 26/$310 171/$392
Totals 129/$291 148/$299 1,215/$392

Four out of five this year have been regular sales.

The cost-per-sf is also influenced by location – 64% of the SS/REO closings were in Carlsbad/Encinitas.

I think we’ll see an increase of short sales over the next 24 months, unless lenders dig in over SB 458 and reject more of them.  If they decide on a case-by-case basis, they’ll probably be inclined to deny those with bigger loan amounts, and take their chances that a collection agency will be able get more after the foreclosure than the a couple of thousand dollars they’d get out of a short-sale.

Bankers Contolling Pace

ocerenter noted two posts ago – could the foreclosure crisis be turning a corner?

I join in his skepticism, due to the numerous ways the data can be manipulated – primarily, we’ll never know how many defaulters are not being foreclosed.  The bankers can just let people live for free if they want, and the public won’t know.

In San Diego County, there are more REOs and short-sale closings, than properties being foreclosed (based on MLS vs foreclosureradar stats):

Time Period REO + SS = REO & SS Totals Trustee sales Diff
2010 7,372 6,332
1H11 3,844 3,250
2Q11 1,999 1,710
June 672 570

If anything, the liquidation flow indicates that the bankers have become better at managing the pipeline – as long as they keep it around 1,000 properties per month. At least they are providing some inventory!

But what about the shadow inventory? Will the underwater folks provide an unmanageable event for servicers in the future? Not as long as selling about 1,000 properties per month is acceptable to the bankers and investors. Defaulters will just have to wait in line!

Federal Share of REOs is Rising

In trying to keep my promise to post only NSDCC-related data, here’s a national article from G-S, with NSDCC relevance at the bottom. Hat tip to Aztec for sending this along:

As of 1Q, the number of seriously delinquent federally backed loans surpassed the number held by banks and private label securitizations and now accounts for the majority of seriously delinquent mortgages (seriously delinquent mortgages comprise loans in the foreclosure process as well as loans that are 90-plus days delinquent but not yet in foreclosure).

This shift is due to the persistently elevated level of seriously delinquent loans among Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA), in contrast with private-label and bank-held loans, where serious delinquencies peaked in 2009 and have declined significantly since.

The chart below shows the number of seriously delinquent mortgages backed by federal entities and the total mortgage market; the right axis shows seriously delinquent loans as a share of the total.

The federal share of REO property is also rising.


SD Foreclosure Counts

The foreclosure numbers aren’t growing yet – we’re all convinced that they’ll be dripped out for years to come, right?  The push towards loan mods and short sales enables all participants to drag out the inevitable, and it’s probably not going to change.

In San Diego County, there has been an average of 1,053 properties per month get foreclosed over the last 13 months – with an average of 764 per month going back-to-bene, and an average of 289 per month being bought by third parties:

San Diego County Trustee-Sale Results, Monthly

Over the same 13 months, there has been an average of 2,716 properties per month sell on the MLS, so there has been an appetite for more than just the bank-owneds.


In North SD County Coastal, the recent detached pendings are starting to wane slightly, though the battles for the high-quality buys continue – there were six written offers on the Glaucus listing in Leucadia over the weekend, with many more interested.  Here are the recent weekly new pendings from La Jolla to Carlsbad:

Week New Pendings LP Avg $/sf # Already Closed SP Avg $/sf
Feb 7-13
Feb 14-20
Feb 21-27
Feb 28-6
Mar 7-13

While there isn’t obvious evidence that prices are on the rise, it looks like last year’s $380/sf average for detached homes sold in North SD County Coastal is holding up for now.

There have been 69 detached closings in NSDCC since February 1st; their average LP-per-sf was $417/sf, and the sold average was $391/sf.

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