by Jim the Realtor | Jul 18, 2012 | Principal Reductions, Shadow Inventory, Short Sales |
From MND:
A Georgetown law professor is proposing that a Resolution Trust Corporation (RTC) like entity might be the key to getting the housing market back on track.
In Clearing the Mortgage Market through Principal Reduction: A Bad Bank for Housing (RTC 2.0) Adam J. Levitin considers ways in which negative equity problems might be addressed and assesses the feasibility of using a “bad bank” entity for pooling and standardized restructuring and resecuritization of underwater mortgages. This is the first of two MND articles summarizing the paper which Levitin wrote for The Big Picture, a Wall Street oriented blog.
Levitin says that the housing market is not clearing and has not since at least 2008 and possibly 2006. He defines “clearing” as a climate in which willing buyers and willing sellers are able to meet on a price. One reason for this failure is negative equity which currently affects 27.1 percent of all residential mortgages. The average negative equity is $65,000, considerably greater than the average household disposable income of $49,777.
“The depth of negative equity,” Levitin says, “is likely to increase as housing prices drop” due to foreclosures and lack of upkeep on properties where homeowners see no upside to further spending. Negative equity impedes clearing because even where buyer and seller are able to meet on a price they often cannot close the deal because the seller cannot pay the additional $65,000.
At the heart of the problem then is that mortgages, unlike houses, are not marked to market but are carried at book value. If they were marked to market they would track home values but a change in accounting is unlikely and ill-advised so we must look to other ways of clearing the market.
To date there has been only one – foreclosure, a method that is slow, inefficient and rife with negative externalities on neighbors, communities, and local governments. Foreclosures can also result in over-clearing. For various reasons the market for distressed properties is thin, bids are heavily discounted, and market prices are driven even lower.
(more…)
by Jim the Realtor | Jul 13, 2012 | Shadow Inventory |
From sddt.com:
In San Diego-Carlsbad-San Marcos, 28.2 percent, or 165,582 properties, of all residential properties with a mortgage were in negative equity for first quarter of 2012, according to CoreLogic.
This is down slightly from the fourth quarter of 2011 when 29.8 percent, or 175,746 properties, with a mortgage were in negative equity. An additional 4.9 percent, or 28,889 residential properties, were in near negative equity for first quarter of 2012 compared to 4.8 percent, or 28,520, in fourth quarter of 2011. From CoreLogic:
by Jim the Realtor | Jul 9, 2012 | Foreclosure Count, Foreclosures/REOs, Shadow Inventory
From sddt.com:
Trustee deeds in San Diego County are down almost 60 percent from June 2011, and one local expert said that’s “really pretty amazing.”
Trustee deeds — the final step in the foreclosure process, transferring ownership from the delinquent borrower back to the lender or to a third party — were filed on 527 properties in June, 3.3 percent less than in May and 59 percent less than June 2011, according to the San Diego County Assessor’s Office.
Notices of default (NOD) — which initiate the foreclosure process by registering that a borrower is in arrears of payment — rose 3.2 percent from May to June, and 2.9 percent from June 2011 to June 2012.
Alan Nevin, principal at The London Group, said the county is headed toward normalcy in the foreclosure numbers, with one footnote: short sales are taking their spot.
“The foreclosure rate is really pretty amazing,” Nevin said. “If you go back to normal times, there were about 200 to 250 foreclosures. We are almost back to normalcy. There’s one footnote – the lenders are pressing the route of short sales instead of foreclosures because they lose less money.”
The county will wait a couple years to reach normal numbers again, Nevin said.
“We’re not out of the woods yet,” he said, because about 35 percent of sale closings are distressed properties. The number of short sales is going down, Nevin said, and will continue to as the underwater borrowers from 2005 to 2007 work through the system.
Nevin said he doesn’t follow notices of default because they “rarely” make it through the whole process to foreclosure.
The flow of transactions can be managed by the lenders and there’s still a “fair amount” of bank-owned properties, but the number can be manipulated, said Norm Miller, a professor at the Burnham-Moores Center for Real Estate at the University of San Diego.
“I think what’s going on is that the banks and lending institutions have become more proficient over the last year. They are able to go ahead and foreclose on properties and write off their losses,” Miller said. “The rate of foreclosures is going down – that’s not new, it has been going on for a while. There are [fewer] defaults and [fewer] foreclosures out there and that’s good.”
Miller said it wouldn’t surprise him if NODs stayed in the 1,200 to 1,600 range for the next several months and the county may reach “long-term equilibrium normal” in one-and-a-half to two years.
San Diego is better positioned than other parts of the country because the county did not over-build, said Nevin, and ran out of product in 2006.
“We’re not seeing any new production so the market will heal itself much faster than other places,” Nevin said. “The only thing stopping a massive surge in home buying in the county of re-sales is a lack of confidence in the economy.”
If the national economy saw job growth of a quarter million jobs three months in a row, Nevin said that could bring up the confidence level.
“Eighty thousand to 90,000 jobs every month doesn’t get anybody excited,” he said.
He expects the foreclosure numbers to stay down and “hover” around the area where they are now “and that’s fine,” he said.
CR had a similar post today about the Phoenix market:
http://www.calculatedriskblog.com/2012/07/phoenix-housing-sharp-decline-in.html
by Jim the Realtor | May 24, 2012 | Mortgage News, Shadow Inventory, Walkaways |
From HW:
The negative equity problem for U.S. homeowners might be worse than previously thought, at least according to a new measure from Zillow.
The online real estate data provider, in its first negative equity report, said 15.7 million, or 31.4% of homeowners were underwater on their mortgages in the first quarter. That’s up from 31.1% three months earlier but down from 32.4% in the first quarter 2011.
Homeowners owed $1.2 trillion more than the value of their homes in the first quarter, according to Zillow.
With roughly 10% of homeowners 90-days-plus delinquent on payments, negative equity “remains only a paper loss” for most, said Zillow Chief Economist Stan Humphries.
“As home values slowly increase and these homeowners continue to pay down their principal, they will surface again,” Humphries said in a news release.
(more…)
by Jim the Realtor | May 7, 2012 | Shadow Inventory |
From the nytimes.com:
VALLEJO, Calif. — On a suburban block with six family homes, palm trees and views of the surrounding green hills, nothing at 110 Windsor Court stood out. Its occupants, who had moved into the foreclosed house a few years earlier, were quiet types.
Until the noise from falling roof tiles alerted neighbors to a fire there one recent morning, and Stephen Snowden, who lived nearby, banged on the front door. Nobody was inside, but firefighters discovered that the house had been converted into a type of illegal business found increasingly in suburbia: a marijuana grow house.
The entire second floor of the five-bedroom, 2,251-square-foot home, as well as parts of the first floor, was used to cultivate marijuana plants.
“They just blended right in,” Mr. Snowden said of the residents. “They left early for work and came back late in the afternoon. They mowed their lawn, took out their trash and got groceries. There was never any extra foot traffic.”
(more…)
by Jim the Realtor | Apr 6, 2012 | Shadow Inventory, Strategic Defaults, Walkaways |
From dsnews.com:
An alarming number of homeowners see strategic default as a viable option should their home continue to depreciate. Almost half of the homeowners participating in an online poll from Housing Predictor say they will walk away from their mortgage obligation if falling home values persist.
Five years into the housing downturn, and Housing Predictor found that 47 percent of those surveyed would intentionally stop making their mortgage payments even if they could afford to in order to get out from under the sinking investment of home-sweet-home.
The number of mortgage borrowers open to strategic default has risen sharply since Housing Predictor last surveyed public opinion on the issue roughly a year-and-a-half ago. In October 2010, 36 percent of homeowners participating in the poll said they would throw in the towel should housing prices continue to drop.
Housing Predictor says the foreclosure crisis, falling home prices, and lingering doubts that the value of homes will increase over most homeowners’ lifetimes are contributing to the increase in mortgage holders who say they will walk away.
FICO estimates strategic defaults to be more than a $20 billion problem annually.
by Jim the Realtor | Mar 28, 2012 | Bailout, Shadow Inventory, Short Sales |
Hat tip to Kingside for sending this in – he noted, “It will be interesting to see if these go anywhere”:
The exemption of debt-relief taxation is due to expire this year.
Bills have been introduced to extend the deadline to January 1, 2015.
The House version, sponsorsed by Rangel & Co.
http://www.gpo.gov/fdsys/pkg/BILLS-112hr4202ih/pdf/BILLS-112hr4202ih.pdf
The Senate’s bill here.
by Jim the Realtor | Feb 15, 2012 | Foreclosures, Market Conditions, Shadow Inventory, Short Sales |
From CoreLogic:
Completed foreclosures for all of 2011 totaled 830,000 compared with 1.1 million in 2010. In December 2011 there was a month-over-month decrease in completed foreclosures to 55,000 from 57,000 in November 2011. The December 2011 completed foreclosures figure was also down from one year ago when it stood at 67,000. From the start of the financial crisis in September 2008, there have been approximately 3.2 million completed foreclosures.
Highlights as of December 2011
-
The percent of homeowners nationally who were more than 90 days late on their mortgage payment, including homes in foreclosure and REO, was 7.3 percent for December 2011 compared to 7.8 percent for December 2010, and 7.2 percent in November 2011.
-
The five states with the highest foreclosure inventory were: Florida (11.9 percent), New Jersey (6.4 percent), Illinois (5.4 percent), Nevada (5.3 percent) and New York (4.6 percent).
-
The five states with the lowest foreclosure inventory were: Wyoming (0.7 percent), Alaska (0.8 percent), North Dakota (0.8 percent), Nebraska (1.0 percent) and Washington (1.3 percent).
-
Of the top 100 markets, measured by Core Based Statistical Areas (CBSAs) population, 34 are showing an increase in the foreclosure inventory in December 2011 compared to a year ago, an improvement from November 2011 when 46* of the top CBSAs were showing an increase in the foreclosure inventory compared to a year ago.
“The inventory of foreclosed properties has begun to shrink, and the pace at which properties are entering foreclosure is slowing. While foreclosure filings are being curtailed by a variety of judicial and regulatory constraints, mortgage servicers are completing REO sales faster than they are completing foreclosures,” said Mark Fleming, chief economist with CoreLogic. “This is the first time in a year that REO sales have outpaced completed foreclosures, and part of the reason for the decrease in the foreclosure inventory.”
NSDCC detached REO sales: 2010 = 199 @ $316/sf, and in 2011 = 190 @ $293/sf
NSDCC detached Short sales: 2010 = 216 @ $318/sf, and in 2011 = 278 @ $292/sf
NSDCC detached Regular sales: 2010 = 2,045 @ $393/sf, and in 2011 = 2,094 @ $393/sf
by Jim the Realtor | Jan 17, 2012 | Market Conditions, North County Coastal, Shadow Inventory, Short Sales, Thinking of Buying?, Thinking of Selling? |
How are short sales affecting the market?
This chart divides Actives by Pendings (A/P, our gauge of the relative ‘health’ of each market). We’ve seen in the past that a 2.00 reading seemed healthy, and 3.00 was tolerable. I included contingents in the Pending counts because now they are much more likely to stick, and if a buyer does cancel, it’ll be because they found a better one and replaced it.
The two columns on the right side of the chart show the number of short sales in each Pending count, and the total number of short sales closed last year in each town:
| Town |
Actives |
Pendings |
A/P |
# of short sales in P |
# of short sales closed in 2011 |
| Oceanside |
339 |
324 |
1.05 |
186 |
280 |
| Vista |
203 |
193 |
1.05 |
98 |
163 |
| SSM92078 |
107 |
95 |
1.13 |
50 |
108 |
| WRB92127 |
150 |
99 |
1.52 |
46 |
82 |
| Carlsbad |
317 |
169 |
1.88 |
68 |
132 |
| Encinitas |
138 |
60 |
2.30 |
19 |
43 |
| Carmel Vly |
125 |
51 |
2.45 |
12 |
45 |
| DM/SB |
131 |
39 |
3.36 |
6 |
14 |
| La Jolla |
176 |
52 |
3.38 |
18 |
14 |
| RSF |
204 |
36 |
5.67 |
16 |
19 |
Oceanside and Vista are smoking red hot with 1.05 reading – they literally have almost as many pendings as actives. Why? Because sellers AND buyers AND agents have embraced short sales. Comparing the pending short-sale counts of current vs. last year, it looks like Oceanside and Vista will probably set new records this year – and received a lot of experience in 2011.
But in NSDCC (the last six categories), it appears that short sales are a relatively new concept – but coming on strong. The difference is capitulation – Oceanside and Vista sellers have conceded on price, and buyers are responding. As a result, the market is working.
We need some old fashioned market clearing in NSDCC, where it is stale and stagnant.
In the last six towns on the list, there are 1,086 detached homes for sale. Even with the dozens of “refreshed” re-lists in the new year, the average market time is 121 days – with 21% of them having been on the market for more than six months!
How many sellers are in the ‘pre-distressed’ stage, and are just testing the market today at higher pricing to see if they can get out with at least enough for a steak dinner?
There must be quite a few – what will be the effect when they finally cave?
Specifically, would it hurt the market if they lowered their price and entered short-sale status?
Based on areas that have already seen capitulation, it doesn’t look like it (capitulation = lenders and listing agents getting sellers off the fence, price-wise).
Oh but wait JtR, Oceanside and Vista is a whole different socioeconomic class; there aren’t that many rich people. OK, we’ll see, but when there are 18 offers submitted on a funky older house on a busy street in La Jolla, I’ll stick to my guns that there are plenty of buyers….waiting.
Short sales are the device being used to ensure a softer landing, and the lenders/servicers will control the pace as needed. But they would be smart to recognize that market clearing is working great where implemented!
by Jim the Realtor | Dec 28, 2011 | Bailout, Fraud, Loan Mods, Protest, Scams, Shadow Inventory, Walkaways |
From cnnmoney.com (seen at CR):
NEW YORK (CNNMoney) — Delinquent borrowers facing foreclosure are learning that they can stay in their homes for years, as long as they’re willing to put up a fight.
Among the tactics: Challenging the bank’s actions, waiting to file paperwork right up until the deadline, requesting the lender dig up original paperwork or, in some extreme cases, declaring bankruptcy.
Nationwide, the average time it takes to process a foreclosure — from the first missed payment to the final foreclosure auction — has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics.
It takes much longer than that in Florida, where the process averages 1,027 days, nearly 3 years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.
Because California is a trustee-sale state, the delays are shorter – only 11 months on average:
And while some borrowers are looking for ways to make good with lenders and get their homes back, many aren’t paying a dime. Nearly 40% of homeowners in default have not made a payment in at least two years, according to LPS.
Many of these homeowners are staying in their homes based on a technicality. There is rarely any dispute over whether or not they have stopped paying their mortgage, said David Dunn, a partner at law firm Hogan Lovells in New York, who represents banks and other financial institutions in foreclosure cases.
“In my experience, they never say, ‘I’m not delinquent’ or ‘I want to pay my bill but I’m confused over who to send it to,’ or ‘Oh my God, you mean I didn’t pay my mortgage?’ They’re not in technical default. They’re in default because they’re not paying,” he said.
(more…)
