by Jim the Realtor | May 10, 2011 | Double Dip, Shadow Inventory |
From the FT.com:
Bank of America plans to shrink its $850bn portfolio of troubled home loans by about half over the next three years as it seeks to quicken the pace with which it resolves problems related to the housing crisis and its disastrous purchase of Countrywide Financial.
Terry Laughlin, who is spearheading BofA’s mortgage modification and foreclosure programs, told the Financial Times he had been given leeway to act quickly to tackle the growing number of bad loans that threaten to overwhelm the bank’s overall performance and tarnish the reputation of Brian Moynihan, its chief executive.
This year BofA hived off its problem loans into a “legacy” unit that Mr Laughlin runs, leaving the “good” mortgages in a separate division headed by Barbara Desoer.
A key part of Mr Laughlin’s strategy will be to shrink the portfolio of “bad” loans to about $450bn-$500bn during the next few years, as mortgages that originated with Countrywide and are no longer offered by BofA – including some with adjustable interest rates – are run off, modified or sold at discount prices.
BofA owns about $118bn of the problem loans outright. It services the rest, which means it collects payments from borrowers and initiates foreclosure proceedings.
About 60 per cent of the 4.2m borrowers were up to date with their payments. The rest were at least three months past due, Mr Laughlin said.
To better handle the high number of delinquencies, Mr Laughlin wants to streamline the modification process, under which borrowers are typically offered lower monthly payments for a period.
Mortgage holders will deal with a single bank employee and should receive a decision within 30 days, about one-third of the time it now takes to determine eligibility.
by Jim the Realtor | May 9, 2011 | Double Dip, Foreclosure Count, Market Conditions, REOs Coming to Market, Shadow Inventory, Strategic Defaults, Thinking of Buying? |
It’s all over the news – the housing double dip is here.
They say that the DD is caused by an overload of foreclosures dragging down prices – but they are talking about the overall national market.
Are the recent trustee sales building a backlog of REOs around San Diego?
It looks like more of the same around here – just when the servicers get some momentum, they turn off the spigot. There have only been 14 successful trustee sales in NSDCC over the last two weeks, so we’re back to the 1+ foreclosure per day.
The threat of future foreclosures is always lingering – could the worst be yet to come? With the banks and servicers controlling the flow, there doesn’t seem to be much reason to expect a flood coming anytime soon – or ever.
How many REOs are floating around in the shadows?
Here are the San Diego County properties owned by each lender, the number of SFRs they own in North San Diego County Coastal, and the count of how many of those aren’t listed yet:
| REO Owner |
SD All Prop |
NSDCC SFR |
NSDCC SFR not listed yet |
| Fannie Mae |
1,060 |
4 |
4 |
| Wells Fargo |
377 |
19 |
3 |
| Freddie Mac |
311 |
2 |
0 |
| Bank of NY |
272 |
17 |
5 |
| Bank of America |
235 |
8 |
6 |
| JPMChase |
124 |
12 |
5 |
| Citi |
88 |
5 |
2 |
| Totals |
2,467 |
67 |
25 |
In the depressed areas where REOs are abundant, there’s no surprise to see some can-kicking, but around North County Coastal it’s been quiet. A few of the shadows have just been foreclosed, so you know there is some lag for evictions, repairs, and processing. Others are involved in litigation too, so it doesn’t appear that they are purposely delaying the process much around North SD County Coastal.
The buyers around NSDCC will welcome the 25 well-priced SFR REOs when they hit the open market over the next couple of months – expect bidding wars!
by Jim the Realtor | Apr 7, 2011 | Psycho-babble, Shadow Inventory, Short Sales, Strategic Defaults, Thinking of Buying? |
From Diana Olick at cnbc.com:
Home prices fell 6.7 percent in February year over year, according to a new report from CoreLogic. That numbers includes distressed sales, that is, sales of foreclosed properties or short sales, where the bank agrees to let the homeowner sell for less than the value of the mortgage. If you take those sales out, however, home prices were basically flat.
“When you remove distressed properties from the equation, we’re seeing a significantly reduced pace of depreciation and greater stability in many markets,” notes CoreLogic’s chief economist Mark Flemming. “Price declines are increasingly isolated to the distressed segment of the market, mostly in the form of REO sales, as the stock of foreclosures is slowly cleared.”
Distressed sales, though, still make up more than a third of all home sales, according to the National Association of Realtors, and that number is likely to rise at least in the near future. The banks have slowed the process of foreclosure, and that has reduced the number of bank owned properties hitting the market lately, but it’s a whole different story with short sales.
“Absolutely we can see on the ground, it’s just happening,” says Robert Cruz, a real estate broker just south of San Francisco who deals primarily in short sales. “The banks are asking us to go out and engage the borrower, find the borrowers who have defaulted or re-defaulted and list the properties before they have to foreclose.”
Short sales used to be a long, tedious process with a very low success rate. “Short sales used to be a waste of time,” Cruz remembers. “Now it’s totally changed.”
Much of that is due to banks streamlining the process and a new government incentive program, but much of it is coming from the banks themselves. Cruz says in the first quarter of this year his firm’s short sale closings were up at least 60 percent, thanks to the banks and servicers being far more aggressive in pursuing them; not only are they pursuing them, but they are paying for them.
While the government’s Home Affordable Foreclosure Alternative Program offers borrowers $3000 in “relocation assistance” after successful short sales, Cruz says some of the banks are paying borrowers up to $25,000. He says the banks know the sellers are more savvy today and know they can live rent free for at least a year before a bank takes possession of the home in foreclosure. $3000 isn’t much incentive to move quickly; $25,000 is.
“It’s a sea change,” adds Cruz.
So why am I telling you all this? Because if short sales continue to increase at this rate, even just this year, that’s going to push the home price numbers down even further. Sure, if you take out the short sales, the numbers will look better, but those big headline numbers generally include short sales, and that will further erode confidence. More short sales will also force organic sellers and home builders to try to compete with lower prices. Short sales may be better for the banks and better for borrowers’ credit scores, but they will take their toll on the greater market.
by Jim the Realtor | Feb 17, 2011 | Shadow Inventory, Short Sales |
It happens about once a week that we see an out-of-town realtor input a new listing in their hometown MLS, thinking that it somehow magically transports in our San Diego MLS here. But it is probably due to their assumption that just because the rest of SoCal is on one MLS system, San Diego must be too – but Sandicor is holding out.
As a result, these listings don’t get exposed to SD realtors, but Redfin picks them up because they search by area, not MLS system. We are monitoring Redfin now, but hat tip to Genius, who sent this over. It is a short sale, the seller owes over $1,000,000, according to foreclosureradar:
633 Rushville, La Jolla
3 br/2 ba 1,214sf
4,099sf lot
$659,000
MLS Remarks:
Wow! What an opportunity to live in La Jolla at this price. This lovely traditional craftsman home is only a couple of blocks from the beach. Home is in good condition on the inside. Tax roll says 2 bedroom but actually 3 with over 1200 sqft of living space. Hardwood floors throughout with a fireplace in living room. Great for moving in or an investment property!
by Jim the Realtor | Feb 16, 2011 | Shadow Inventory
From the REChannel:
It didn’t make the headlines when it was first announced in November 2010 and it didn’t make the headlines this week.
But if President Barack Obama’s proposed 2012 Federal budget cuts involving the sale or disposition of 69,000 government-owned buildings located across the U.S. is passed by Congress, it would be the largest real estate deal of its kind in this country’s 236-year-old history, according to several almanacs and real estate industry sources which track such deals.
Instead of an outright sale, some of the properties could possibly be transferred to other agencies in need of space; or donated to colleges, parks and hospitals, according to Obama’s previous memos to federal agencies.
Peter R. Orszag, former director of the Office of Management and Budget, said in a June 2010 blog post the federal government has 14,000 excess buildings and structures and another 55,000 that are under-used or completely unused.
According to the GOP’s Oct. 6, 2010 White Paper, members of the Transportation and Infrastructure Committee claimed the sale of the buildings would save the government $250 billion in maintenance, insurance and other related costs over the next 10 years.
Committee Ranking Minority Member John Mica, R-Fla., noted in October the federal government, as the nation’s largest asset holder, manages 896,000 buildings and structures with a total area of 3.29 billion square feet and more than 41 million acres of land.
The GOP committee’s report was particularly critical of the General Services Administration.
It noted the government’s landlord owns “large numbers of vacant or underutilized federal buildings” and yet “struggles to dispose of its surplus property in a timely fashion and for reasonable rates of return despite its enhanced property disposal authorities.”
The report criticizes GSA’s real property management for its “apparent inability to maximize market opportunities to house federal employees at the lowest long-term cost to taxpayers.”
Beyond GSA, the report cites potential savings by selling off or reconfiguring assets controlled by the Transportation Department, Coast Guard, Federal Emergency Management Agency, Amtrak and the Army Corps of Engineers.
For example:
- The government would save $2 billion by selling 20 percent of “nonperforming” real estate assets.
- It would save $1 billion by “reducing or eliminating spending on unneeded courthouses and excessive courthouse space.”
- It would save up to $180 billion by “encouraging additional investment in infrastructure from the private sector by providing a better definition of public-private partnerships for undertaking highway, transit, port, rail, airport and other infrastructure projects.”
The Obama administration has agreed the federal government has surplus property.
by Jim the Realtor | Feb 12, 2011 | Market Conditions, Shadow Inventory, Walkaways |
From cnbc.com: http://www.cnbc.com/id/39873678/
A new survey by Pew Research says 36 percent of Americans believe walking away from their mortgage is perfectly acceptable. We want to know if you would ever simply leave your mortgage and your home behind.
Tell us what you think. Share your opinion:
Would you ever leave your mortgage and your home behind?
No: 46%
Total Votes: 2267
by Jim the Realtor | Feb 8, 2011 | Market Conditions, Shadow Inventory, Speaker Panel, Strategic Defaults, Thinking of Buying?, Thinking of Selling? |
From Diana at cnbc.com:
(S)everal speakers at the forum said several scary things about housing and foreclosures. Mark Zandi of Moody’s Economy.com is looking for a hybrid version of Fannie and Freddie, or a mortgage market more privatized but with government backing. He said that if the mortgage market were fully privatized, mortgage rates would go up at least one percentage point and home prices would drop ten percent.
Laurie Goodman of Amherst Mortgage Securities put up some truly scary charts about non-performing loans and, with a flurry of numbers I couldn’t follow, said that without government intervention about 11 million more borrowers could lose their homes.
“Equity is the single most important determinant of default, not unemployment,” declared Goodman. This as a new report from CoreLogic this morning showed home prices dipping over 5 percent nationally in December, year-over-year.
“The key thing for investors to look at right now is what’s going to open up for them, what part of the playing field is going to open up where they can actually step in and be part of the mortgage market again,” said Armando Falcon, chairman and CEO of Falcon Capital Advisors, on a bit of a brighter note. “And that’s clearly going to be for the jumbo prime mortgage sector.”
by Jim the Realtor | Jan 31, 2011 | Shadow Inventory |
From HW:
Whether they like it or not, the nation’s banks control most of the country’s shadow inventory, according to a report Friday from Morgan Stanley.
Even more, properties in imminent default are typically cheaper homes with prime mortgages. The analyst adds that their findings buck conventional wisdom that these homes are either concentrated in the slums of Detroit, or prevalent amongst cardboard cutter McMansion neighborhoods.
The shadow inventory, they say, is the biggest problem for average Americans living in the nation’s major cities.
And, what’s more, the homes are more and more being controlled by the banks, as opposed to Fannie Mae, Freddie Mac or private securitization trusts.
“While agencies certainly maintain control over a large portion of the shadow inventory at just over a third, we can see that the majority of the control over delinquencies is in the hands of the banks, and their share has increased over the past year,” reported Oliver Chang, James Egan and Vishwanath Tirupattur (see chart below):
“This may be because borrowers are becoming delinquent at a faster rate for bank-held loans, but checking transition rates for each controlling party, we do not see a significantly larger change in transitions into delinquency for bank-held loans,” they added.
Of the shadow inventory, 75% are valued below $250,000, showing that McMansions have a small share of delinquencies (see below chart):
Further, the shadow inventory is growing across all of the United States. The analyst expect that more than 8 million liquidations are in order over the next five years before housing stabilizes.
“While hard-hit cities represent a more than fair share of shadow inventory, its distribution broadly encompasses all corners of the country,” said the analysts.
The liquidation of subprime early on in the recession is now being replaced by later delinquencies in prime collateral. The shift in collateral is making the supply imbalance worse for the best part of the credit spectrum.
CoreLogic said in September that based on the shear number of prime mortgages in the market, that foreclosure and delinquency rates would steadily tick upward. Compared to the less than 3.5 million subprime, there are about 40 million prime loans in the marketplace, 6.2% of which were 60 days delinquent in June 2010 and 3% of which were 90 days delinquent.
“We do see a slowdown in liquidation rates of bankheld loans, suggesting that the increasing share of shadow inventory is due to banks holding onto their delinquent loans longer than agencies or private securitization trusts,” they said.
by Jim the Realtor | Jan 26, 2011 | Foreclosures/REOs, Shadow Inventory, Short Sales |
From HW:
Notices of default, the first step in the California foreclosure process, dropped 17.5% in the fourth from the year before, but the decline may not have come from borrowers improving their financial situation, real estate data provider DataQuick said.
Lenders recorded 69,799 NODs at California county offices in the fourth quarter, down from more than 84,000 in the fourth quarter of 2009 and the lowest level since the second quarter of 2007.
“We don’t know how much of the decline is due to less household financial distress, and how much is due to shifts in lender and servicer foreclosure policies,” DataQuick President John Walsh said. “The level of default activity would certainly be higher if it weren’t for alternative strategies such as short sales, or even lengthening grace periods.”
More than half of the homes in California that received an NOD in the last 18 months have been foreclosed on or sold through a short sale. The status of the other half isn’t clear, DataQuick said, but they should be in the modification or short sale process.
“The institutions that hold these loans in their portfolios will do whatever it takes to lessen their losses, including waiting,” Walsh said. “An additional factor is all the turbulence when it comes to the formalities of the foreclosure process.”
by Jim the Realtor | Jan 5, 2011 | Loan Mods, Market Conditions, Shadow Inventory, Strategic Defaults |
From Diana Olick at cnbc.com:
I have argued many times that just because a loan is underwater (value of loan is higher than value of home) it doesn’t necessarily mean that the borrower will stop making timely payments.
Yes, the incentive to abandon the home is there, but for most homeowners, their home is their community, their daily life, and not just an investment. Most probably think the value will come back over time, and unless they desperately need to move, they have no reason to stop paying.
Amherst analysts disagree with me. “Borrower equity status is the single most important predictor of success,” they claim. To explain their premise, they use two definitions of performing loans: A “successful” loan is one that is always performing, re-performing or voluntarily prepaid. A “clean success” takes out the re-performing loans. Here’s what they found:
For loans with equity, 88.9% were successful after 2 years, and 84.4% represented a clean success.
For loans with CLTV >120, only 53.6% of loans were successful and only 40.9% represented a clean success.
We talk a lot about the shadow inventory of foreclosed properties overhanging the market and weighing down inventories, but the inventory of potential new defaults is clearly high; that potential, even with steady economic recovery, exists and must be factored into the equation.
The latest home price reports are not good, and even though sales appear to be bottoming in some markets, prices always lag. Also, many of the sales are foreclosures (around 30 percent), so that knocks the price recovery premise on its head as well.
Terry Laughlin, who is spearheading BofA’s mortgage modification and foreclosure programs, told the Financial Times he had been given leeway to act quickly to tackle the growing number of bad loans that threaten to overwhelm the bank’s overall performance and tarnish the reputation of Brian Moynihan, its chief executive.
