Recent Articles
Oct 13, 2009 | No Comments | Sean Mills
New data suggest that foreclosures are rising in more expensive housing markets.
About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home [...]
New data suggest that foreclosures are rising in more expensive housing markets.
About 30% of foreclosures in June involved homes in the top third of local housing values, up from 16% when the foreclosure crisis began three years ago, according to new data from real-estate Web site Zillow.com. The bottom one-third of housing markets, by home value, now account for 35% of foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began to accelerate in the late spring and that more expensive homes have more recently accounted for a growing share of all foreclosures. “The slope of that curve in recent months is much sharper than it was recently,” said Stan Humphries, chief economist for Zillow. Rising foreclosures among more-expensive homes could create added pressure for a housing market that has shown signs of stabilizing in recent months as sales of lower-priced homes pick up.
The Zillow research compared homes against the median values for their local market and broke each market into three tiers by value.
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Oct 9, 2009 | No Comments | Sean Mills
The “me, me, me” mentality is alive and kicking in the good ole US of A. At the IMN Distressed Residential Real Estate Symposium last month one prominent lender stated his business is doing just fine due to short refis where owners are refi-ing the existent debt short or threatening to walk away from their [...]
The “me, me, me” mentality is alive and kicking in the good ole US of A. At the IMN Distressed Residential Real Estate Symposium last month one prominent lender stated his business is doing just fine due to short refis where owners are refi-ing the existent debt short or threatening to walk away from their non-recourse loans. I ask you how is that any different than these debtors?-Sean
A solid two years into the housing bust, the national foreclosure wave doesn’t show the least signs of abating. Banks that had called a foreclosure moratorium are now back to the business of taking back properties, and the foreclosure numbers are again at record highs. As the foreclosures rise, so too does the criticism of “walkaways” who hand the keys to their drastically devalued houses back to the bank.
Last month a study from the credit reporting agency Experian and consulting outfit Oliver Wyman estimated that close to a fifth of troubled mortgages involved borrowers who were “strategically” defaulting—walking away from mortgages they could pay but decided not to because they owed more than their houses were worth. Self-assigned guardians of financial ethics see the willingness of borrowers to abandon their mortgage debts as a sign of the “erosion of social and moral standards.” The aim of these critics is to shame debtors into sticking with their mortgages. That’s something debtors should take with a grain of salt. There are many good reasons to keep paying your mortgage and avoid the black mark of foreclosure, but the immorality of sticking the bank with a loss isn’t one of them.
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Oct 2, 2009 | No Comments | Sean Mills
This article will touch a nerve with a lot of people, not the ones dropping the old house for a newer cheaper one to take advantage of the bail out but the people who are not struggling financially but can’t seem to morally walk away just to take advantage of the “free ride”. I am seeing [...]
This article will touch a nerve with a lot of people, not the ones dropping the old house for a newer cheaper one to take advantage of the bail out but the people who are not struggling financially but can’t seem to morally walk away just to take advantage of the “free ride”. I am seeing this a lot in the areas I visit and research.
The classic definition of a “strategic default” is a borrower who can afford their mortgage, but stops paying it because they owe far more than their home is worth. This measurement from Experian is very different and includes many people who can no longer afford their mortgage. Long ago borrowers paid their mortgages first – to keep their homes – but that was when people actually had money invested in their homes. -Calculated Risk
Morals and ethics people, morals and ethics.-Sean
Oct. 1 (Bloomberg) — Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.
Homeowners like Conroy who can afford their monthly payments are weighing whether to sell and pay the difference, stick it out until housing prices recover, or walk away. In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for New York-based Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent.
So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC, a Dublin-based credit-checking company, and Oliver Wyman, a New York-based consulting firm. Two-thirds of those who walked away defaulted on their primary residences.
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Oct 1, 2009 | No Comments | Sean Mills
Here is some more data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009
Modified Loan Performance … [T]he percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the [...]
Here is some more data from the Office of the Comptroller of the Currency and the Office of Thrift Supervision: OCC and OTS Release Mortgage Metrics Report for Second Quarter 2009
Modified Loan Performance … [T]he percentage of loans that were 60 or more days delinquent or in the process of foreclosure rose steadily in the months subsequent to modification for all vintages for which data were available. Modifications made in third quarter 2008 showed the highest percentage of modifications that were 60 or more days past due following the modification. Modifications made during fourth quarter 2008 and first quarter 2009 performed better in the first three to six months after the modification than those made in the third quarter 2008.
Note: This doesn’t include HAMP yet because all of those modifications are still in the “trial period”. That raises a question: If a borrower re-defaults during the trial, will they still be considered a “re-default”? Something to watch for if the re-default rate drops sharply next quarter – they might be excluding the trial period re-defaulters.
Click on graph for larger image.
This graph shows the cumulative re-default rate by quarter of modifications. About 25% to 30% of modifications fail in the first three months.
For Q1 and Q2 2008, about 55% of borrowers have re-defaulted. Q3 2008 will probably be worse, and Q4 2008 and Q1 2009 about the same.
Over time, I expect a very high re-default rate since many of these modifications are just “extend and pretend” (the missed payments and fees are added to the principal, and the rate is reduced for a few years), although about 10% of borrowers received a principal reduction in Q2 (more than double as in Q1).
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Sep 23, 2009 | No Comments | Sean Mills
Anyone who knows me personally has heard me speak about the shadow inventory of defaulted but NOT foreclosed homes awaiting some type of action from the bank. Just last week I posted numbers for homes going to auction in Orange County which detailed a relatively high number, 91% plus postponed, yet to be absorbed by [...]
Anyone who knows me personally has heard me speak about the shadow inventory of defaulted but NOT foreclosed homes awaiting some type of action from the bank. Just last week I posted numbers for homes going to auction in Orange County which detailed a relatively high number, 91% plus postponed, yet to be absorbed by the market either via purchased at auction or sold as an REO by the bank once foreclosed. I know of a few people who have seen their home go to foreclosure only to sit out in the twilight zone or sold immediately with no rhyme or reason on either to the average Joe. This article does a pretty good job of summarizing my conerns with this inventory. -Sean
Debra and Arthur Scriven were served notice in June 2008 that their mortgage lender, a unit of Citigroup Inc., was preparing to foreclose on their home. Fifteen months later, the Scrivens are still in their home near Columbia, S.C., and battling to stay there, even though a dispute with the lender over how much they owe prompted them to stop making regular payments last year.
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Sep 17, 2009 | No Comments | Sean Mills
Can the market function without $8,000 credit for first-time home buyers?
DALLAS – When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it.
As many as 40 percent of [...]
Can the market function without $8,000 credit for first-time home buyers?
DALLAS – When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it.
As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February.
In the view of the real estate industry and some economists, all that money is well spent. They contend the credit is doing what it was meant to do, encouraging a recovery in the housing market that is gathering steam. Analysts say the credit is directly responsible for several hundred thousand home sales.
Skeptics argue that most of the money is going to people who would have bought a home anyway. And they contend that unless it is allowed to expire on schedule in late November, the tax credit is likely to become one more expensive government program that refuses to die.
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Sep 16, 2009 | No Comments | Sean Mills
As the chart illustrates there is more pain to come on the horizon in relation to resetting buying drugs online without prescription loans but this time in the upper end of the spectrum. The average loan at this level is four times the value of the sub-prime loans that were made. -Sean
As the chart illustrates there is more pain to come on the horizon in relation to resetting buying drugs online without prescription loans but this time in the upper end of the spectrum. The average loan at this level is four times the value of the sub-prime loans that were made. -Sean
Sep 16, 2009 | No Comments | Sean Mills
Ballooning Payments Put Mortgages at Risk, Posing New Setback to Market
The housing market faces the prospect of a new round of foreclosures as hundreds of thousands of risky home loans known as option adjustable-rate mortgages reset to significantly higher payments that could force borrowers to fall behind, according to a report released Tuesday by Fitch [...]
Ballooning Payments Put Mortgages at Risk, Posing New Setback to Market
The housing market faces the prospect of a new round of foreclosures as hundreds of thousands of risky home loans known as option adjustable-rate mortgages reset to significantly higher payments that could force borrowers to fall behind, according to a report released Tuesday by Fitch Ratings.
About 70 percent of the $189 billion in outstanding option ARMs will reset by 2011, the report said, which would be another setback to a teetering housing market still struggling to recover from the mortgage meltdown that precipitated the financial crisis.
Option ARMs make up only 1.3 percent of percent of outstanding mortgages and were used by a far smaller segment of the population than subprime mortgages, according to First American CoreLogic, so the fallout from the resets should not be as devastating. But the unraveling of the option ARMs could be felt for years.
“It does tell you there’s going to be continued front-page news about high levels of foreclosures as these loans continue to struggle,” said Paul Miller, an analyst at FBR Capital Markets.
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Sep 11, 2009 | No Comments | Sean Mills
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said. “I think there is no doubt that home prices will go down [...]
Home prices in the US could fall by another 25 percent because of high unemployment and another leg down will come for stocks, banking analyst Meredith Whitney told CNBC Thursday.
“No bank underwrote a loan with 10 percent unemployment on the horizon,” Whitney said. “I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when.”
Local governments and states are chronically under-funded and “most states are under water,” adding to the problem of low private consumption, she said.
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“If you look at the drivers for unemployment I don’t see that reversing very soon,” Whitney said.
If consumers were to decide to spend, “that would be a game-changer,” but it would be an unnatural thing to do in a recession, she said.
“A lot of themes are constant, which is the US consumer and the small business doesn’t have any credit, credit is still contracting,” Whitney said.
Consumer debt and consumer credit have dropped according to the latest figures which also show that people have been spending more from their debit cards than from their credit cards.
“Obviously that doesn’t bode well for spending,” Whitney said.
She said another leg down was coming for stocks but that Goldman Sachs [GS 176.50 
1.63 (+0.93%) buy prescription drugs without a prescription 
] still has “gas in the tank” and she kept her ‘buy’ on its stock.
“Goldman is taking a lot of the place that Lehman left,” she said.
But banks are not going to see their earnings rise too much from now on, she warned.
“Banks are taking advantage of what the government is doing by artificially inflating asset prices so they can ride a steep yield curve and they’re going to have a third quarter that reflects that,” Whitney said.
Their shares are unlikely to be uplifted by these results as it happened in mid-July, because then they were under-valued, she added.
Sep 10, 2009 | No Comments | Sean Mills
This looks like a better opportunity for the Lenders/lien holders than a straight REO sale. Maybe the buy drugs shadow inventory of REOs and foreclosures which are in limbo due to the moratoriums will finally see the light of day and start to make it into the pipeline of homes for sale.
-Sean
By Diana Golobay [...]
This looks like a better opportunity for the Lenders/lien holders than a straight REO sale. Maybe the buy drugs shadow inventory of REOs and foreclosures which are in limbo due to the moratoriums will finally see the light of day and start to make it into the pipeline of homes for sale.
-Sean
By Diana Golobay at HousingWire
The mortgage servicing industry in coming weeks will see details of an incentive program aimed to prevent foreclosures by encouraging servicers to pursue short sales and deeds-in-lieu of foreclosure.
US Treasury Department sources confirmed to HousingWire the Treasury expects to issue details on the short sale and deed-in-lieu program later this month.
The program is being finalized and will be announced as soon as possible, according to testimony Wednesday by Federal Housing Administration (FHA) commissioner David Stevens.
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