Saturday, July 4, 2009

More foreclosure fodder....

From the LA times comes another article about the coming foreclosure wave. I sure as hell hope it hurries up.

Mortgage defaults have surged to record levels amid rising unemployment and falling home prices. Lenders are expected to move quickly to clear up backlogs as moratoriums on foreclosures expire.

Reporting from Washington -- Just as the nation's housing market has begun showing signs of stabilizing, another wave of foreclosures is poised to strike, possibly as early as this summer, inflicting new punishment on families, communities and the still-troubled national economy.

Amid rising unemployment and falling home prices, mortgage defaults have surged to record levels this year. Until recently, many banks have put off launching foreclosure action on the troubled properties, in part because they had signed up for the Obama administration's home-stability plan, which required them to consider the alternative of modifying loans to make it easier for borrowers to make payments.

Just how big the foreclosure wave will be is unclear. But loan defaults are up sharply. And with many government and banks' self-imposed foreclosure moratoriums expiring, the biggest lenders indicate that they are likely to move more aggressively to clear up a backlog of troubled mortgages.

But rising foreclosures will depress home values, pushing more homeowners underwater. Mark Zandi of Moody's estimates that 15.4 million homeowners -- or about 1 in 5 of those with first mortgages -- owe more on their homes than they are worth.

The rapid pace of layoffs is of particular concern. Employers shed nearly a half-million jobs in June. Homeowners who are out of work have little chance of having their mortgages modified. That puts many homeowners on a collision course with banks that are preparing to take a more aggressive stance.

"Absolutely," Chase Bank spokesman Tom Kelly said when asked about an impending surge in foreclosures. Since April 6, Chase has approved modifying 138,000 loans under Obama's program. But an undisclosed number of other Chase borrowers didn't meet modification eligibility, and many of those homeowners face possible foreclosure.

Bank of America, the nation's largest servicer of home mortgages, also did not release the volume of likely foreclosures. The bank said it had extended offers to modify loans to more than 45,000 borrowers under the Obama plan. Bank of America spokesman Dan Frahm said the company was projecting a "slow increase" in the number of monthly foreclosures, potentially reaching 30% above previous normal levels.

Much will depend on how quickly lenders can push the process along. It generally takes three months to a year from the time a borrower receives a notice of default to a foreclosure sale, in which case the lender usually takes title to the property.

Government and company reports show that the number of completed foreclosures nationwide slowed sharply late last year and into early this year, largely because of various moratoriums in effect during much of the first quarter.

But anecdotal reports indicate that foreclosure sales have started to climb again in the second quarter. And the pipeline is clearly getting fuller.

California accounts for an outsized share of mortgage loan defaults. A stunning 135,431 homeowners in the state were hit with notices of default in the first quarter, an increase of 11% from the earlier peak in the second quarter of 2008, according to real estate information service MDA DataQuick. Foreclosure sales in the state have been moderating after averaging a high of 26,500 a month last summer.

But just recently, said the 37-year real estate veteran, there's been a surge of requests for so-called broker price opinions, or appraisals that lenders often ask brokers to provide just before they put a foreclosed property on the market.

"I think it's going to be a very big wave," he said. "Just like what we saw through 2008."


Jesse said...

I don't know X, I see a government conspiracy/plan to boost prices and change people's outlook on housing market just the way they fooled the investors in the stock market by changing accounting guidelines! Its not going to work and they are setting up another batch of borrowers up as the next victims of the foreclosure wave. I don't see another reason for the phantom inventory or delaying the foreclosure process. People are tryin so hard to get a piece if these "distressed sales" amid high unemployment and uncharted economic territory. We are setting ourselves for a lost decade or two! We are gonna end up worse than japan!

golfer_X said...


Todd said...

This appears to me to be the brilliant minds in government trying to keep people in their homes no matter what the cost is to everyone combined with banks sitting on inventory in the hopes that the government comes to their rescue with some sort of bailout. Do these people really not understand that this would all be over much more quickly if they'd just stop interfering and let the process happen? This is all very much like removing a Band-Aid, you can peel it slowly so that it kind of hurts for a longer period of time or you can rip that sucker off and it hurts like hell but it's all over with much more quickly.

Rt.66 said...

Agreed on the Japan path. Its funny, people started to talk about the US going the way of Japan last year and people pooh-poohed the idea as absurd.

Yet we continue to take step after step, exactly as Japan did. I say that the Japanese model is considered the succesful model for dealing with a economic and financial meltdown, by our Gov.

The lemmings who bid up housing and created this mess are now scurrying around trying to scoop up the few REOs the banks let on the market.

ButterMonkey said...

Oh give me a break! This house was just sold as an REO last month for $392k and the buyers just put it back on the market for $449k. I hope they lose $20k in holding costs for pulling this stunt. Idiots.

golfer_X said...

I saw two new listings in the woods today and both look like flip attempts. Did they fix em up. One of the two looked very nice (the one on Elsinore)

ButterMonkey said...

X, I don't know if the Dorchester house had any renovations done on it, but #1 how much can you do in 2 weeks and #2 that house didn't need much done to it. It needed new floors, a little bit of wallpaper removal, and some paint. The kitchen was new and high end.

On the Elsinore house. They paid $400k for it and did a lot of work. Now it's on the market after 2-3 months of holding costs plus real estate fees. I'm wondering how much they'll make on that.

ButterMonkey said...

Oh, and I just had to add this. What the heck is up with the sale of the house on Stratford? No chance in hell that that place sold for $640,000. $340,000 maybe, but definitely not $640,000

Todd said...

I'm seeinng signs of flippers in Rancho Cucamonga as well. This house sold for $325k this past March and then was listed For $469k a few weeks ago. It appears to have new paint inside and out, new flooring inside, and new landscaping front and rear but I doubt it was $144k worth.

golfer_X said...

I don't know how these guys will do. I do have one friend that's done a couple of flips recently and done OK. But it's a risky game in a declining market. After all you are setting your own comp when you buy the place. And with the new appraisal rules it's got to be hard to justify a higher price to a lender. The house on Elsinore sure is nice looking inside though. I can't believe he will make any money it though.

RealLawforRealPeople said...

I hope this market does change it going to be on the risk the banks are willing to take.