Thursday, October 15, 2009

'Worst three months of all time'

Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

That deluge contributed significantly to the quarter's record 237,052 repossessions, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes.

"REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan-modification efforts and high volumes of distressed properties," James Saccacio, RealtyTrac's CEO, said in a statement.

Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. Not only has the Obama administration's Making Home Affordable foreclosure prevention program taken a bite out of REOs but lenders themselves have scaled back repossessions over the past few months to give the program time to work.

And in some low-price markets, lenders simply aren't following through on foreclosures, according to Jim Rokakis, treasurer for Cuyahoga County, Ohio, which includes Cleveland.

"They'll even set the date for the sheriff's sale, but they don't file the final papers," he said. "They hold it in abeyance and let the residents stay in the house."

In ever more frequent cases, delinquent borrowers want out of the mortgage worse than the lenders. There are no firm statistics for it, but many industry watchers claim the percentage of REOs caused by borrowers voluntarily walking away from their homes is skyrocketing.

A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.
No end in sight

The foreclosure crisis may not diminish anytime soon. "The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers," Sharga said. "It's going to be a lingering problem."

Plus, the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies. That means the crisis may not end quickly.

And because there are so many delinquent borrowers, Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market.

"It's hard to envision [the banks] putting millions on properties up for sale and cratering prices," he said. "Recovery will be slow and gradual. I don't see home prices getting much better until 2013."


VectorzSigma said...

I'll let you finish but let me stop you right there. The great depression had ... WAIIT... nevermind.

VectorzSigma said...

You guys are going to love this one:

Sara said...

Even cheerleaders for the industry are saying this is not over. And you have flippers these days literally covering up major issues in houses they buy and asking for 25% above what they were selling few months ago. Then you have idiots who pay way above asking for pigs in lipstick, thinking they're getting great deals. What a joke! Check out the new listings in the Mira Loma part of Eastvale--all above 400,000. For What? No major university or hospital. It's not even incorporated. There's what? One bank? a Starbuck? that's if they stay in business.
The yahoos are back to the bubble mentality--buying the FAKE sense of urgency that's being promoted before our eyes: "More buyers than houses;" "Hurry up the tax credit is expiring." So ok they pay 70 to 80k above value so that they can get 8k. IDIOTS.

Tyrone said...

I'm shocked and surprised by this news!


golfer_X said...

I just saw the Sept preliminary unemployment numbers from the EDD. Riverside County is now at 14.7%!

VectorzSigma said...

Yet ANOTHER possibility why foreclosures haven't hit the market. Sleezy judges and lawyers trying to socialize deadbeat home debtor's losses.

boston herald

BrianH said...

Sara can you back up your claim about sleezy flippers please?

Sure, like every profession, there are complete hacks trying to rehab and sell a home. However, reading your post one would think they are all that way.

Have any specific address of flippers covering up "MAJOR" problems?

Sara said...
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Sigma said...

Oh boy. Here we go again.

How is that possible? I thought FHA was pretty strict about checking these things.

The monthly payments on her debt amount to $1328. Her income is $2470, leaving her with just $285 a week to live on. She's paying 54% of her income to make the mortgage payments. She earns that income by holding down one full time and two part time jobs.

Sigma said...

Oh simple explanation. She was just hiding her income. According to Myspace, she makes "$100k-$150k".

Typical full-of-sh1t $30k millionaire. Spin Spin!

golfer_X said...

I saw that story too. Problem with news reports these days is that the reporters do ZERO fact checking. I could go to a reporter and tell them some sob story about my house, my bank and my dog leaving me for another owner and they would print it if it fit into some other story they were writing.

I really find it hard to believe that this girl got a loan for a bag of grapes much less a house. She probably has a parent co-signor or something. Even so, the fact that she thinks she can afford it just shows how out of touch with personal finance many people are.

BrianH said...

Ok so Sara you have provided one example out of 3500 closed sales a month in Riverside for darn near the entire year. If you told me what you do for a living I could easily google up one example of your profession being rotten.

The point I'm trying to make is you have now made to very broad statements about investors that are very inaccurate. Again, I'm not saying in some cases you are correct however you are being far to general about the profession.

There are many of us who do a very fine job of fixing up and selling homes. Many of us have been doing this long before the REO craze and will be doing it long after this current REO batch is gone. The folks doing half assed rehabs will screw themselves out of the business and those of us doing honest work will be here for the long haul. I've never understood why certain civilians have an immediate disdain for this profession.

As for your example specifically on Mississippi. A cracked fiberglass tub/shower is very easily repaired to as new condition without having to replace it. Anything short of a large hole is fixable to as new. Broken wall/floor tile is also very easily fixable. I'm sure the house from a construction stand point was in far better condition then what you thought you saw. Understandable as most people without experience think things are much worse then they actually are. Additionally, this person owned Mississippi for 20 days prior to putting it on the MLS for sale. 20 days is 4 work weeks. You would crap your self at what a professional rehab crew can get down in 4 work weeks.

Sara said...

Regarding that house, you asked for any address and I provided you with one & a description. I don't have the time nor the energy to list and describe every suspicious house that was and is listed. I've seen many and I provided an example. Again that house did not simply have cracked anything. It had big holes everywhere: bathtubs, walls with cut wires as if someone went around with a hammer destroying everything. This was not your average fixer.
I'm done arguing this, so this is my last post here. I just want to say that I agree with Martin Burtin who said...
"I don't hate R/E investors, you people are trying to earn a profit and a living and have chosen a field of work that is not illegal. Great, and the better among you could even tout that you improve neighborhoods by renovating the properties before selling them for what the market will bear; so it is a good and fair deal because nobody will buy unless they willingly accept the price.
Understand also that you compete with many regular buyers who would enjoy getting a deal and fixing up their own home as funds and time are available. That used to be an American tradition. When investors fix and flip properties it makes far fewer homes available to the weekend handyman to choose from, and it pushes the prices of the average home upwards. Professional R/E investors trample on the dreams of these people, making it very difficult/unlikely that they can get their own home cheap enough to do a remodel that makes $ sense. You trample a dream, you earn some neg-karma, kapish?"

BrianH said...

Thank you for making my point Sara. I know you will read this even if you don't respond.

You also demonstrate the victim mentality perfectly as well as a true understanding of the real world we operate in. FYI this is verifiable on the respective websites. Fannie, Freddie, FHA and VA all give the first shot to owner/user buyers when disposing of REO's. Investors are second rung buyers of these inventories and are routinely shut out of opportunities to purchase these foreclosures. Also, Fannie, Freddie and FHA all offer financing to owner/users which finances the purchase plus repairs, a luxury not afforded to investors

Best of luck to you.


A dream trampling, bad karma wielding, capitalistic, short cut taking, cheap material using rehabber.

golfer_X said...

Settle down you too.

There's nothing wrong with investors generally speaking, unless they are offered an unfair advantage in buying distressed properties. Having all cash to buy with is an advantage but not an unfair one. Good investors turn homes around quickly fixing them properly. This helps the neighborhood and offers people that don't want a fixer an opportunity to buy a move in ready home. There are scumbag flippers out there that will patch a cracked foundation with spackle and tile over it. But there are home owners that will do the same.

Flippers did not cause the bubble. The bubble caused an increase in flippers though. Banks, unscrupulous agents, appraisers, brokers, buyers and sellers all played their parts. It didn't matter if they were flippers or not.

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Sara said...
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