May Foreclosures

Submitted by Rich Toscano on June 7, 2008 - 11:59am

The 1,762 NOTs delivered in San Diego last month was a new record. NODs were down 5% from April, but May was nonetheless the second-highest month on record.

NODs were up 114% percent and NOTs were up 187% from last May.

The long-term chart shows that foreclosure activity is now running nearly 3 times as fast as the pace that typically prevailed in the 1990s bust. This is absolutely uncharted territory.

(category: )

Submitted by SD Realtor on June 8, 2008 - 12:32am.

I did see that there were over 1700 trustee deeds! That is indeed a record in San Diego if I am not mistaken.

SD Realtor

Submitted by ocrenter on June 8, 2008 - 7:28am.

ARM reset chart

correct me if I'm wrong, but it does appear that the record breaking REOs we are experiencing should be from early-mid last year. more record breaking should be in the forecast this year.

Submitted by Eugene on June 8, 2008 - 10:24am.

"correct me if I'm wrong, but it does appear that the record breaking REOs we are experiencing should be from early-mid last year."

http://www.bubbleinfo.com/san-diego-coun...

Most recent REO listings have NOD dates from late December / early January (first missed payment in October)

Resets were never that big of a deal, and they will become a non-issue in the coming months. Remember that post-reset rates are tied to one of the benchmark rates like LIBOR of 1-year treasury and those went down sharply since September.

Submitted by LA_Renter on June 8, 2008 - 10:48am.

Concerning Arm resets Calculated Risk had a post on that this morning based on an article from Newsweek

http://calculatedrisk.blogspot.com/2008/...

It looks to me that we are coming out of the eye of a hurricane. The most powerful portion of a hurricane is usually the back wall, that has most devastating winds and highest storm surge. That analogy seems appropriate here. Quote from the Newsweek article

According to Credit Suisse, monthly option recasts are expected to accelerate starting in April, 2009, from $5 billion to a peak of about $10 billion in January, 2010.
...
The loans automatically recast after five years, but many will recast sooner as loan balances hit specific principal caps—typically between 110% and 125% of the initial loan amount.

Submitted by FormerSanDiegan on June 8, 2008 - 4:00pm.

(bold off please)

The option ARMs may be in trouble regardless, because they allow principal growth (especially bad when property values decline), BUT all the other loans may actually reset at or below their initial rate.

It is important to note what interest rate the loans reset to when they do.

Considering that your typical alt-A or prime ARM was typically tied to the 1-year LIBOR with a margin of 2.25%. At today's LIBOR (about 3.1%) these would reset to about 5.35%.
That means that a 5/1 JUMBO ARMs originated in 2004 with a fixed initial rate of aroun d 5.25-5.75% would reset to about the same rate.

The amount of damage caused by resets going depends on short-term interest rates.

Submitted by AN on June 8, 2008 - 6:55pm.

Wow, this bold is stubborn. Probably need Rich to go into the code and turn it off.

Submitted by Eugene on June 8, 2008 - 7:10pm.

test
test
test

Submitted by Rich Toscano on June 8, 2008 - 7:28pm.

Done. LAR used "strong," not "b." (FSD had the right idea but only closed out one of the strong tags -- In 99% of these cases, the problem is forgetting the slash on the closing tag, resulting in two opening tags).

rich

PS - To give credit where it's due, AN had THAT right idea and closed out about 1000 B tags but no strong tags. :-)

Submitted by SD Realtor on June 8, 2008 - 9:51pm.

Lets not forget though that even though a loan may recast at the same rate the new payment is now the amortized payment rather then an interest only payment. Thus even at the same rate, the payment may indeed be considerably higher even if there was not alot of depreciation. The lag time brought up from NOD to REO is a significant concern.

SD Realtor

Submitted by LA_Renter on June 9, 2008 - 7:56am.

Bold no more. That was actually the first time I used one of those things. Sorry for the trauma :)

Submitted by DWCAP on June 9, 2008 - 9:37am.

I am sure this has been discussed before, but it hit me, and I didnt have an answer, so I am gonna ask it again. Why are the NOT's tracking the NOD's so well? It isnt a mirror image, but it is amazingly similar. I would have guessed that the charts would be 4-6 months off of each other.

Submitted by Eugene on June 9, 2008 - 11:20am.

I am sure this has been discussed before, but it hit me, and I didnt have an answer, so I am gonna ask it again. Why are the NOT's tracking the NOD's so well? It isnt a mirror image, but it is amazingly similar. I would have guessed that the charts would be 4-6 months off of each other.

Some similarity goes away if you adjust for the number of business days in each month. For example, you see a 'dip' in September '07, followed by a 'spike' in October, because September only had 19 business days, but October had 23 business days. Maybe, at the time, banks were overloaded with defaults and NOD/NOT numbers were affected by their processing rates.

In November '07 they were probably delaying NOD's and NOT's because they were expecting a bailout. (Bailout arrived in early December and it was not what they expected, so they resumed processing) You can see a corresponding dip in NOT's 4 months out, in March '08.

Submitted by SD Realtor on June 11, 2008 - 10:18pm.

The more short sales I get involved with the more hopeless it becomes to try to assume a consistent tracking between NODs NOTs and REOs. Some lenders, not all but some are very diligent about processing short sales. Countrywide, at least in my experience is so friggen hopeless that it is ridiculous. My point is that there is such a huge lag time for distressed sales because of lender processing times that inevitable delays and stays of execution for trustee sales are becoming the norm now. I guess you can lump the numbers into a swag of say 6-9 months instead of the normal 4 months from NOD to trustee sale but even that will not be to accurate.

I am tempted to simply look at trustee sales and on thier own rather then try to predict what the trustee sale volume will look like in 6 months based on the NOD rate... tempted but will not resort to it just yet. I think the numbers are so overwhelmingly out of any realm we have seen that things do not matter to much at this point.

Let's just say we have a long ways to go.

SD Realtor

Submitted by dsmith39 on June 23, 2008 - 2:27pm.

Looks like one of Al Gore's charts to illustrate how the world's going to end. Actually I think it's the exact same chart. Only thing worse then global warming is global warming without a roof over your head (at least a roof you can say is your own). If you would like to see a list of all these properties for foreclosure sale click me (oh that doesn't work so go to http://governmentauctionsitereviews.com

Submitted by gosox on July 20, 2008 - 6:29pm.

Do you think that plotting NOD & NOT vs sales offset by 3,5,7 years holds any value. NOD & NOT vs current sales shows how the market is responding to current forclosers. It does not show how many more are to come and for how long.

What would be even more interesting is number of variable rate + interest only loans offset by the term date when the rate changes and principle is due. Starting back to 2001 and showing the term date on the same plot as the NOD & NOT.

Thanks.

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