More Moratoria

Submitted by Rich Toscano on June 18, 2009 - 3:15pm

Yes, it's a word. I think.

Another California anti-foreclosure measure went into effect this week. It's called the "California Foreclosure Prevention Act," and it puts a 90-day moratorium on certain qualifying foreclosures. The name "California 90-Day Procrastination on a Subset of Foreclosures Act" was apparently deemed too unwieldy.

continue reading at voiceofsandiego.org

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Submitted by pencilneck on June 19, 2009 - 9:20am.

Related article in today's UT:
Few homeowners expected to benefit from foreclosure law

Snip:

“My view is if we can even help one family avoid foreclosure, it's a win,” said Assemblyman Ted Lieu, D-Torrance, who sponsored the law.

Perhaps the "Saving the California housing market one family at a time act" was also too unwieldy a name? A few million more bills like this and we might get some sort of recovery in place.

Submitted by urbanrealtor on June 21, 2009 - 1:08pm.

The concept of kicking the can down the road does not, IMO, explain the increasing disparity between NOD's and REO's.

Generally NOD's are filed after 3 months of missed or partial payments. However, this can be done after only one missed payment. Some banks wait 5-8 months.
The point is that this public metric does not have a very clean correspondence to fulfillment (or failure) on a private contract.

That's the problem with NOD's.

The other problem, which addresses the disparity more directly, is that most banks seem unwilling to do short sales, loan mods, or work-outs until a borrower is at default status (so usually more than 3-4 months late). Once you get past this threshold, the bank devotes an increasing amount of resources to you, the more behind you are. Essentially, the later you are as a borrower, the more the bank tries hard to not foreclose. I lost a listing a couple of months ago because my borrower-seller was contacted by a Wells manager to accept a payment that was 60% of his previous payment. He was 14 months behind. Good for him. Not good for my wallet but still I am happy for him.

I suspect that just as other companies that deal with large attrition rates (eg: AOL), the banks have "saves" departments to try and work something out when the payments reach a certain level of lateness.

Just my take.

Submitted by moneymaker on June 22, 2009 - 8:20am.

What I'm wondering about is how did he get 14 months behind without getting foreclosed on, and does he have to come up with a huge lump sum to cover those 14 months(even at the new rate). Would you consider this a forestallment or a true workout?
Forestallment(my def=)-Bank getting the last bit of money from mortgagee before giving them the boot.

Submitted by jpinpb on June 22, 2009 - 9:12am.

LOL. I like that. Forestallment.

Submitted by urbanrealtor on June 22, 2009 - 10:38am.

threadkiller wrote:
What I'm wondering about is how did he get 14 months behind without getting foreclosed on, and does he have to come up with a huge lump sum to cover those 14 months(even at the new rate). Would you consider this a forestallment or a true workout?
Forestallment(my def=)-Bank getting the last bit of money from mortgagee before giving them the boot.

It does them little good to give the guy the boot if they can keep him in there and paying (even at a reduced rate). Since he is broke and jobless, I am doubting that they will ask for any additional money. As far as the long time frame, he was just going to let it go to the bank and agreed to sell it only after it became clear that the bank was in no hurry. It really costs them a substantial amount of money to repo and resell a property. This gives them a solution without the expense. He will keep paying and when the value has increased sufficiently, they will then be in a position to get tougher. The value has already increase somewhat (like most of the bottom tier) but not enough for it to make sense yet.

Submitted by rocket science on June 22, 2009 - 12:19pm.

Please excuse me, I must have missed something. But if as you say he is 'broke and jobless' why would the bank extend him a new loan that he likely can't pay. And why would he if he knows now that he can live there quite a while and pay nothing?

Submitted by surfer00 on June 22, 2009 - 3:29pm.

The Calif moratorium doesnt have the teeth of the federal ones we have experienced. Found this somewhere:

Apparently, almost all of the lenders and servicers who were ostensibly not to be allowed to foreclose on homes during the 90-day period made possible by the moratorium on foreclosures passed by the legislature about a week ago, were able to get exemptions to the moratorium and did so BEFORE the foreclosure moratorium bill even passed the legislature! The exempted lenders and servicers don’t have to modify or prove they tried to modify a single mortgage before foreclosing on properties in California. In other words, nothing changed… essentially nothing… nada… not a thing.

Submitted by urbanrealtor on June 27, 2009 - 11:49am.

rocket science wrote:
Please excuse me, I must have missed something. But if as you say he is 'broke and jobless' why would the bank extend him a new loan that he likely can't pay. And why would he if he knows now that he can live there quite a while and pay nothing?

Because you missed something.
Thats why.
My explanation was not as complete as it ought to have been.
After some time on unemployment, he decided to open a business using some savings and while he has yet to actually make much at this, he does have the potential to do so.
THis is why he is still able to afford groceries after being laid off over a year ago.
The bank is betting that he will end up being able to pay the reduce amount and that even if he cant the market value on the unit in question will float (at least by enough to justify the ¨forstallment¨) by the time they would have to do the foreclosure dance again.
I don´t often laud the betting skills or risk management prudence of the banks but both of these bets are fairly conservative and likely to pay off.
His place had a market value of 110k when they made their offer.
It has a market value of about 145k now.
In real dollars, I expect it will be closer to $200k in the next 2years.
That is a reflection on the lowest market segment.
I am not boostering but going based on what I see as a buyer´s agent for this segment.
If they had forclosed when they made the offer their net would have been about 90k.
If they keep waiting, they could double that easily.

As far as the borrower´s motivation, just think about it:
He gets free (if he defaults again) or cheap (if he cooperates) housing.
Either way he pays less than market rent.

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