Mortgage Defaults Plummet, For Now

Submitted by Rich Toscano on October 8, 2008 - 8:11pm

The number of homes entering the foreclosure process declined steeply in September -- but the drop is likely temporary.

The blue line on the accompanying graph represents how many Notices of Default, which are the nastygrams sent to delinquent borrowers, were delivered in September. The orange line tracks Notices of Trustee Sale, which inform said delinquent borrowers that their homes are about to be repossessed.

The graph makes it pretty clear that NODs dropped like a rock last month. We haven't seen a number of default notices this low since February 2007 -- a breezier time, when it would have seemed laughable to suggest that mainstream media outlets would be publishing stock photos of Depression-era breadlines a year and a half down the road.

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Submitted by peterb on October 8, 2008 - 9:34pm.

Mr. Mortgage has a good reason for this head fake.

Submitted by BKlawyer on October 8, 2008 - 9:37pm.

No, NO No! The reason that NODs and NOTS have dropped is b/c THE BANKS HAVE STOPPED FILING THEM! 2 thoughts on this from my RE-connected clients. Both are weak attempts to skew the emotional landscape of the housing crash and burn. 1 is that by not foreclosing they don't have to take the hit on their books as an REO (although it's still a nonperforming asset). The other is the graph Rich is using can be used to push the market.. "See?, everything is fine b/c the numbers have dropped." I have clients who have not paid on their mtg. for over a year and every month they get a letter from Countrywide that says: "apparently you are having difficulties so we will bring you current. Please make this month's payment." It's OK though b/c Encinitas is different from the rest of the Country. . .

Submitted by Arraya on October 9, 2008 - 2:26am.

bklawyer-this is huge. The bankers are picking the peoples pockets on the road financial armageddon. Unbelievable! They only have a few weeks before this thing blows ski high.

Submitted by peterb on October 9, 2008 - 8:04am.

BKlawyer- Encinitas you say? Might there be weakness out there yet unofficially recognized? Different indeed!!

Submitted by SD Realtor on October 9, 2008 - 9:22am.

This is not any surprise at all. A few months back we posted about legislation at both the state and federal level that gave significant extensions to loan servicers for the foreclosure process. So let's see... they want to stall, the government wants them to stall.... the homeowner gets to stay for free....

Why is anyone surprised at this at all.

Can anyone guess what the next logical step is?

Submitted by Rich Toscano on October 9, 2008 - 9:56am.

It seems from some of these comments that people aren't clicking thru to read the rest of the article at the Voice site (which is where I talk about this being a temporary artifact of those laws discussed a couple months back). Is this true? I had flattered myself to assume that people clicked thru to the rest of the Voice articles.

Is there a better way to link to stuff I write for them? Is that link not obvious, or just too much of a hassle? Just want to figure out if there's a better way to do it.

Feel free to email with ideas.


Submitted by peterb on October 9, 2008 - 10:08am.

Rich, good point. I dont always click through, too.
Maybe just put the whole article on the site? But I guess you want the hits on your professional site? If so, I would just make it more obvious..." to read the entire story, click to my page at..."

Incidentally, have you seen Mr. Mortgages latest bank analysis on his blog? Man, that guy should be syndicated, as you should be as well. It's almost criminal how MSM has fleeced the public with their highly inaccurate reporting and forecasting.

Submitted by cr on October 9, 2008 - 10:15am.

Here's the rest of the article.

Rich Toscano wrote:
It's pretty unlikely that the number of folks blowing off their mortgage payments dropped in half (and then some) in a single month. Instead, it appears that the statewide foreclosure legislation I mentioned a couple months ago is making itself known. The law inserts an extra 30 days into the period between an initial missed payment and the eventual NOD. It would explain why NODs fell off a cliff while NOTs remained relatively unchanged.

If the new law is at work, that blue line is likely to start heading up again within a month or two.

We'll see what next month looks like, but don't be surprised if people start calling the bottom. Again.

Submitted by Rich Toscano on October 9, 2008 - 10:18am.

Peter, I should have mentioned this in my original post. The Voice folks like for the stuff I write for them to appear exclusively on their site. So I can't really just reprint them wholesale here.

I thought the best solution was to put a teaser here and link to the article over there. (For the occasional article too short to have a teaser I just reprint it here but that's rare).

I don't care all that much whether people click over but it seems like it might be good practice to do so before commenting, otherwise you might be wasting your time by making a redundant point.

Haven't seen the latest MM yet... I will check it out.


Submitted by SD Realtor on October 9, 2008 - 11:35am.

Hi Rich

I read through the entire article. Again my belief is that we are seeing a battle of two forces, the first being the NOD/NOT rate and the second being the government combatting these rates. What we have seen are a racheting up of measures by both state and federal levels of government to prolong the process (essentially) along with proddings to lending institutions to rework loans. All of this has taken awhile to establish but we should start seeing numbers that bear out the effects. These attempts will NOT be able to effectively stem the tide because of the upcoming second wave AND even moreso because of the walk aways of non distressed homeowners.

However, I believe we are far away from seeing the end of these efforts. I do indeed believe we will see direct intervention in the future. I believe this intervention will take the form of extensive rewriting of loans, principal write downs, fixed rate loans, etc... In exchange the homeowners will give up future appreciation and possibly make promises of occupancy, etc... We will see.

I am not sure how well these measures will go to stem the numbers. I am not positive I agree with your premise that this is merely a pipeline effect. (That is, that the pipeline is simply longer and what we are seeing is the pipeline filling back up such that we will see our previous numbers come back in the future after a few months) In general I agree with your concept as it is logical. Yet, I do think our government officials have 100% abandoned any effective ideas about letting the market operate freely. To me they have adopted a captain will go down with the ship approach. In the end I believe we will inevitably have a nationalized approach to lending insured DIRECTLY with 100% tax dollars.

It will be interesting to see how effectively this stems things. No I do not believe it will reverse the depreciation trend. In fact it will increase corruption and provide ample opportunity for people to take advantage of the system. Yet again, it may simply slow things down so that we just slog along for a few years in a downward/flat market that of course will vary for different strata of homes.

Submitted by DWCAP on October 9, 2008 - 4:25pm.


I think your link is just fine. I get a teaser, and if I have the time and the interest, I go to the Voice page. Come to think of it, I dont know if I have ever not used the link, but that is mostly because I like to read the whole article. Your best points are often at the bottom of the article. The only suggestion would be to have a "(continued)" at the end of the teaser just so we know the link isnt just a reference link.

Submitted by DWCAP on October 9, 2008 - 4:27pm.

Any ideas what this is gonna do to sales? I mean what was it 60-70% of sales had a foreclosure action in the last 12 months? So if the banks stop forcing these things through the pipe, will we see a huge drop in sales too? Banks stop selling, Buyers stop buying, and it all grinds to a hault?

Submitted by jpinpb on October 9, 2008 - 6:26pm.

I posted on another thread that I keep track of NODs in about 10 zip codes since the beginning of the year. For the past 3 days there were NO Notices of Defaults filed in any of the zip codes. NONE. I was a little surprised and taken aback, til SDR directed me here. Thanks, Rich. I read the full story. It all makes sense now.

But DWCAP raises a good question. What does it mean for us waiting? Are they just going to start sending out NODs in 30 days?

Are banks really going to negotiate the loans and there will be less inventory? Less NODs? Less foreclosures?

Submitted by jpinpb on October 9, 2008 - 6:25pm.


Submitted by Fearful on October 11, 2008 - 8:18am.

It seems odd that the 30-day period would make its effects known in September, having become law on July 8. Does this delay make sense?

Are the banks also holding on to the loans in hopes of a homeowner bailout?

Submitted by temeculaguy on October 11, 2008 - 9:32am.

I also like the current teaser article format, don't change a thing. Mr. Mortgage is a little too doomsdayish for me but he writes some good stuff. My zip has also fallen of a cliff as far as not's go, but the nod's still seem on pace. Currently there are six sheriff sales coming up this week, for three months it averaged 45 a week. The nod's never dipped, not last month, the month before or now, so those nots are built up. I also know countrywide clients who have exceeded a year with no payment and who have had their not delayed with no money, only talk of a rework. I think Mr. Mortgage is correct on this point, that the state law caused a hiccup in the pipeline, that will give the stats a month or two of looking positive. I also think that the amount of bank failures and mergers, fdic takeovers and outright government ownership has contributed the interruption of our regularly scheduled program. Add in the "mark to market" suspension forthcoming and the biggest reason, the banks awaiting paulson's "dump your trash" market that is about to open and I think I'd sit a few weeks on the sidelines if I were a bank. I fully anticipate November and December to be slow because of the holidays and elections, then Jan/Feb to explode, just in time for the spring buying season.

Submitted by CA renter on October 12, 2008 - 1:09am.

and the biggest reason, the banks awaiting paulson's "dump your trash" market that is about to open and I think I'd sit a few weeks on the sidelines if I were a bank.

Yes, the banks are holding off in anticipation of a Treasury dump.

For those who are so-inclined, watch this hearing on mortgage foreclosures. Near the end (IIRC), there is a panel of bankers who admit to holding off on foreclosures in anticipation of govt bailouts.

If this link doesn't work, it's on C-SPAN, from September 17, 2008.

House Financial Services Cmte. Hearing on Preventing Mortgage Foreclosures
Rep. Barney Frank (D-MA) chaired a hearing on the compliance of the mortgage industry in response to a request to delay foreclosures until the institution of the Hope for Homeowners Program. Topics included the implementation of the Hope for Homeowners program and foreclosure mitigation efforts by loan servicers.
Wednesday, September 17, 2008 : Washington, DC : 3 hr. 49 min.

Submitted by jyurasek02 on October 14, 2008 - 9:05am.

Is there any way to get the data of NOD's and NOT's for secific zipcodes and/or regions of the greater SD area? I have done some research, but most sites are pay-for and I am hoping to get some good data without payment. Also, once you zero in on an area, can you get the addresses of these homes? Should be public information correct? Please let me know, anyone.

Submitted by jyurasek02 on October 14, 2008 - 9:09am.

Is there any way to get the data of NOD's and NOT's for secific zipcodes and/or regions of the greater SD area? I have done some research, but most sites are pay-for and I am hoping to get some good data without payment. Also, once you zero in on an area, can you get the addresses of these homes? Should be public information correct? I guess the San Diego Journal lists these filings, but you need a subscription to view all of the data. I was hoping that I could get some excel compatible data to sort and analyze. Let me know please.

Submitted by jimklinge on October 19, 2008 - 8:11am.

There are notices of trustee sales and REOs here:

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