The Foreclosure Onslaught Continues

Submitted by Rich Toscano on April 14, 2009 - 5:01pm

(Note: The KPBS These Days appearance is archived here for anyone interested).

The number of San Diego properties entering foreclosure hit an all-time high last month, as illustrated by the blue line in the following graph:

In the month of March, 4,260 homes received default notices, which are nastygrams informing delinquent borrowers that they are in foreclosure.

continue reading at voiceofsandiego.org

(category: )

Submitted by SD Realtor on April 14, 2009 - 5:32pm.

I think this is going to be a pretty important event. We really REALLY need to get some inventory in this market otherwise I do envision upward price movement.

Rich your thoughts about a 90 day lag on more trustee sales would match up with my thoughts that perhaps this craziness will let up come mid to late summer.

Let's cross our fingers and see because this is ridiculous. These properties have to go somewhere.

Submitted by baruza on April 14, 2009 - 5:51pm.

Do you have any information about how the types of loans going into default might have changed? Mr. Mortgage had a post about jumbos making up 31% of CA loan defaults in March, which is way up from before, and I'd be curious how this played out in SD county specifically if you knew.

Submitted by peterb on April 14, 2009 - 8:20pm.

Mr Mortgage analysis looks fairly serious.
http://www.fieldcheckgroup.com/2009/04/1...

"Last month the Notice-of-Trustee Sale (NTS) counts surged. From the time an NTS is filed, the property is taken to foreclosure within 21-45 days. This will result in an increase in foreclosures by 100-200% in April when reported in the first part of May."

Submitted by jpinpb on April 14, 2009 - 8:47pm.

I just want to bring this to the attention of the Piggs. I check NODs in about 10 ZIP codes for a over the past year.

Usually what I've seen is a high percentage of the properties I marked on SDL that had NODs were listed for sale, or very shortly thereafter, listed for sale, usually short sale. I didn't record data, but I would be comfortable saying 9 out of 10 of the places w/NODs were listed, attempting to sell either before the NOD or very soon thereafter.

The very few that were not listed, it appeared the NOD was sent to a different property than the subject one in default, i.e., investor, out of city or state. Those usually ended up for sale fairly quickly (w/in 3 months) by the bank.

In the past month or so, while checking NODs, it's been the opposite. About 9 out of 10 properties were not listed for sale, not attempting a short sale. Nothing. The NODs were sent to the subject property. Only 1 out of the 10 were listed for sale.

I don't know what this means. I don't know if all the NODs are being re-worked or going through loan mods. I just found it very strange. I expected to see them listed for sale, but they're not.

Submitted by urbanrealtor on April 14, 2009 - 11:34pm.

I read the voice article and I don't agree with Rich's assessment that soon NOT's will follow the NOD's.

Not that he is wrong exactly.
Its just that it should not ever be enough of a lagging indicator that anyone ever says "it should start to follow" (or whatever he actually said) .

It strikes me that there is more at work here than meets the eye.

I am unclear if the issue is mods and workouts (ala jpinpb's remarks) or if it is an issue of new laws getting sorted out by lenders or what kind of combination (if any) of those 2.

Alternatively, it really could be just the banks getting less prompt about the process.

I would like to see another month but it sure looks like a noticeable trend.

Rich, can you pipe up here?

Submitted by CAwireman on April 15, 2009 - 5:05am.

JP, what site are you referring to? (SDL?)
Thanks

jpinpb wrote:

Usually what I've seen is a high percentage of the properties I marked on SDL that had NODs were listed for sale, or very shortly thereafter, listed for sale, usually short sale. I didn't record data, but I would be comfortable saying 9 out of 10 of the places w/NODs were listed, attempting to sell either before the NOD or very soon thereafter.

Submitted by jpinpb on April 15, 2009 - 8:23am.

SDLookup. If you go to regions and click on the folder of the city you're interested, there are addresses. The ZIPs I've been following are 92109, 92037, 92110, 92117, 92106, 92107, 92103, 92104, 92116, 92122, 92130.

I do not mark all the properties (ie condos). Mostly SFH. I do mark NODs for all SFH and in some ZIPs even the condos.

As I check daily on listings, I'm still not seeing the places I marked w/NODs in the past few weeks come on for sale. This worries me.

Submitted by crazyob on April 15, 2009 - 11:06am.

In response to jpinpb

I wonder if the banks have stopped selling their homes and even pulling ones from the market that were from sale. This all started two weeks ago when the new "mark to market rules" were approved. Within these new rules a bank can claim their home that was bought in 2006 for 500k is still worth 500k on the books, if they sold it they would need claim the loss of the last couple of years more like $375k.
That being said why would a bank sell a forclosed property? I think in the next couple of months you will see more and more empty unkept forclosed homes, NOT FOR SALE, bringing more blight to neighborhoods, Thanks Banks!

Thanks jpinpb you do great work on sdlookup! Thanks to Rich too!

Submitted by jpinpb on April 15, 2009 - 11:19am.

crazyob - you may be on to something there. Maybe all these NODs on places are either going to be re-worked or sold in bulk, not ever getting listed. M2M.

So the next question would be what the M2M will do, then. Are they going to rent all of them? I mean, rents are already declining and I just don't see it. If banks re-work half (being optimistic) and the M2M rents what they get, renters will be in a great position for bargains.

I'm not understanding the M2M very well. I'm thinking if there's a loss to those who buy bulk from banks, they are also covered by the taxpayers. So, no skin off them. They can just list them, too.

Once again, I think this is going to be a long, drawn out process and the places w/NODs from last month, won't get to market until end of year, and accordingly for every month thereafter.

Submitted by danthedart on April 15, 2009 - 11:27am.

Banks are lifting their internal moratoriums. These are all moratoriums that we haven't heard about previously. There will be a lot of REOs in the next few months.

http://www.calculatedriskblog.com/2009/0...

Submitted by jpinpb on April 15, 2009 - 11:35am.

Thanks for the link, dan. I was trying to get my mind around it.

Submitted by dafox on April 15, 2009 - 12:54pm.

from past data, it looks like NOTs follow NODs by 11 months. My other data chart hacks have shown FC's follow NODs by 12 months - that sounds about right to me: once there's a date in place, it all goes pretty fast.

http://img522.imageshack.us/img522/8459/...
I shifted that to see when things hit, and how closely they track - seems pretty consistent.

Submitted by Rich Toscano on April 15, 2009 - 1:03pm.

Urban, it could be. If the downtrend (or non uptrend) in NOTs were to continue for another couple months I would suspect something else was going on (exactly what you said -- either mods or increased delays). But at this point, it seems like we are still within the usual "lag" window judging from past lags in the chart. I'm certainly open to evidence that something else is afoot; I just haven't seen any as of yet.

Rich

Submitted by urod on April 15, 2009 - 1:39pm.

Don't hold your breath, bears.
People are just trying to get their loans modified.
It is just that simple.

Submitted by jpinpb on April 15, 2009 - 2:37pm.

urod - are you in the industry and you know people are just getting their loan mods, all of them?

I understand that there are a lot of hoops and criteria and many will not qualify for a loan mod.

Submitted by sdduuuude on April 15, 2009 - 2:46pm.

With a 50% re-default rate on loans modified through that one program (I forget what it's called), I'm not seeing loan modifications as having much of a long-term effect on NOTs.

Submitted by jpinpb on April 15, 2009 - 2:58pm.

People may be trying to get loan mods. I question how many are actually successful in doing so.

Submitted by patientrenter on April 15, 2009 - 7:13pm.

jpinpb wrote:
People may be trying to get loan mods. I question how many are actually successful in doing so.

Given that the government's goal is to keep home prices as high as possible, if there aren't enough loan mods to do that, then changes will be made to get more of them. I think it's as simple as that. But I agree that it will be a challenge for the government to keep all the different markets across the country at the same level of residual bubbledom, so we will see some local effects from too many or too few foreclosures (as in the lack of inventory right now).

Submitted by sdrealtor on April 15, 2009 - 9:51pm.

I am hearing lots of anecdotal evidence about higher end loan mods. I also beleive the recitivisum (know I butchered the spelling on that) will be much lower on higher end loan mods. It is very different modifying the payment on a subprime loan that someone qualified for on the teaser rated than a white collar professionals loan that qualified on a 5/1 arm product rate.

Its not a cure all but its defintely having an impact on the higher end..........

Submitted by Arraya on April 15, 2009 - 9:58pm.

http://money.cnn.com/2009/04/13/real_est...
NEW YORK (Reuters) -- Unemployment is a bigger reason for missed mortgage payments than high interest rates, according to a study from the Boston Federal Reserve that raises questions about President Obama's plan to stem foreclosures by modifying loans.

Borrowers are more likely to default on their payments because they have lost their jobs or because the price of their homes has plummeted than because of tough terms on their mortgages, the study found.

Submitted by urbanrealtor on April 15, 2009 - 10:29pm.

sdrealtor wrote:
I am hearing lots of anecdotal evidence about higher end loan mods. I also beleive the recitivisum (know I butchered the spelling on that) will be much lower on higher end loan mods. It is very different modifying the payment on a subprime loan that someone qualified for on the teaser rated than a white collar professionals loan that qualified on a 5/1 arm product rate.

Its not a cure all but its defintely having an impact on the higher end..........

I was talking with a loan mod consultant I trust (a list that has 2 people on it) and I got some interesting anecdotal thoughts from her.

Basically, she said that the first round of mods (like a year ago) were all forbearances.

That would mean that they were just a month or 2 of relief without a real fix.

My point is that I think a lot of the current wave are a more systemic fix and will be less likely to re-fail regardless of amount. However, it can't hurt that the subject borrowers are of much better means.

Submitted by rubberducky on April 15, 2009 - 10:30pm.

I'm trying to get mine mod'd.

Been working with the bank over 100 days, nothing.

I'm at 6% interest rate, and value is down a good 40% (optimistically, pessimistically, it's worse).

My CC is at 6%, no reason they can't just drop my interest rate into the 4s. Well, except that my house "doesn't have enough value to justify a Refi"

This month was the "pay the mortgage or pay the taxes" month. We'll see if I have their attention now.

What benefit do they have to reduce my mortgage as long as I'm paying 'em, yeah?

Seriously - anyone know a good CPA and real estate attorney, I may need one of each to help me through this.

Submitted by peterb on April 16, 2009 - 7:27am.

rubberducky - Please keep us informed on your progress. You sound like you're in the situation that's the big question right now.

Submitted by NotCranky on April 16, 2009 - 7:52am.

A question for this interesting brain storming session.

Does a notice of rescission get recorded after a "loan mod"? This would be to cancel the NOD? It is the normal procedure for remedying the NOD after arrears are paid and the loan is made current by the borrower. If they are recorded or if there is some other standard document in the case of loan mods that would that would change the foreclosure process or at least the paper trail for it. As we know it can be interrupted or delayed anyway but something that actually cured NOD's might be different? There has to be a way to get a handle on what is happening to these NOD's if anything. From the graph it looks ot me that up to this point NOT's are tracing NOD's as they have been for the cycle.This is inclusive of teh dip in NODs due to the rules changes. As some have noticed however this is a bit of a nail biter going forward.I think it will continue to more or less track and NOT's will come up significantly. This is just based on rumors that Loan mods are mostly a hoax or a waste of time.

JP makes a good point too. Something to look into. The rate at which NOD's coming onto the market as short sales that is.

There are also social possibilities for why the conversion rate might change too.I can think of a few possible factors. If,big if, the poorest and most upside down of the liar loan participants and the serial speculators fools are long gone, perhaps those that remain as single family owner occupied will have more familial or other resources to turn things around. They are not actually going to come out in the streets yelling that mom and dad paid their house down or that they got a loan mod. Also I think there are people defaulting on purpose because they see it as a way to jump on the loan mod train. They may actually have the means to cure the default and may or may not be motivated to if they don't get a bailout.I have no clue how much this could be happening.

Submitted by jpinpb on April 16, 2009 - 8:37am.

Ok. I just got an email reply from a very reliable source:

"In CA in Q1 there were 150k new loan defaults...350k nationally. Fannie Freddie modified 24k loans in the entire nation during that time. Of the 24k half will redefault. Infinite supply."

Submitted by sdrealtor on April 16, 2009 - 9:21am.

JP,
150K does not equal infinity. The other point is where are they. The only one that matters to you is on the home that you actually want. Thats the question.....

Its gonna take a lot more time. Time better spent waiting on a beach than on a blog;)

Submitted by jpinpb on April 16, 2009 - 10:59am.

Posting the info here also:

So here's the link I was able to get from Mr. Mortgage:

FHFA Foreclosure Prevention release

The 150k was in CA for just Q1. The 24k loan mods were nationwide.

Submitted by peterb on April 16, 2009 - 11:16am.

Any info on the criteria for a loan mod? This may be more telling than numbers that can hide all kinds of important data.

Submitted by jpinpb on April 16, 2009 - 11:20am.

I haven't been able to dig up info on criteria, nor whether it becomes recourse.

One other question is if you're required to have a job in order to do a loan mod. Just posted this on SDL about 6.1 million unemployed.

Submitted by sdrealtor on April 16, 2009 - 11:51am.

Just google "Loan Mod in a Box" and it will take you to the FDIC website with some guidelines.

happy to be of service;)

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