Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Coming Soon: A 300 Percent Increase in Foreclosures
Reason ^ | 02/04/2011 | Tim Cavanaugh

Posted on 02/04/2011 7:33:28 AM PST by SeekAndFind

At Calculated Risk, Tom Lawler, a real estate economist and former risk policy veep at Fannie Mae, tries to figure out how many people have actually lost their homes to foreclosure, short sales or deed-in-lieu desertions. The answer: Not enough. Lawler (who is now living the life of Riley on a Virginia farm) says the number of foreclosures that have been completed so far is a drop in the bucket compared to the number of loans that have gone bad:

Still not enough.

On the other hand, the above numbers could well OVERSTATE significantly the number of homeowners who lost their primary home either to foreclosure or to a short sale. A “significant” % of completed foreclosure sales has been completed foreclosures on non-owner-occupied homes, though estimates vary as to what that % has been. In addition, not all short sales have involved homeowners “involuntarily” leaving their home, but who instead wanted to (for economic or other reasons) move and who were able to negotiate a short sale with their lender.

So what is the right number for folks who lost their residence to foreclosure, a short sales, or a DIL? I don’t rightly know.

It is pretty clear, however, that overall foreclosure moratoria, foreclosure delays, modifications, and other workout activity continued to keep the number of homeowners who “lost” their homes to foreclosure massively lower than one would have expected given the delinquency/in foreclosure numbers.

So what will this mean when the last moratorium is lifted, the last show-me-the-note lawsuit gets thrown out of court, and the last loan modification has failed? Well by that time you’ll probably be able to buy property on a planet orbiting some nice warm star in Constellation Cygnus. But there could be roughly three times as many homes on the market as there are now. Lawler points to 1,445,000 completed foreclosures and short sales at the end of 2010, compared with 4,296,01 mortgages that are past due by 90 days or more.

Getting a handle on the shadow inventory is more than just a way to fill up the time between Sunday afternoon looky-loos. You should feel for these foreclosed people because they’ve lost their jobs – even though in most cases they haven’t lost their jobs. You should be worried about how foreclosure drives up neighborhood crime – even though it doesn’t. And be afraid, be very afraid of the failure of the Home Affordable Mortgage Program to keep hardworking American working families who work hard in America from losing their homes – even though the HAMP is actually designed to buy time for the banks. And if you really want to drop tears as fast as the Arabian trees their medicinal gum, read up on HAMP's underwhelming numbers, ineffectiveness, and costly efforts to limit redefaults.

Speaking of redefaults, the OCC/OTC Mortgage Metrics report [pdf] is out for the third quarter of 2010, and the results are barely less horrific than they were in the previous report. Just under half (47.6 percent) of modified loans are 30 days or more overdue (strong likelihood of permanent default) within a year; more than a third (36.7 percent) are 60 days overdue (near certainty of permanent default) and nearly a third (29.8 percent) are 90 days overdue (for God’s sake, get out of the house). Just to be clear: These are mortgages that the bank – frequently with backstopping from the taxpayers – has already fixed up once.

Redefault rates are showing gradual improvement, but the numbers are still pathetic. A quarter of all modified loans go bad after six months. To get even B-minus performances you have to make serious reductions in the borrower’s monthly payment. A third of bad borrowers who have had their payments reduced by up to 10 percent still default again; more than a quarter default after having their payment reduced between 10 percent and 20 percent. And 14.6 percent who have had their mortgage payments cut by more than 20 percent still manage to default within half a year. That goes beyond bad personal finance and becomes an achievement you have to respect.

Loans modified under HAMP actually have much better performance than other modifications. But the numbers are so poor all around that you shouldn’t hold your breath waiting to hear arguments for the success of the program. At this point the consensus that HAMP has failed seems pretty much unassailable. Which is just as well: If HAMP actually worked as promised, it would cost us almost a trillion dollars.



TOPICS: Business/Economy; Culture/Society; News/Current Events
KEYWORDS: foreclosures; housing; housingbubble; unexpected

1 posted on 02/04/2011 7:33:31 AM PST by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind

Trillions will be lost because they were never there on the equity side.


2 posted on 02/04/2011 7:42:29 AM PST by MrEdd (Heck? Geewhiz Cripes, thats the place where people who don't believe in Gosh think they aint going.8)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

The mortgage problem has never been adequately addressed. It will take more than good cheerleading and wishful thinking. These losses have to be declared sooner or later.


3 posted on 02/04/2011 7:46:44 AM PST by Brownie63
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

Which will impact the economy in a more negative way: people losing their homes, or banks going under?


4 posted on 02/04/2011 8:04:10 AM PST by snowrip (Liberal? You are a socialist idiot with no rational argument.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: MrEdd

I know a young couple, bought a home in the 250,000’s (seemed like a good price at the time...back in 2006), put 70,000 down, but the home has lost more than half it’s value since they bought, so now there is no equity. They sold on a short sale (not necessarily because of the mortgage payment but because of the taxes/insurance hit they were taking on the property.) The bank came back and placed some sort of a lien on them for the difference of what they owed and what the short sale was. They were current on their payments, but like I said, insurance and taxes unfortunately weren’t adjusted down as fast as the prices fell, and the bank absolutely refused to change or lower their interest rate, so they chose short sale.

Here’s an interesting story from our morning paper which seems to me is going to lead us right back into the same sort of mess we’ve come out of:

http://www.tampabay.com/news/business/realestate/article1149420.ece


5 posted on 02/04/2011 8:05:21 AM PST by dawn53
[ Post Reply | Private Reply | To 2 | View Replies]

To: SeekAndFind

prices just don’t seem to have dropped here in Eastern Washington...they still want a ton of money for a smallish house in town......and land seems very high


6 posted on 02/04/2011 8:05:27 AM PST by cherry
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
Obama’s Debt Reduction Commission has recommended elimination of the mortgage deduction on our taxes. I doubt it will happen but if it does, real estate prices still would fall further. Because mortgage interest is the largest tax shelter the average person has, many buy more house than they need.
7 posted on 02/04/2011 8:17:19 AM PST by BealNoortz
[ Post Reply | Private Reply | To 1 | View Replies]

To: BealNoortz

RE: Obama’s Debt Reduction Commission has recommended elimination of the mortgage deduction on our taxes

Well if true, this will all but ensure that real estate values will fall FASTER. Why? Because the tax incentive to own, buy or invest in real estate will be GONE.


8 posted on 02/04/2011 8:19:43 AM PST by SeekAndFind
[ Post Reply | Private Reply | To 7 | View Replies]

To: SeekAndFind

Why is it that in earlier decades we didnt have all this mass conundrum with mortgage foreclosures and sky high real estate prices? The artificially overpriced homes plus the big taxes to maintain them are putting a kabosh on the economy for so many.


9 posted on 02/04/2011 8:27:15 AM PST by tflabo
[ Post Reply | Private Reply | To 1 | View Replies]

To: tflabo
I suspect if unemployment was in the pre obama levels, 5-6%, there would be quite a few houses quickly snapped up from the pool of foreclosures.

There are currently some very good deals out there, with once in a lifetime low rates for 30 year mortgages, but no one has, or wishes to spend, what bucks they have saved up, because the entire system is teetering, with the US govt f rom top down having no effin idea of how to stimulate growth.

Their answer to everything is MORE TAXES.

10 posted on 02/04/2011 8:34:41 AM PST by going hot (Happiness is a Momma Deuce)
[ Post Reply | Private Reply | To 9 | View Replies]

To: cherry
Eastern Washington?....great fishing all over the place! Outdoorsman's paradise and conservative also!
11 posted on 02/04/2011 8:37:48 AM PST by AngelesCrestHighway
[ Post Reply | Private Reply | To 6 | View Replies]

To: SeekAndFind

One has to wonder what will happen to the second mortgages on these foreclosures. I am betting over 40% of all foreclosures on first mortgages also have seconds behind them.


12 posted on 02/04/2011 8:38:02 AM PST by Toespi
[ Post Reply | Private Reply | To 1 | View Replies]

To: Brownie63

Not to worry obama’s buddies at the big global banks are dumping them on the taxpayer

Unlimited credit for GSEs seen as backdoor bailout

http://www.reuters.com/article/2010/01/05/us-usa-housing-bailout-idUSTRE6044YU20100105

Is Fannie bailing out the banks?

http://finance.fortune.cnn.com/2011/01/03/is-fannie-bailing-out-the-banks/


13 posted on 02/04/2011 8:39:34 AM PST by FromLori (FromLori">)
[ Post Reply | Private Reply | To 3 | View Replies]

To: SeekAndFind
Beware: The Second Real Estate Collapse is Coming in 2011 !

Please take a peek at my freeper page. Scroll down deep. I've been 100% correct in my predictions since early 2004. 'Nuff said here

14 posted on 02/04/2011 8:40:54 AM PST by ex-Texan (Ecclesiastes 5:10 - 20)
[ Post Reply | Private Reply | To 1 | View Replies]

To: FromLori

Obama is dumping on us alright!.....


15 posted on 02/04/2011 8:45:49 AM PST by AngelesCrestHighway
[ Post Reply | Private Reply | To 13 | View Replies]

To: cherry
prices just don’t seem to have dropped here in Eastern Washington...they still want a ton of money for a smallish house in town......and land seems very high

It really is all about location. Where I live property may have decreased a little but not near what I read about in other parts of the country.

16 posted on 02/04/2011 8:45:50 AM PST by Graybeard58
[ Post Reply | Private Reply | To 6 | View Replies]

To: snowrip

“Which will impact the economy in a more negative way: people losing their homes, or banks going under?”

Letting the banks go under what good has it done to bail them out? Millions still lost their homes and their jobs and they screwed investors to boot. On top of that we are still bailing them out through the GSE’s and it’s costing taxpayers Billions. Iceland let them fail and now they are well on the road to recovery. Besides you do realize who those big global banks had on their payroll don’t you? That’s right zero for years. Lloyd the vampire Blankenfein is a life long democrat and Jamie Demon is his favorite banker.

Title and link only due to copyright

Iceland Shows Ireland Did ‘Wrong Things’ Saving Banks
http://www.bloomberg.com/news/2011-02-01/iceland-proves-ireland-did-wrong-things-saving-banks-instead-of-taxpayer.html

Barack’s Wall Street Problem is Now America’s

http://www.noquarterusa.net/blog/2008/09/21/baracks-wall-street-problem-is-now-americas/

JPMorgan CEO Jamie Dimon Donates Serious Cash to Democrats

http://www.opensecrets.org/news/2009/07/jpmorgan-ceo-jamie-dimon-donat.html

JPMorgan Chase Asked to Stop Funding ACORN

http://nlpc.org/stories/2009/09/15/jpmorgan-chase-asked-stop-funding-acorn

Editorial: Bailed-out banks should stop funding ACORN

http://washingtonexaminer.com/opinion/2009/04/editorial-bailed-out-banks-should-stop-funding-acorn

President Obama’s Favorite Banker

http://www.economicpolicyjournal.com/2009/07/president-obamas-favorite-banker.html

Banks accepted and bundled ‘deficient’ loans
Mortgages rejected by due-diligence firm were lumped in, crisis panel says

http://www.marketwatch.com/story/banks-accepted-rejected-loans-crisis-panel-2011-01-28?reflink=MW_news_stmp


17 posted on 02/04/2011 8:48:05 AM PST by FromLori (FromLori">)
[ Post Reply | Private Reply | To 4 | View Replies]

To: Graybeard58

Location, location location....It’s all going to be about location when all the boomers retire. I don’t think they will be looking for homes next to major metro areas.....


18 posted on 02/04/2011 8:50:07 AM PST by AngelesCrestHighway
[ Post Reply | Private Reply | To 16 | View Replies]

To: Bullish; CJ Wolf; houeto; Quix; B4Ranch; Whenifhow; Silentgypsy; blam; FromLori; Lurker; ...
Just-think-of-it-as-extreme-camping ping.

"Economic Holocaust" ping.

Increasing volume ping list watching the slow motion Economic Holocaust.

FReepmail me if you want on or off
The Comedian's "Economic Holocaust" ping list...


Today is a good day to die.
I didn't say for whom.

19 posted on 02/04/2011 9:14:47 AM PST by The Comedian (It's 3am all over the planet, and nobody's been answering the phone since 2008.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

huge waves of foreclosures will just feed the media narrative they need to get a third-party economic populist on the ballot in 2012. Obama is counting on that.


20 posted on 02/04/2011 9:18:32 AM PST by Buckeye McFrog
[ Post Reply | Private Reply | To 1 | View Replies]

To: FromLori

I agree. Foreclosures are just a symptom; unhealthy banks and back room political relationships are the actual disease. Time to amputate both of them.


21 posted on 02/04/2011 9:25:59 AM PST by snowrip (Liberal? You are a socialist idiot with no rational argument.)
[ Post Reply | Private Reply | To 17 | View Replies]

To: FromLori
Question for discussion.

Who has done more damage to America in the first decade of the twenty first century??

(1) Al Qaeda

(2) The investment banking industry

22 posted on 02/04/2011 10:42:39 AM PST by Notary Sojac (We have had three central banks in America's history: two of them failed and so will this one....)
[ Post Reply | Private Reply | To 13 | View Replies]

To: snowrip
Banks with mortgage backed securities that were bailed out MUST pass that subsidy on to the mortgage holders (homeowners) by REDUCING THE PRINCIPLE ACROSS THE BOARD ON ALL MORTGAGES.

How in the hell do they get bailed out AND STILL OWN THE MORTGAGES AT FULL VALUE????????

GUILLOTINE ! ! ! ! ! !

23 posted on 02/04/2011 10:51:12 AM PST by Huebolt (It's not over until there is not ONE DEMOCRAT HOLDING OFFICE ANYWHERE. Not even a dog catcher!)
[ Post Reply | Private Reply | To 21 | View Replies]

To: Notary Sojac

(2) The investment banking industry


24 posted on 02/04/2011 10:54:46 AM PST by FromLori (FromLori">)
[ Post Reply | Private Reply | To 22 | View Replies]

To: Notary Sojac
(2) The investment banking industry

We need to keep a keen eye on both sides of the imaginary aisle. A crook is a crook whether he's wearing a donkey costume or an elephant costume.

Inject all the money that was stolen by the Wall Street deadbeat beggars, their puppets in D.C., the GSEs, O.C.C, S.E.C, etc. back into the economy.

Where running a lot of deficits...the biggest might be in govt. credibility.

25 posted on 02/04/2011 1:27:44 PM PST by Chunga85 ("Foreclosure Fraud", TARP, "Mortgage Crisis", Bailout)
[ Post Reply | Private Reply | To 22 | View Replies]

To: Toespi

“One has to wonder what will happen to the second mortgages on these foreclosures.”

Toast. The second gets nothing. When in short sale the second usually gets $500-$1,500, but they are usually happy to get that knowing they’ll get nothing once the property forecloses.


26 posted on 02/04/2011 1:58:06 PM PST by CodeToad (Islam needs to be banned in the US and treated as a criminal enterprise.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: Huebolt

The way things are set up, the banks get MORE MONEY on the foreclosures, therefore, negotiating with the homeowner is a no go. No incentive for them to do that. NONE.


27 posted on 02/04/2011 2:09:16 PM PST by TruthConquers ( Delendae sunt publicae scholae)
[ Post Reply | Private Reply | To 23 | View Replies]

To: tflabo

“Why is it that in earlier decades we didnt have all this mass conundrum with mortgage foreclosures and sky high real estate prices? The artificially overpriced homes plus the big taxes to maintain them are putting a kabosh on the economy for so many.”

The cause of the overpriced homes is the sad but simple truth of “free money.” The interest rates were so LOW that it created the equivalent of free money that people used to bid up prices on homes. Most lay this at the feet of Alan Greenspan. It is a part of this puzzle, but not all of it. The other part was that banks were making easy huge bonuses on selling these mortgages as securities, CDS. So, because the banks were REselling these mortgages, what did they care that the loans were bogus pits of lies?? None. This allowed the whole housing boom with the adds on furniture, and remodels, etc to grow and make America look like she was doing well, when she was really rather sick. The cure is killing the patient.


28 posted on 02/04/2011 2:17:32 PM PST by TruthConquers ( Delendae sunt publicae scholae)
[ Post Reply | Private Reply | To 9 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson