March New Loan Default Summary
- Total CA Foreclosures — At 1.5 Year Lows
- Total CA new Defaults – Surging
- Subprime -- Declining
- Alt-A — Constantly Rising
- Pay Option ARM – Surging, Despite Wachovia being on Moratorium
- Jumbo Prime – Relentless
- Super Jumbo – Surging
- Fannie – Freddie – Surging
CA House Prices are Bottoming – But for the Wrong Reasons
————————————————–—————————————————————-
With proprietary default and foreclosure data only available to a select number of firms in the nation and decades of mortgage and real estate experience, we are able to provide high-level and granular broad-market and company-specific insights never before available – sometimes months ahead of public news and events. Looking ahead of the mortgage and housing market and into bank’s residential mortgage portfolio and balance sheet is now much easier. Best, Mark Hanson
————————————————–—————————————————————-
The mortgage default and foreclosure news flow has been heavy over the past couple of weeks. But aggregated news is tough to make sense of or trade. At Field Check Group we can break down the default and foreclosure data hundreds of different ways including by originating and foreclosing lender, loan type, loan amount, present property value, MSA/City/State/Zip and more making it easy to understand.
Below are various looks at the default universe by loan type. When breaking it down this way, what has happened to date and going to happen in the future becomes much clearer. It also gives a clear picture of the task at hand the Administration has with respect to its new foreclosure prevention plans, as the loan default wave is a mile high and they are swimming into it with a canoe.
-Total CA Foreclosures — At 1.5 Year Lows
In March, new foreclosures were at 1.5 year lows. Actually in Q1 2009, foreclosures were much lower than in Q1 2008 due to broad market legislation and bank-specific moratoriums. This has kept distressed inventories at a low and allowed the low-end housing market — the only segment getting any action — time to consolidate a bit. But remember, supply is everywhere. Although foreclosure-related sales are 50%+ of the market in the bubble states it is only about 35-40% of total supply at this point in CA. The rest of the supply comes from Ma and Pa Organic homeowner who is being squeezed out or can’t sell due to epidemic negative equity. Of the 60-65% of supply that is organic, 50% are typically listed as a short-sale.
-Total CA new Defaults — Surging
New loan defaults – of which a large percentage will turn into foreclosures 5-7 months following the notice month — are surging. In the past that would be indicative of a major foreclosure wave coming. Now with aggressive moratoria and mortgage mod initiatives in place, the eminent wave may not break all at once. It will break, but could be stretched across more months than typical. One thing is for sure, there is a pig the size of Godzilla in the python right now that has worked its way to the lower intestine.
Subprime Defaults — Declining
New Monthly Subprime notice-of-defaults have eased off considerably. This is because the mortgage crisis started with Subprime, and mortgage mod initiatives and moratoriums are most targeted to Subprime loans.
Alt-A Defaults — Constantly Rising
New Monthly ALT-A notice-of-defaults have surged along with total defaults but not with such an aggressive rate of change. This is because mortgage mod initiatives and moratoriums are most targeted to Alt-A and Subprime loans.
Pay Option ARM Defaults — Surging
Pay Option ARM defaults are continuing to surge despite one of the nation’s largest Pay Option holders — Wachovia — remaining on near full moratorium.
Jumbo Prime Defaults — Relentless
The Jumbo Prime default chart is absolutely unique but increasing steadily along with total defaults. Within this category supply this high can’t be absorbed into the housing market because sales over $417k are so slow.
Over $750k Loan Amount Defaults — Surging
Defaults on original loan amounts over $750k are surging with total counts higher than total sales in this segment. Supply from foreclosure is about to hit hard in the mid-to-upper end housing market. And remember, foreclosure supply is only one form and account for only about 35% of total supply.
When we look back at 2009 on December 31st with Champagne bottles in hand, we will reflect upon 2009 as being the ‘year of the mid to upper end house price collapse’.
Fannie-Freddie Monthly Loan Defaults — Surging
This goes hand in hand with the FHFA report put out yesterday showing new GSE loan delinquencies and defaults are surging. This is what the low-to-mid end of the market can’t handle right now — it has finally reached a point of decent supply-demand with help from mortgage mod initiatives and foreclosure moratoriums kicking the can down the road.
A surge in GSE defaults and foreclosures will bring around round 2 of the low-to-mid end house price fall. Many are hopeful that Obama’s new mortgage mod plan focused upon GSE loans will prevent this. But given that the GSE’s at present have 1.229 million delinquent and defaulted loans and were only able to pump out 9k mortgage mods in January, I believe that is wishful thinking.
House Prices Are Bottoming — But for the Wrong Reasons
Present values of properties at the notice-of-default stage are clearly rising due to the shift in the mix of loans/properties going into default from lower to higher. This ‘mix-shift’ effect may push up median house prices in 2009 creating the appearance that the market is improving when in reality it is because more higher-value properties are defaulting, being foreclosed upon and reselling through the Realtor network.
This is the last look at prop values before they become REO and are listed for resale. Present values of props at the actual foreclosure stage have stabilized but are not yet increasing as they are at the NOD phase shown previously. Given 60% of all resales are from this foreclosure stock, this does not indicate prop values in CA will rise in the near-term.
For any of you that play MSA based house price futures, this chart series nails the Case-Shiller.
**For more information in our default/foreclosure related research including real-time mortgage default, foreclosure and loss tracking across large-named publicly traded companies please email me at the address below. Looking ahead of the housing and mortgage market and into bank’s residential mortgage portfolios and balance sheets is now much clearer.
Best Regards,
Mark Hanson
Mark@TheFieldCheckGroup.com
Analysis by Mark Hanson, Field Check Group Real Estate & Finance
Data provided by ForeclosureRadar.com
April 25th, 2009 at 2:48 pm
Bank securitized the loans.. they cared of comission..
April 25th, 2009 at 3:18 pm
Well…there really is no point going back and forth here because it’s evident I’m dealing with a bunch of people who have no concept of personal responsibility.
Unless you understand that concept, this dicussion is pointless. I find it amazing how people can’t admit their hand wrote that signature on that loan contract.
The hypocrisy is very easily demonstrated by a simple example.
Let’s say:
A) You’re a landlord
B) You have a lease arrangement where you state to a wood-be renter is going to pay $500/month on a luxury townhouse in a upscale neighbourhood for 6 months.
C) After 6 months, the contract explicitly states that the rent is going to go up to $2000/month.
D) An eager renter comes in and rents your place.
E) 6 months later, they break the contract and walk away…claiming you screwed them.
Now tell me what you’d think of that renter….
If you say nothing…you’re lying. If you say you’d do the same…you’re lying too.
This is EXACTLY the same as walking away from a mortgage. Some people will call you a bastard for wanting to increase the rents that much…and people would be right to do so. BUT….the renter did this willingly and did so because he or she wanted to get away with living in a nice place for $500/month…and then move on.
The renter:
A) Signed the contract knowing what they were getting themselves into.
B) Should have been informed about the contract BEFORE deciding to rent.
You people are a bunch of apologists for crooks on Main street. A crook is a crook…whether on Wall Street on Main Street. Stop making excuses for losers and idiots who cared about nothing but money.
April 25th, 2009 at 3:41 pm
noz, You have got it all wrong. Talking about personal responsibility, I am all for it. I am very responsible person in my life. I teach people how to own your mistakes and learn from them and not make them again. But this issue is not so much about personal responsibility..this whole bubble was about corporate responsibility which was allowed to be thrown out of the window by the oversight agencies. If personal responsibility was to fix all the ills in our system, what would we need laws and enforcement for? May be we should just fix the drug problem through personal responsibility: Hey people you are personally responsible for using drugs, it is not the fault of drug dealers. see how easily the problem is solved and millions saved in fighting the drug trafficking?
This problem was created by the corporate greed and irresponsible government. Period. Yes some people bit more than they could chew, others got greedy and bought homes they could not afford….but main issue was lose credit and no oversight.
Since we will bail the banks out…think about what will be next? the banks who acted so greedily and so irresponsibly and brought the whole system to halt will be saved again, without any punishment so for. I shiver when I think how recklessly and irresponsibly they are going to act next time.
April 25th, 2009 at 5:14 pm
I see the “debate” still rages.
The angry renters can cry all they want. A non-recourse mortgage loan is as clear as day about foreclosure. If the lenders don’t like it, then perhaps in the future they should only accept appraisal values for amounts they are willing eat if the buyer walks.
And if the angry and “prudent” on this forum don’t like that, well it really doesn’t matter what you think now, does it?
April 25th, 2009 at 6:22 pm
Non-recourse loans are only in those states, where the state “forces: the lenders to loan in that fashion. Most of the bone head buyers of homes in the last several years had no idea about recourse or non, but found out after they got their ass handed to them, and took the ez way out. I just hope all the people walking away, not because of changes in their circumstance, but due to “not wanting a depreciating asset any longer” get paid back in spades later in life. BE it in business if they run their own business, most are probably government workers, so I can’t wait for their pensions and benefits to get cut, and listen to the bitching about contracts so forth and so on. I will have a grin ear to ear!
April 25th, 2009 at 6:31 pm
NOZ
“No I care because it’s affecting ME and my wife.”
Why would you worry about what other people are doing and letting that affect you and your wife? You have no control over the situation, just like I have no control over the government bailing out the banks.
The problem is not going away anytime soon and now that the government is involved, it is going to get strung out for years longer. We are just going through a heavy duty wash cycle and when the final spin stops, everyone wants to come out of the wash clean. Everybody is getting hit with the blades of the agitator. In the mean time, all they can do is fend off the best that they can, as the blade comes around for another smack at them.
Maybe in the next real estate boom, bank will increase the required down payment, rather than doing irrational no money down loans.
April 25th, 2009 at 7:16 pm
Quick question for those of you who do not think it their are any personal ethics or responsibility involved. Why is it that military personel cannot default on their personal debt or liabilities? I’ll tell you why, because it reflects on their personal character, and that is part of how you are evaluated in the military. Be it a rent payment, or being underwater thousands of dollars on an asset. I’m sorry you don’t want to hold yourselves accountable, but its not right. And if our culture has truly changed to accept bankruptcy and foreclosure without any stigma, our system will be imploding!
April 25th, 2009 at 8:24 pm
Housingrealist
We follow the example set by our government. Government is going to default on all its debts and obligations too. It is the American way. Love it or leave it. You don’t actually think that the government intends to tax people to pay all those bonds they issue now do you? Government even steals from the social security trust fund to pay its bills. They borrow the money and stick a bond in there and tell you that they invested the money, at interest, which YOU pay LOL. Currently the government is involved in the largest taxpayer heist in history called bank bailout.
April 25th, 2009 at 8:24 pm
Eithics?
You are asking people lined up against a firing squad to worry about personal hygiene.
Let’s see, I personally valuate the largest purchase you’ll ever buy via an appraiser, lend you money to finance the purchase, then dump thousands of that asset on the market for half of what you paid then expect you to remit on the inflated value?
It sure serves the “prudent” well for having to chip in on this shit.
April 26th, 2009 at 9:49 am
For those who think that the contract “allows” walking away, that’s not quite correct. Read the mortgage note and the very first part of it will talk about how the mortgagor promises to pay $x amount. Failure to pay is a “default” (ie, a breach of the contractual agreement to pay). If walkaways choose to default on the contract, that’s fine by me. However, the walkaways’ future lenders will begin to take that into account in making credit decisions with respect to future loans (and any existing revolving loans (ie, credit cards)). Walkways should enjoy filling out the “Have you ever defaulted on any obligation in the past ___ years” question on their next loan application (and if they lie, that’s fraud and any non-recourse provisions/laws won’t be applicable in that situation).
And if you think mortgage defaults will only affect the walkaways’ credit for a specified number of years, just wait. Credit scoring will change, laws will change and the result will be that the default will stay on the credit record for a much longer period of time. Walkaways access to credit will be constrained while the responsible people will have greater access to credit.
I agree that walkaways have the right to default on their contractual obligations (just like many companies which default on their obligations and end up in bankruptcy court), but the walkaways better be sure that they fully understand how defaults will affect their future access to credit (and the changes that might be made to laws/credit scoring systems to limit their future access to credit).
On the topic of Mr. Mortgage’s post – that is some scary stuff…obviously the downward spiral is ramping up for the second act…this should be a doozy. Seems like the bottom in housing in CA still hasn’t happened.
April 26th, 2009 at 11:39 am
Hello All:
A government mandate that all defective mortgages be Recalled, Reduced to the true current appraised value and Re-issued at the banks cost/loss, no taxpayer money involved.
The 91% of homeowners who are current with thier mortgage payments are ELIGIBLE AND ENTITLED to a no cash out refinance not to exceed the true appraised value of the home, IF their monthly mortgage payment WILL BE LOWERED, no income or ratio’s required, regardless of whether a principal reduction is required or not.
Delinquent homeowners are also eligible for principal reductions but would have to prove income within 31/41% guidelines. If they couldn’t qualify, the home is foreclosed on.
The loss is between the homeowner and the lender, not you and I or our government bailing out the banks.
April 26th, 2009 at 12:58 pm
JR
So if you are 200k underwater on a home and that is 200k at interest, you might be declined a loan in the future. Let’s call it 5% intrest to make it easy, that would be an additional 10k per year interest.
In five years you would have come out 50k ahead plus the 200k you don’t owe and the market will still likely be weak.
Looks like defaulting and walking pays better than sticking to it.
April 26th, 2009 at 1:19 pm
Not true, JR.
Remember, we’re all subprime now.
We are already seeing rental ads and mailers from big box electronics stores who finance eagerly soliciting business from those who have a foreclosure on their record.
And foreclosures have just begun to hit the alt-a, prime and jumbo-prime borrower, ie those with real earnings.
Credit scoring will change, alright. Every mode of business that gauges the integrity of their customers with a fico score will be making serious adjustment in favor of forgiving mortgage defaults.
Cable and telecom companies want to eliminate half their potential customers by denying service those who foreclosed? Att and Comcast better write off entire regions of the country.
How much do you want to bet California will outright ban insurance companies from charging higher rates to those with a foreclosure? Steve Poisner must be frothing at the populist euphoria that will catapult him into the governorship by just proposing this idea.
Who do you think has been buying all those Ford F150’s? “Prudent” renters?
And, if BAC, Citi, JPM, et al ever want to earn a buck again after the CDS market is outright banned by the SEC, they better devise a foreclosure forgiveness lending program to the New Subprime Borrower.
Read Mr Mortgages posts. There are simply not enough of the “prudent” to sustain our consumer markets in any respect. Expect the importance of a foreclosure on one’s credit report to change accordingly.
April 26th, 2009 at 2:23 pm
I say remove forclosure from credit report, if you lost a home in 2008, 2009
I say there are millions of people going into forclosure in 2008, 2009.. lenders will lend again! in this emerging market!
April 26th, 2009 at 2:24 pm
forclosure in 2008, 2009 … will not count as much..as forclosure in the past!
April 26th, 2009 at 2:27 pm
correction: not “in” but “to”
I say there are millions of people going into forclosure in 2008, 2009.. lenders will lend again! TO this emerging market!
April 26th, 2009 at 2:32 pm
JR, you’re correct.. it’s going to change the FICO score.. it’s going count LESS than it did in the past, because this is not a normal time… get it??
THERE ARE JUST TOO MANY THAT FORCLOSED AND MANY MORE THAT WILL BE FORCLOSED… and while there are some that abused the system, the major problem was loose credit, and no government oversight…
April 26th, 2009 at 7:10 pm
If you were foreclosed upon I think minimum down payment should be 30% for those people going forward, if they plan on buying a home in the next 10 years. There needs to be some repercussions for walking away. For those that stay in the thome, they may be above water after 10 years. Due to mortgage amortizing and real estate market beginning to appreciate again.
April 26th, 2009 at 8:09 pm
Housingrealist, it doesn’t matter one bit what your think.
April 26th, 2009 at 8:29 pm
but there is.. FICO going down 150-250 points.. losing the house.. loosing downpayment, lossing additional improvement, .. having to wait to buy a home again.. emtional distress… embaresement… moving… it’s NOT EASSY LOOSING a house…
You make it seem, like stop paying..and get another one right away??
it takes a lot to buy again..
- pay off rest of debt
- save for future downpayment
- live with the bad experience, shame
April 26th, 2009 at 8:34 pm
I want the rest of you..that decide to stay (if underwater..unemployed/maybe no choice) not loose 80%… according to all of you that want ex-owners to wait… this market is GOING DOWN FURTHER .. with out ex-owners come back in….1997 prices or lower is in the bag!
April 26th, 2009 at 8:57 pm
Housingrealist
Well who are banks going to lend to then? If as you say it is going to take ten years for those that do not walk to break even and the rest walked, and you say they should not be allowed to buy for 10 years, I guess we don’t need banks for another ten years.
This leaves only a tiny segment of the population in which to move housing prices.
April 26th, 2009 at 9:34 pm
The banks will lend to all the new household formations that are currently occuring, and will occur over the next 10 years. The last housing trough was 1997, so I’m not sure why housing prices need to go back to levels damn near about 1.5X median income. This is in northern CA too.
Question for ex owner now renter
Why are thinking things need to go back to 1997 pricing now(prior trough)? Evidently, ou bought post 1997 only to go back to renting for reasons I’m not sure of. Why only now the precience with respect to housing prices. Did you not see the light when you bought prior? Median homes will tend to transact at roughly 3X median income(depending on cost of money). If you’re in a area still not seeing this, then more downside to come. If, you are in an area that is already seeing pricing at this level, and maybe lower, then I suspect you will start seeing a pick up in activity soon.
Keep in mind that typcially those that were calling tops rarely are the same who call the bottoms. It is tough for us to change our take on why things won’t continue to get worst well into the recovery. That goes for all asset classes. Homes can’t transact below relacement cost forever.
April 26th, 2009 at 9:51 pm
I bought in 2006.. and I didn’t see it coming (or at least not this bad).. now I’m doing way more reading than before..
I’m already seeing some places hiting 1997 price (or worse). I also see some real estate at 90% off peak! (I realize not for all, but I see some really big drops!)
I think prices could hit the 1997 prices and go below cost because:
- lack of buyers (to balance supply)
- the supply is growing (forclosures, shadow inventory, more forclosures in 2009/2010..as the second wave is catching velocity),more people retiring/want to sell (boom generation – 78 million), loss of jobs accelerating, the new generations in their 20’s..are not forming families until 25-30+ of age.. and companies soon are going to default on loans too, rents are going down (I’m surround by 6 empty aparaments in my complex!, material prices are going down, empty rentals for businesses, salary pay cuts..I’m hearing 30% in some instance, builders keep building, 90% of loans are FHA/potential blow up
WE’RE HEADING (if not already in one) TOWARD DEPRESSION..this is not your regular decline, where cost will matter .. as suply is out of control! THIS IS YOUR SUPPLY AND DEMAND MODEL..
THAT’S WHAT I SAY YOU NEED EX-OWNERS BACK IN (at least some of them, that didn’t walk on every other debt too!)
April 26th, 2009 at 10:02 pm
I hope I’m wrong for the good of the country…but it’s just too many signals..that is going to get much worse, before it gets better..
I try to do my part without my home anymore.. and spend some, while saving as well for the next home… but if people like you say I should pay 30% down payment.. I better stop spending again, and go save that 30%…
April 27th, 2009 at 9:01 am
Saying that a mortgage contract does not “allow” walking away is semi-correct. I would not say that divorce is “allowed” in a marriage, but it is an option if the marriage is not working out, and it carries a series of consequences for each party…but I digress. We are really dealing with semantics here. There is a provision in each contract which stipulates the consequences of non-payment. Using the term “allow” would imply that this is an acceptable practice from the lender’s perspective. Although this is not something they would advocate, it does give legal “permission” to walk away from the home. It is not without punishment or consequence, however the consequences are plainly laid out, lose the house and negative marks on your credit report.
The dangers associated with not walking away simply outweigh the long-term benefits. “Toughing it out” will be much more costly for a deeply underwater owner both in real costs as well as possible opportunity costs over the next several years. Additionally, if a modification is sought, I am confident that virtually every lender will do their best to have the terms of the modification change the consequences of non-payment to allow for deficiency judgements in the future. I will fully acknowledge that the “ethics” arguements from bitter renters have a degree of merit, however I would argue that the tangible impact of staying in a home which truly should not have been bought in the first place is much more dire and potentially much more damamging.
It is clear to me that this is an issue on which several of us will have to agree to disagree. I just don’t see why people on both sides of this issue have such a hard time acknowledging that each position has some merit. To each his own and best of luck to all in these difficult times.
April 27th, 2009 at 12:36 pm
When I say it doesn’t matter one bit what one thinks, I say that as a matter-of-fact. TARP was opposed 300 to 1, and I cant think of one economist outside of this administration who believes PPIP isn’t a game-able scam.
My personal (and unwavering) opinion is that we are being played to the tune of 10-12 trillion to pad the losses of 20 banks. For whatever logic this administration is using to justify it, PPIP is a reality – in addition to being the final incentive lenders needed to never make a single concession or concede any loss or blame for the defective mortgages they made between 2003-07.
In this respect, I believe one would be a complete moron to continue to pay a mortgage on a home worth half of what they paid. And this is the reality for most who purchased during the past 5 years in California.
To stay would mean your earnings are taxed to insure the losses of your lender (via PPIP). It’s time to cash in on that policy.
If you’re only 10-20% underwater, weigh the prospects of saving 20% over 5 years vs paying down the principal of your current underwater home. Choose the option they is best for your balance sheet in 5 years.
If you have to refinance a conforming jumbo out of an adjustable, weigh the payment on the new jumbo (currently prime +2-3%) vs the payment on buying your same house in 3 years for 200k less with an alt-a/subprime rate (currently prime vs 2-3%).
Perhaps you simply cant afford the home for a variety of reasons, relocation, life adjustment, etc but cant sell your home because lenders have been dumping heavily discounted properties in your neighborhood and now you’re underwater. If losses have already burned your down payment, perhaps it’s time for the lender to share a portion of the losses.
Regardless, because of the of position of our Government that 20 of the largest banks are too big to fail, it is high time to become your own advocate.
April 28th, 2009 at 4:04 pm
All this talk about people just “walking” away from their obligations because it didn’t work out – is all fine and dandy considering the context of the times we’re in; but for these same people to think they deserve to just casually “buy” a another home with another loan is ludicrous.
The hit they will take on their credit will prevent them from doing so – AS IT SHOULD BE!
I have little sympathy for those who bought (and dramatically OVERPAID) between 2003 and 2006. MATH doesn’t lie and these people were absolute fools to believe the hype being spewed. I just don’t buy the “I didn’t know better” crap. The days of using a house as an ATM are DONE FOREVER!
If you want something, it’s finally come to the point where you’ll actually have to EARN IT – not borrow it.
NO MORE BUBBLES!
April 28th, 2009 at 4:23 pm
You know, I don’t think anyone here is making excuses for the banks. But once again I ask someone to explain to me how homeowners shouldn’t be partially if not mainly blame for the current crisis.
Bertdilbert, I think it’s insulting for you to try to spin it into “they’re not really homeowners”. You know exactly what I meant by “homeowners”, we don’t need to split hairs over the definition of the word.
You actually think homeowners have a case against the banks if they can’t make the mortgage? Like that guy on CNN, who was making $8000 A YEAR, and refinanced his house for $300,000 (I forgot the exact figure. He then pocketed a couple hundred thousand dollars and haven’t made a payment to the bank from day one. He has been living mortgage/rent free for over two years and now he’s crying boohoo because the bank is about to kick his butt out the door. “but but but I didn’t know. I was making $8000 A YEAR and didn’t know I couldn’t afford a $3000 A MONTH mortgage. I was tricked, I was fooled, those bad people at the bank”
April 28th, 2009 at 4:26 pm
Benzy – Amen!
April 28th, 2009 at 5:57 pm
I hope we review mortgage fraud for all those individuals who used stated income loans. Either committing tax fraud, or mortgage fraud. Pick the crime you are going to get prosecuted for. I hope to god the cram down provision does not pass the senate. From what I read on this site, bankruptcy will be the new in thing. No stigma, no ethics, just discharge my debt please. I don’t use those jet skiis anyhow!
As an aside, the biggest joke I’ve heard, was a guy I was talking to during the bubble years said he paid cash for his car. The conversation went on further where we discussed his home equity line of credit, where I asked what did you spend that money on. His answer, my and my wife’s car. That was his version of paying cash. Take from home, and buy with borrowed money! SIMPLETON!
April 28th, 2009 at 10:57 pm
wonton: “Like that guy on CNN, who was making $8000 A YEAR, and refinanced his house for $300,000″
of course he is an idiot. but what about the bank who gave that loan? smart? responsible? honest? NOT
April 29th, 2009 at 7:36 am
Just “import” Japanese-style “three-generation, 100 year mortgages.” Do it by “adding” a “California twist.” Make them “four-generation, 120 year mortgages” instead. Then everyone can meet their mortgage payments (as well as your children, grandchildren, and great-grandchildren). See, that wasn’t so difficult — was it?
April 29th, 2009 at 10:35 am
Nobody is advocating for buyers who committed mortgage fraud, even if they were coerced into a stated income situation.
But, I’ll assert that absent of the non-recourse provision for purchase money, mortgage lending would be magnitudes more fraudulent.
In short, the banks failed, not the buyers. The bank has an incentive to:
1. Find a buyer who can afford the home, and
2. Assure that the home appraises for a value the lender is willing to eat if they buyer defaults.
Neither of these requirements are the buyer’s responsibility. Then why do you advocate for the buyer paying for the mistake? I ask, are your cruel, insane or bitter?
April 29th, 2009 at 1:38 pm
What if the govt keeps the moratorium on foreclosures going for a while yet? And they keep the rate low as well? Will these become attempted short sales? Will more people just not pay their mortgages?
Is there any data on how many people are not paying their mortgages and have not gotten an NOD?
April 29th, 2009 at 7:59 pm
I don’t think a moratorium or low rates will help, Peter.
Mr. M has bogged extensively about this, but moratoriums and modifications by way of lowering the rate and effective monthly payment still have a very high default rate when reality sets in.
The core problem is the high loan balance vs current value on millions of loans. Moratoriums, especially in CA have proven to be a temporary stop gaps. An indefinite moratorium is extremely unfair to prospective buyers as it artificially props up home values.
The ideal solution would be a mass reevaluation of home values for purchases made between 2003-07 with the lender taking a a high proportion of the loss. If the verified income of the current owner can afford the reevaluated balance with a 30 year fixed then they wouldn’t lose the home. If not foreclosure.
I know the angry renters and the “prudent” are fuming as this suggestion, thinking it rewards granite loving, mojito drinking heathens. In support of my argument, I present the millions of foreclosure properties and shadow inventory that has yet to be absorbed by you “prudent” savers. It will never happen. There is simply not enough “prudent” renters and savers to make a dent in this inventory at ANY price.
And I assume most who’ve received a NOD are not paying their mortgage.
April 30th, 2009 at 6:57 am
Can I get a 20% downpament @ 0-1% interest from government? I’ll go buy today! Can I get an FHA loan today? I’ll go buy today! Apears not…
Then…Why would those not paying their mortgage today, or those undervalued..get REVALUED? but those that already forclosed.. go back to end of the line..and WAIT 10 years and need a 30% downpayment??
Are we discrimating?? What type of message would we be sending to our kids.. and future buyers… if we just bail out / revalue today for those that are underwater or not paying??
Time appears to be the only solution!
April 30th, 2009 at 7:08 am
The (PRICE) bottom will be IN..when demand is HIGHER than SUPLY.. in other words..when ex_owners like myself come back in the market.. 2011-2012!!!
April 30th, 2009 at 7:23 am
There are 20 million empty homes right now in the country (residential, rental, vacation homes!) We need ex owners to buy like yesterday!
http://www.bloomberg.com/apps/news?pid=20601213&sid=am4VMDGoSAPY&refer=home
April 30th, 2009 at 7:39 am
Sorry..I’ve exagerated.. only 19.1 million homes empty now!
April 30th, 2009 at 9:37 am
Wanton
“You actually think homeowners have a case against the banks if they can’t make the mortgage?”
Not in a case where the home buyer obtained the loan by fraud, ie lied about income on an application. I believe those should be held criminally accountable AND responsible for bank losses as a result of that fraud.
Getting past the ones that lied, Where the bank made a loan that was an assured default, the bank should be criminally liable and responsible for the borrowers loss.
It is just as fraudlulent to lie about income to show having the ability to pay as it is to lie about giving someone a loan that they cannot knowingly pay when the loan resets.
Both actions are frauds.
April 30th, 2009 at 10:05 am
“Not in a case where the home buyer obtained the loan by fraud, ie lied about income on an application. I believe those should be held criminally accountable AND responsible for bank losses as a result of that fraud.”
Wait one second, Bertdilbert, the majority of the time, those lies came from the buyer, or at least the buyer knew and went along with what was put on the application. Another lie is that now they pretend they didn’t know.
Again, no one is making excuses for banks. But you seem to go out of your way to make excuses for the borrowers.
April 30th, 2009 at 10:42 am
Christ, ex-owner. We’ve been through this before.
Fine. Let’s continue to shuffle the chairs around the deck. I buy your former home, you buy mine. We both pay less. Who takes the loss?
April 30th, 2009 at 11:35 am
I’m hearing more stories about people that have not paid their mortgage for well over 6 or 8 months and have not gotten an NOD. Dont ask, dont tell. This seems to be the current theme of the banks and govt working together to avoid reality. How long can it go on???
April 30th, 2009 at 12:14 pm
“Then…Why would those not paying their mortgage today, or those undervalued..get REVALUED?”
Ex_owner, I agree with you on this. It’s totally unfair.
April 30th, 2009 at 1:18 pm
Peterb,
Your comments about the time to be issued a NOD (at least in CA) are correct. Our house is 50-60% underwater. We called the lender back in August 08 to discuss the possibility of a modification. They said they would not entertain mods for people who were current…so we stopped paying. They were more willing to talk to us after we were 3-4 months behind but only to offer deals which would solidify our position in financial jail. We got a NOD at the end of February so it took around six months for us. That being said, we have neighbors who have not paid in 18 months (yes, 18 months) and they have yet to receive a NOD. I believe it varies greatly depending on the lender.
The funny thing is, I called my lender and told them that it is clear that a mod is not going to work out and wanted to see if they would like to schedule a date to take the house back. I was not asking about a “cash for keys” or anything else, just to work out a time for them to take the house back as a deed in lieu so they wouldn’t have to go through the foreclosure process. Honestly, I was trying to find some sort of reasonable end to the situation but they refused. When the lenders refuse to accept a home in good condition, and end up paying more money to take the home back in worse shape, it is difficult to understand their thought processes. They said that they will not take the house back unless a short sale has been pursued for at least three months. I told them that I would not pursue or consider a short sale at all and that we will be moving out on June 1. They maintained that they will not take the house back. It boggles my mind that they would rather have the house sit vacant for who knows how long than to just take it back and either rent it or sell it. I know that we could stay there for a while longer and continue to save money but we just want to move on and start over.
So I guess to answer your second question…it can go on indefinately.
April 30th, 2009 at 1:33 pm
On a side note, I have seen a lot of posts from angry people upset about having to pay for all of the people who are getting foreclosed on. I am just going to ballpark some numbers here…
Let’s assume that the taxpayer cost from the housing bust is one trillion dollars. Let’s also assume that there are 300 million people in the US. And let’s assume that the top 10% of incomes are paying 90% of the taxes. And I will assume that none of those top 10% read this blog. This means that the cost for the rest of us is around 3400 dollars. If this is taxed over the course of ten years, it will cost each of us around $28 a month.
I could be way off on my assumtions here, but it doesn’t seem like that big a deal to many of us and certainly won’t have life altering impacts. I am sure that those who are angry about having to keep renting for the past few years because the bubble prices were so outrageous will benefit far more through lower priced homes than the $28 dollar a month hit they take on their taxes. And if the $28 dollars a month does have a profound impact on your finances, you are not in the market to buy a house anywhere anyways.
If someone has a better number to attach to the cost for joe taxpayer, I would be interested to hear it. I just get tired of vague and nebulous rants about how much the bubble is costing all of us.
April 30th, 2009 at 2:43 pm
Benzi,
I was sugesting that long time ago… you buy mine, I buy yours..
Who takes the loss to what you would think the fix is..? to revalue the under water owner?
- how come no sugestion about demand? people that lost already
(wait 10 years..make 30% downpayment..)
- how come no suggestion on who buys the homes for people loosing their jobs (they wont qualify)
- how come no suggestion on who buys the homes for people loosing their homes due to fraud .. like the 8000/year guys(they wont qualify)
There are 19.1 million homes vancant right now.. do the research
I say/repeat:
- let ex_owners like myself come back in
- remove taxes from paychecks..so people have more $$
or just let time take course…
April 30th, 2009 at 4:12 pm
Partyboy – could be that they aren’t able to do a deed in lieu b/c of their investor agreements – balance still considered ‘forgiven’ and probably bound by loss agreements. Just a thought. Also, could be more negative tax implications (for you) thru deed in lieu instead of foreclosure (I’m sure you were aware though).
April 30th, 2009 at 5:40 pm
Wanton
If I suggest that those that are found to have lied on their mortgage application should be responsible for the banks losses and be convicted of fraud, how exactly to you interpret that to be siding with the home buyer?
If you think that is siding with the homebuyer, I am guessing that you would suggest waterboarding or something of that nature as being more reasonable?