The foreclosure wave is here — look beneath the headlines
- Notice-of-Trustee Sales are up 100% from Feb to May and subsequent foreclosures are up 75% from March to May.
- CA foreclosure activity outpaces total house sales by 100% – infinite supply
**We chose one of many weekly research reports and notes for this blog. For more information on our variety of absolutely unique research offerings please see the website.
In early April I was digging around my default and foreclosure database reviewing servicer and originator specific foreclosure numbers and noticed that a couple of the nation’s leading servicers were acting funny. At that point, most servicers had been ratcheting up Notice-of-Defaults for three months while scaling back sharply on filing new Notice-of-Trustee Sales. Subsequent foreclosures had been bouncing off of year and a half lows since October. Based upon the evidence from the two previously mentioned large-bank servicers, I then made the call about a wave of foreclosures about to hit.
The wave is here even though it did not show up in the aggregate numbers released by RealtyTrac yesterday morning. In their report, CA aggregate foreclosure activity was reported down 4.46%. That is not accurate.
There are three stages of foreclosure, which we track religiously every day. Because each stage is separated by a period of up to 4-months, the mix can change dramatically causing the aggregate to move in the opposite direction of present conditions. Additionally, back in 2008 most servicers all did things the same way at the same time. Now, each bank and servicer has their own agenda so the monthly numbers are much more volatile, which can lead to misinterpretation.
In May, aggregate foreclosure activity was not down 4.6%, rather up 13.5%. On a more granular level, the takeaways are that Notice-of-Trustee Sales are up 100% from Feb to May and subsequent foreclosures are up 75% from March to May – these are significant events. Especially when considering that the housing market at the low end has been benefiting in part by the lack of inventory caused by the Q4 2008 – Q1 2009 moratoria.
The Waves
The chart below shows aggregate foreclosure activity of all three foreclosure stages. The red and yellow lines — Notice-of-Trustee Sales (stage 2) and actual foreclosures (stage 3) respectively — are the wave. In the past three months NTS and foreclosures have surged, as evidenced by the red and yellow growing twice as large. Again, notice-of-Trustee Sales are up 100% from Feb to May and subsequent foreclosures are up 75% from March to May.
So, why aren’t foreclosures up 200% – 300% from March and back to all-time highs, as the March through May Notice-of-Trustee Sales surge would indicate? It’s because of capacity and timing.
We know for a fact the GSE’s and several servicers came off moratorium around the time that Obama made public the Home Affordable mod and refi programs at the end of March. From there the servicers had to make the decision to participate, integrate the new borrower modification and loan decisioning and slotting technology and train staff. If this took 6 weeks, which would be incredibly fast, then in the second week of May they would have started re-qualifying and contacting the back log of distressed borrowers with the new loan mod, workout and refi offers. Then they have to give the borrowers a reasonable time to accept or deny. It is only June 11th — there simply has not been enough time. But early foreclosure numbers for June show the foreclosure ramp remains intact.
The chart below breaks out only the Notice-of-Trustee Sales and actual foreclosures, stages two and three. When viewing it this way, the surge in NTS and foreclosures since Feb and March respectively is obvious – each stage up 100%!
The Notice-of-Trustee Sales and foreclosures will continue to come. Notice-of-Defaults — the first stage of foreclosure and the earliest leading indicator of everything mortgage, housing and balance sheet related — have been hitting record highs since December.
The past 6-month NOD average is 45k…the 6-month average for the worst time in the summer of 2008 was only 43,500.
The subsequent foreclosures that come from this latest 6-month NOD surge will hit about the same time a mortgage mod re-default surge from the 2008 NOD surge does. At this point if new NOD’s have leveled out or even fallen by 50%, the re-defaults from bad loan mods made when mods were new and even more reckless than today will keep foreclosures as headlines through next Spring at least.
The following chart is of monthly Notice-of-Trustee Sales (second stage) showing the bleed over from the Notice-of-Defaults in the previous chart. NTS are back at all-time highs. Holding back all of these foreclosures will be an impossible task through modifications alone. This is the wave.
The chart below is of actual foreclosures. Foreclosures follow the NTS stage by 14-60 days. From the March lows to May, foreclosures have almost doubled. This highlights the bleed over from NTS that will continue. Early June results already show a 10-month high foreclosure run-rate of in the low 20k’s.
Lastly, the following shows total CA house sales vs. total CA foreclosure activity. The blue lines reflect total foreclosure activity and red lines, total sales. This chart clearly highlights how much of a supply problem that foreclosures are and why there is such a push to kick the can down the road through moratoriums and by modifying America.
**We chose one of many weekly research reports and notes for this blog. For more information on our variety of absolutely unique research offerings please see the website.
Best Regards,
Mark Hanson
Mark@TheFieldCheckGroup.com
Data provided to Field Check Group Real Estate & Finance by ForeclosureRadar.com
June 17th, 2009 at 8:45 pm
David The Renter,
I’ve got a question for you.. do you think prices could fall back to 1998’s levels? or is that completely out of the question for you?
June 17th, 2009 at 8:48 pm
I should add by 2012-2013?
350K in 2000
430K in 2003
640K in 2006
430K in 2009 good enough for Dave The Renter
???K in 2012
I’m guessing $250K by 2012, ($230k by 2013)…
June 17th, 2009 at 9:02 pm
87% of forclosures in may didn’t go to auction in cali? can someone explain that?
MM, onestly, when do you think the SHADOW INVENTORY will be released to the public?
builder sentiment down, home building up??
economy green shoots, unemployment up??
investor,firt time buyers, chinese snaching/bidding on homes, forclosure wave gets bigger, mutliple waves coming
SOMTHING HAS TO CRACK! WHEN? 2012, OR SLOW …through 2022?
June 17th, 2009 at 9:05 pm
deflation or stagflation?
June 18th, 2009 at 8:01 am
ex_owner, for selfish reason, I hope you’re right about price falling to 1998, although I doubt it.
Oh and let me add something to your historical price list:
350K in 2000
430K in 2003
640K in 2006 goog enough for ex_owner
430K in 2009 good enough for Dave The Renter, but ex_owner thinks Dave’s an idiot
???K in 2012 NOBODY KNOWS!!!
June 19th, 2009 at 12:53 pm
“???K in 2012 NOBODY KNOWS!!!”
Exactly. And that’s why people should be very cautious. I’m sure there bargains out there, but in uncharted waters that RE presently resides, sharks and other predators are everywhere.
June 19th, 2009 at 5:40 pm
fool me once shame on you.. fool me twice..can’t fool me again!
June 20th, 2009 at 1:51 pm
Mark,
Is it possible to estimate the current “shadow inventory” ? Thanks
June 20th, 2009 at 5:02 pm
This is starting to look like a “Land Grab”
I have been making offers for about 6 months.
Houses are sold from TARP banks without being listed.
Example: Listed 9:00 am active Pending 9:01 am same day
I wrote to Wachovia and they answered me saying they fired
this Realtor.
Now its going on at JP Morgan, which I have also written to.
The houses I tracked back are being sold to wealthy investors, and real estate investment groups.
I wrote to Obama, Pelosi (my rep) and Frank and got no response.
latest today “Short Sale, 24 hour notice call agent before showing.
No more offers, pending.
less than 24 hours.
We paid for the bailout and we can’t buy these homes.
June 20th, 2009 at 5:05 pm
JC the shadow inventory are the homes the banks are postponing at auction.
Friday:
37 to be auctioned
33 postponed
they are sitting in the shadow inventory, not paying property taxes, or mortgage. Some up to 2 years.
June 21st, 2009 at 12:44 am
Kim, thanks for the update. Keep us inform if you find out anything new. Something is going on, the big boys are playing games and we, the little guys, get screwed every time. I went to see house today. I actually called the listing agent yesterday when it was listed for one only day, and was told it got over 60 offers. WTF!! True, the agent could have lied, but multiple 30-40 offers is no longer unusual. Yet, our government is trying to prevent foreclosures from coming on the market.
June 21st, 2009 at 7:06 am
Wonton, you and many others.. are sure playing their game.. patience required, in order to win! Their “damage control” and “perception game” will soon loose, if you stop bidding on ONE (0f many) home(s) that’s released.. there are (much, much) more in the pipe.. more than you can imagine.. and more coming… do you want THE bottom in 2012 or 2022?
June 21st, 2009 at 7:08 am
USE SOME COMMON SENSE!
June 21st, 2009 at 7:13 am
I’m going to guess shadow inventory in Cali is at 200,000 homes, am I good Mark?
June 21st, 2009 at 7:27 am
Wonton, let me add something too:
430K in 2009 good enough for Dave The Renter, but Wonton..is having doubts (should I trust ex_owner, who already experienced the loss, the nighmares, is getting his common sense back?.. or am I missing out??)
WONTON.. GO BUY! please! I like nothing better to see than you “living” in a house.. that depreciates for 12 years!
June 21st, 2009 at 10:45 pm
ex_owner, your posts are silly and they don’t make sense.
June 22nd, 2009 at 9:46 am
as far as i can tell, the shadow inventory has two parts: the REO properties that are not being listed and the NTS properties that are having their auctions postponed.
from attachment E of the sac city/county 2009 Foreclosure Action Plan: http://www.shra.org/Content/Housing/Foreclosure/HCD/ExhibitE.pdf
“Estimates of Numbers of Properties Remaining in REO Vary – It is
unfortunately difficult to pin down the number of properties that remain in REO status at any point in time. Information from DataQuick Information Systems estimates that the number of unsold REO properties in Sacramento County increased from about 4,400 in August 2007 to over 14,000 in July 2008. However, information received from the Sacramento Association of Realtors(SAR) indicates that they were tracking only about
2,100 REO properties for sale in mid-August 2008.”
so, that 12k properties in the shadow inventory in july 2008. looking at the 3rd quarter Foreclosure Tracking Report (FTR)
we add 2/3(4720) for august and september and 3167 from the 4th quarter FTR and 2819 from the 1st quarter 2009 FTR for a total or 14000+3000+3167+2819 = 22986 REO properties in the sacramento region.
now we have to get at how many REO properties sold since august 2008. i will post again when i figure that out.
and dont forget, this does not count the NTS that are currently being postponed at a rate of 73% (what report did i get that from, anybody?)
June 22nd, 2009 at 9:48 am
sorry, link to quarterly reports:
http://www.shra.org/Content/Housing/Foreclosure/ForeclosureRpts.htm
June 23rd, 2009 at 8:26 am
I am one one town, watching the foreclosure radar everyday.
36 set to auction
30 postponed
June 23rd, 2009 at 11:39 am
Thanks Kim. Do you know what the reason is for these postponed props?
June 23rd, 2009 at 3:50 pm
Wonton, so the prices don’t get lowered (too many homes at auction.. let people bid up the few that are available at auction)… or maybe they don’t want to take the loss this quarter.. they’ll take it next quarter.. you like my thinking? or still silly to you?
PATIENCE GREEN HOPPER
June 23rd, 2009 at 6:00 pm
yes ex_owner, your posts are still silly.
You can talk all you want but we know what you’re about, don’t we?
You bought at the peak and lost your home. So what do you do? You blame others for your mistake or at least you want others to share the blame for your decision. Even so, you are still infatuate with owning a home but you CAN’T buy. So you attack anyone even thinking of buying, because they have something that you don’t, A Choice.
Look, price is important but there is more to a value of a home than just price. Which is better, to buy a home now for $400,000 if you can afford it or to buy the same home for MAYBE $350,000 three years from now? That’s three years of your life that you can never get back, how much is that worth? Each one of us has to answer that for ourselves, and it’s not up to you for determine the answer for other people.
June 23rd, 2009 at 7:51 pm
Wonton, stop blogging..and go buy one! I think you’re talking in reference to someone that could buy now..not me personally..I’m still in jail credit remember?
I’ll continue to save, and learn(ed/ing) from my mistakes!
Life it’s not only about buying a home, you know? my time will come again sometime in the future..it’s just funny to see you and other being manipulated by the many “bids” on a home, and trying to understand what’s going on… you still won’t.. and will not until you go through it.. good luck my friend..now go and help the economy!
June 23rd, 2009 at 8:05 pm
“Which is better, to buy a home now for $400,000 if you can afford it or to buy the same home for MAYBE $350,000 three years from now? That’s three years of your life that you can never get back, how much is that worth?”
$100,000
On your price of $350,000.. saving 50,000 over life of the loan.. 100,000 .. seems a lot of money to me… conidering I’m still next to my kids, still working, roof over my head, and saving
Now think on $200,000 (my believe that prices could go to 1998)
200,000.. saving 200,000 with interest over life of the loan.. 400,000
HMM? and add to that a nice 20% down payment(RATHER THAN A FHA LOAN).. 260,000 over life of the loan.. 520,000! GEEEEEEEEEEEE now we’re talking some SAVINGS!
June 23rd, 2009 at 8:12 pm
so stop saying it’s a place to live..it’s so important.. put your money where your mouth is.. go buy!
Ninja loans are back! right?
unemployment non existant! right?
people are paying their mortgages! right?
securitization is back!
underwater owners..their balance is wipped off
ex-owners can get a home a again!
EVERYTHING IS ROSY! keep smoking the pipe and buy a home to live in (for couple years..than you can blame me.. cause I said buy!)
June 23rd, 2009 at 8:16 pm
THIS MARKET IS DEAD FOR YEARS!!!!!!!!!!!!! ENGINEERED BY THE BANKERS!! SO THEY CAN BUY LOW, AND GET MORE $$$$$$$ LATER…RINSE AND REPEAT!!!
EVEN IF THEY WANT HYPER INFLATION.. IT WON’T WORK.. WE THE PEOPLE WON’T STAND FOR IT AGAIN! STOP THE BAILOUTS!!! LET THE MARKETS GO BACK TO NORMAL (i say 1998, but remember many place are already at 1988 prices..or lower..IT WILL OVERSHOOT… have you checked DETROIT? I can go buy 8 homes right now for CASH!)
June 23rd, 2009 at 8:20 pm
WELCOME TO THE GREATER DEPRESSION! (some see it early..some will see it later)
June 24th, 2009 at 12:36 pm
I finally figured out what ex-owner-now-renter is. he’s fortuneteller!! he can forecast the future! Oh great one, when is it a perfect time to buy. Since you made such a wise decision before, all your future decisions MUST be as wise too!
June 24th, 2009 at 1:00 pm
Banks delaying foreclosure because they don’t want to pay property tax. It is destroying neighborhoods, the former owners have long since moved out. They also don’t have to evict when they want the house. The banks are trying to force a bottom and keep inventory low.
This will go on for years, don’t expect to buy and see any appreciation for years.
June 24th, 2009 at 1:03 pm
NewHomeOwner, you got it! and I’m a better one than Wonton! I’ll stick with my savings and DEFLATION call.. now go buy a washer, dryer, a car.. go STIMULATE!
btw did you buy a new home? or just new to owning?
..AND, if it’s such a good time now.. why are there INCENTIVES to buy?
8 K, low interest, gov worry about deflation… CAN YOU EXPLAIN THAT WISE ONE??
June 24th, 2009 at 9:48 pm
MM,
What’s up? when is the next article coming? it’s been 10 days!
Maybe you can write one on the “shadow inventory”…
June 25th, 2009 at 10:41 am
Mark, are we on track or are you surprise at the lack of foreclosures that we’re seeing up to date?
June 29th, 2009 at 12:00 am
If what Kim says is true, that banks are delaying foreclosure on vacant properties and not paying property taxes, how long until people start talking about using the adverse posession law to pick up properties for free (or the price of property taxes)? That’s pretty much exactly what the law exists for — to make sure that land remains reasonably well utilized.
Anyway, that would sure force banks to foreclose in a hurry.
June 29th, 2009 at 8:23 am
I watch one town only, with very high default rate.
Friday:
36 set for auction
33 delayed
3 sold to bank
Listed by banks 4
went contingent 11
forcing a bottom.
Foreclosed and held back for one year, bank won’t respond to my offer to purchase.
Was Countrywide, owner listed as Bank of New York Mellon
Loans on property 648K
Bank of Mellon purchased for 236K
Where did the other money go?
lots of shady stuff going on.
June 29th, 2009 at 8:55 am
“Loans on property 648K
Bank of Mellon purchased for 236K
Where did the other money go?”
The money didn’t go ANYWHERE because it wasn’t THERE in the first place. Poof!
June 29th, 2009 at 10:26 am
I have a good friend who has not paid his mort. in over 8 months and has heard very little from the lender.
A family on our block did a couple refi’s a few years back and purchased outright to new cars both BMW’s, and some pretty nice toys etc… we thought at the time they were just doing good. I just learned they have not made a payment since last year and have been living rent fee.
A third family just moved out, said the bank would not call them back so F-um they rent around the corner.
I wonder how many more in Mission Viejo are in the same boat.
June 29th, 2009 at 1:31 pm
Why is Mr Mortgage “missing in action”?
June 30th, 2009 at 9:29 am
Mark,
Please keep doing what you are doing! There are an awful lot of bottom callers out there – and they are people who should know better!
July 1st, 2009 at 3:40 pm
So, are you on vacation or is someone paying you some hush money?
I would be interested in your thoughts on these quotes:
“In better times, lenders tended to begin the foreclosure process after three months, said Guy Cecala, publisher of Inside Mortgage Finance. Now it is not unusual for it to take nine months for the process to begin, he said.
‘No one is in a rush, lender-wise, to deal with the property,’ he said. ‘If you have to sell at a loss, why rush?’
Lenders traditionally write down the value of the home six months after an owner stops making payments, but the total loss is not recorded until the property is sold in foreclosure, said Mark Zandi, chief economist of Moody’s Economy.com.”
“It used to be that they wanted to foreclose as quickly as possible. . . . [Now] it’s like this hot potato that nobody wants.”
More than ever, foreclosure has become an unattractive outcome for lenders.
“What we’re seeing more and more right now are cases of a lender threatening foreclosure and the foreclosure sale is canceled at the last minute,” said Jeanne Hovenden, a Richmond bankruptcy attorney, . . . . “It’s more like the lenders don’t want to own any more real estate and are using foreclosures as a pressure tactic.”
quotes from:
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/23/AR2009062303500_pf.html
What percentage do lenders now write down values after six months?
Has this percentage changed since the FASB changed its mark to market rules?
In other words, are the banks writing off very little until they actually foreclose?
Are the banks delaying foreclosures to avoid taking write downs and having to meet increased capital requirements (knowing that they have upcoming problems with commercial real estate and credit card defaults)?
I would really like to hear your thoughts.
Thanks.
July 4th, 2009 at 5:54 am
People, there is just so much going on regarding the foreclosures, that you just don’t get. For example:
Kim, not to pick on you, but the property tax excuse is not valid. The reason is that property taxes represent maybe two months of payments. No big deal. Andy why do I say that?
Simple, the Pooling and Servicing Agreements for the Securitized loans require that the Master Servicer make “advances” to the investors of each any every payment missed by the borrower. With most PSA’s, that must occur each and every month until the loan is either brought back to performing status or the home is foreclosed on, at which time they can get back their advanced payments. So foreclosure would make the most sense, but the Master Servicer is not foreclosing immediately. Why not?
Because the TARP money goes to the Master Servicer, so that the Master Servicer is reimbursed the advances, so that they do not go out of business due the the advances destroying liquidity.
This means that the Master Serrvicer can foreclosure at their leisure, keeping REO’s “low”, also trying to do workouts, and su much more.
Follow the money……
As to those who complain about Mark not posting more often, he has a real jjob, that requires real work. He just can’t stop and write articles to please people. He must make money also.
July 24th, 2009 at 6:53 am
A lot of usefull financial info.
July 24th, 2009 at 10:21 pm
Haha – you don’t see posts like this too often
July 26th, 2009 at 11:32 am
I talked to a real eztate analyst from CA last year who was predicting a 70% peak to trough drop on CA property , based on then currently available data. Anyone care to comment . It will be the same in Dubai already at 50%.
July 27th, 2009 at 9:42 am
Thanks for the news, I really didn
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