Keith Jurow: House prices in New England crashing in 2012
The amend-extend-pretend policy of America’s banks is most pronounced in New England, particularly New York where the lenders live. There have been very few foreclosures despite high default rates, partly because the judicial foreclosure process in these states is log-jammed, and partly because lenders don’t want to foreclose and recognize their losses. Of course, this policy has prompted a great deal of strategic default among loan owners who recognize they can live for free, but it has succeeded in making everyone else believe their neighborhoods are somehow immune to the housing bust, at least until the last year when prices because to fall precipitously.
I have gotten to know Keith Jurow over the last year or so. He authors articles on Seeking Alpha, Business Insider, and Minyanville, where he also publishes his housing market report. He and I correspond frequently, and I am impressed with his writing and research. His latest work is a presentation to the Financial Policy Council in New York. His main presentation begins four minutes ten seconds into the video.
One of the most astounding revelations that came from his research is how much larger the shadow inventory is than is widely reported. Lenders don’t have to file a Notice of Default when a borrower becomes delinquent on their payments. They have the right to do so, and prior to the housing bust, they always did as quickly as possible to begin the foreclosure proceedings and get their money back. However, as the housing bust worsened, lenders began delaying their NOD filings because they already had more than they wanted to process because the foreclosures were hurting house prices. The borrowers who were delinquent but not yet served notice became shadow inventory.
CoreLogic is the most widely reported measure of shadow inventory, but they rely on lenders to voluntarily report their delinquencies. Lenders are under no obligation to report, and no obligation to tell the truth if they do. However, the State of New York requires lenders to notify the state and the borrower when they become delinquent that they may be subject to a foreclosure. It’s like a pre-notice prior to the actual Notice of Default. In New York, the shadow inventory is visible to those who know where to look for it. These numbers used to be published, but for some unknown reason (likely industry pressure), these numbers have not been published for quite some time. The data is public information, and Keith Jurow found the bureaucrat responsible for tallying this information and obtained it. The numbers in New York are astonishingly large. Keith’s outlook on prices in New England is rightfully bleak.