Nov162012
Foreclosure cancellations in California up 62% in late 2012
Everyone active in the real estate market today laments the lack of available inventory. Orange County housing market prices are rising due to the restricted inventory. Banks are focus on loan modifications and short sales to resolve their prior bad loans. In the interim, delinquent mortgage squatters are enjoying their free ride.
Earlier this year, the State of California passed the Homeowner Bill of Rights (Detailed review of the new changes to California foreclosure law). In the new law, banks are no longer allowed to pursue dual-track foreclosure processing. If a loanowner is seeking a loan modification, the process must be allowed to run its course — gaming the system included — before the bank and finally push out the committed squatters. In preparation for the new law taking effect January 1, 2013, banks are cancelling all their foreclosure proceedings on properties pursuing a loan modification. Apparently, this is a whopping 62% of all loanowners in foreclosure.
October 2012 California foreclosure Cancellations were up 62.1 percent from the prior month, and 36.7 percent compared to last year. While this is not the first time Cancellations have spiked, this is the largest one-month increase since we started tracking foreclosures in September 2006. It seems likely that the increase is being driven by the Homeowner Bill of Rights legislation that goes into effect on January 1, 2013 and its provision to restrict the dual-tracking of foreclosures. Dual-tracking is the term applied to loans which are being considered for either a short sale or loan modification while simultaneously proceeding through the foreclosure process. Prior to January 1, lenders will have to cancel any foreclosure on a loan for which a short sale or loan modification is being considered, and it appears that process has likely already begun.
October 2012 California Notice of Defaults was down 8.0 percent from the prior month, and down 48.9 percent compared to last year. October 2012 California Foreclosure Sales were up 9.3 percent from the prior month, but down 38.9 percent from the prior year..
“The California Homeowner Bill of Rights that takes effect in January 2013 is beginning to impact foreclosure trends,” said Sean O’Toole, Founder and CEO of Foreclosure Radar. “This is another example of where changes in foreclosure trends are driven by government intervention, and not necessarily economic recovery. While the impacts are still unclear, the elimination of dual tracking may avoid some unnecessary foreclosures, but will lengthen the foreclosure process and delay ultimate recovery. Expect further impacts to foreclosure trends in the months ahead.”
For anyone waiting for the foreclosure inventory to lessen the supply shortage, this is not good news. As I noted recently, MLS inventory is NOT coming as foreclosure filings dry up. Now with a bevy of cancellations, there is little or no chance of any significant amount of foreclosures hitting the market and ending the supply shortage. Until banks manage to push prices back up to the peak, restricted inventory is the new normal.
The banking cartel won.
California REO acquisitions up nearly 10%
REO inventories stabilize
The real goal of lender REO policy this year was to reduce their standing inventories. Lenders were holding tens of thousands of homes waiting for better days. Those homes have been cleared out, and the remaining inventory is in their (very slow) processing pipeline. The pipeline REO has stabilized statewide at about 65,000 units over the last 4 or 5 months.
Pipeline processing taking even longer
Banks are certainly not worried about making their foreclosure processing any more efficient. Since it now takes them nine and a half months to process a foreclosure, the 65,000 they currently own are all in process. It represents the total acquisitions over the last 9 months. I don’t expect to see REO inventory levels drop much from here unless they decrease their processing times.
Notices are also declining
Lenders have greatly reduced their foreclosure filings over the last year despite the fact they have no shortage of delinquent squatters to foreclose on. It is a sign that banks are in no hurry to process California foreclosures due to the upcoming law changes on January 1.
Orange County
The story in Orange County is similar to the rest of California. REO processing is back to levels of April through July. Overall, REO processing is down about 50% from last year’s levels.
Notices of default in Orange County also took a dive for the third straight month. Squatters in Orange County can breathe a little easier.
The inventory saw a similar leveling off.
Amend-extend-pretend continues. Lenders are in no hurry to process more foreclosures, and their liquidations still hang over the market. Over the last six months, their snail’s pace of liquidations has created a dramatic and completely artificial shortage of supply which has caused prices to shoot upward. Expect more of the same going forward. It might get even worse.
”the banking cartel has won”
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Au contraire….. ‘credit’ is signaling the prospect for major event risk is increasing, not decreasing. Let’s not forget that once confidence is lost, things can unravel PDQ.
I find it hard to have faith that the cabal of bankers manipulating the housing market won’t keep control long enough to reflate the bubble. They have loanowners, politicians, and the federal reserve on their side.
“They have loanowners, politicians, and the federal reserve on their side.”
Sort of sounds like the 3 pillars of the ponzi apocalypse. Especially now since the Fed is floating out the idea of keeping rates 0% until 2016.
Three more years of zero percent interest rates will drive prices up significantly, particularly if the jobs market improves. Once prices start going up and Ponzi borrowing resumes, the economy will get a sudden jolt of spending juice, and everyone will celebrate the great policies of the federal reserve. Then the Ponzi scheme will implode, we will have another nasty recession, and everyone will wonder what went wrong.
Either way you cut it, people on the coasts are screwed. Between the banks, and the FED making sure housing prices and costs go up, and the Federal gov’t doubling taxes on anyone making over $250k I don’t see how anybody can win?
Are we seriously trying to create a welfare state? you hear that big sucking sound?
We are evolving past an earned-income model to a Ponzi-borrowing model. If you actually earn money, you have to pay a huge amount in taxes. If you Ponzi borrow that money out of your house, you don’t pay any taxes, and when the system collapses, you get bailed out by those poor fools who earn income and pay their own way. The incentives are to Ponzi borrow and walk away or petition for debt relief after the crash.
Excellent comment!
Look for interest rates rising, as in 2016, as a clue to a possible easy money housing bubble. Banks like to lend when interest rates go up.
Yeah, I hear ya. Problem is, the basis of the model is Soviet era-esque in that it subsidizes existing malinvestment at the expense of new capital commitments, and is micro-managed by a cadre of academic/policy wonks who believe they’re so gifted that they can actually control the business cycle.
No argument here. But as a wise investor once said, the markets can remain irrational (or manipulated) longer than you can remain solvent (or bearish).
I have no doubt a price will be paid for all this manipulation, but when and how large are open questions, and in all likelihood, it will be years away.
I agree. Unless the shadow banksters come up with an easy money lending scheme soon, the bubbles that are blown will be short lived and the ultimate direction of prices will be down. Watch out for the easy money bubble though. Perhaps Obama’s election slowed it down but we will see by the way Dodd-Frank stops the predators.
Foreclosures still four times normal, 30-day delinquencies rise
The percent of loans in foreclosure, or the foreclosure inventory rate, fell to the lowest level since the first quarter of 2009, according to the latest delinquency survey from the Mortgage Bankers Association (MBA).
On a non-seasonally adjusted basis, the foreclosure inventory rate in the third quarter was 4.07 percent, down 20 basis points from last quarter and 36 basis points from a year ago. MBA reported the quarterly decrease was the largest since the survey’s history.
“The level however, is still roughly four times the long-run average for this series as we continue to see back logs of loans in the foreclosure process in states with a judicial foreclosure system,” said Mike Fratantoni, MBA’s VP of research and economics, in a release.
MBA noted five states alone accounted for 51.7 percent of the nation’s share of foreclosure inventory: Florida (23.4 percent), California (8.3 percent), New York (7.2 percent), Illinois (6.5 percent) and New Jersey (6.3 percent).
On a seasonally adjusted basis, the national delinquency rate stood at 7.40 percent in the third quarter, according to the survey. The decrease is a quarterly and yearly decline of 18 and 59 basis points, respectively.
The non-seasonally adjusted rate, however, increased quarterly by 29 basis points to 7.64 percent. The MBA explained the a typical seasonal pattern is for the rate to increase from the second to third quarter.
The delinquency rate includes loans that are at least 30 days or more past due but not in foreclosure and covers mortgages on one-to-four-unit residential properties.
The delinquency rate for loans that are 90 days or more past due was 2.96 percent, a drop of 23 basis points from the second quarter and 54 basis points from last year.
Fratantoni explained the decline in mortgage delinquencies was helped by a decline in 90-plus delinquencies.
“The 90 day delinquency rate is at its lowest level since 2008, and together with the decline in the percentage of loans in foreclosure, this indicates a significant drop in the shadow inventory of distressed loans-a real positive for the housing market,” Fratantoni stated.
The rate for 30-day delinquencies increased to 3.25 percent, rising quarterly and yearly by 7 and 6 basis points.
14M Homeowners Still in Negative Equity
In the third quarter of this year, negative equity slipped further and now represents less than 30 percent of homeowners with a mortgage, Zillow revealed Thursday.
According to a negative equity report, 28.2 percent of all homeowners with a mortgage remain underwater, a decrease from 30.9 percent in the second quarter.
The 28.2 percent translates into about 14 million U.S. homeowners who owe more on their mortgage than their home’s value. In the second quarter, about 15.3 million homeowners were underwater.
While the numbers may be diminishing, they still have broad implications.
“[A] substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner,” Zillow chief economist Dr. Stan Humphries said in a release.
Zillow attributed the decline in negative equity to rising home values, which increased 1.3 percent from the second quarter to the third, according to data from the company.
Even though home prices are offering some relief to the problem of negative equity, Zillow warned challenges still lie ahead.
“The housing market has found real momentum of its own, but is not immune from shocks to the broader economy. If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains – and, as a result, falling negative equity rates – could stall,” Humphries added.
The real estate data provider also found the 30 largest U.S. metros saw quarterly declines in negative equity.
Among the metros, Phoenix experienced the biggest quarterly decline in negative equity. The metro went from having 51.6 percent of homeowners in negative equity in Q2 to 45.5 percent in Q3, a decline of 6.2 percentage points. In Las Vegas, negative equity dropped 5.5 percentage points to 63 percent quarter-over-quarter. Denver had the third biggest quarterly declined, where negative equity fell 4.9 percentage points to 22.2 percent.
In Pittsburgh, only 14.3 percent of homeowner are in negative equity.
Interest rates may hit 3%.
Freddie Mac Reports New Record Lows for Fixed Rates
Fixed mortgage rates dropped to all-time record lows “amid indicators of higher consumer confidence and lower wholesale prices,” according to Freddie Mac’s Primary Mortgage Market Survey.
According to the survey, the rate on a 30-year fixed-rate mortgage (FRM) averaged 3.34 percent (0.7 point) for the week ending November 15, down from 3.40 percent the week before. The previous low record for the 30-year fixed was 3.36 percent, set the week of October 4 this year.
The 15-year fixed average also fell to a new low, dipping to 2.65 percent (0.7 point) from 2.69 percent the week before. The previous low record for an average 15-year FRM was 2.66 percent, set the week of October 18 this year.
Figures for adjustable-rate mortgages (ARMs) were mixed. The 5-year Treasury-indexed hybrid ARM averaged 2.74 percent (0.6 point), up from 2.73 percent previously. On
the other hand, the 1-year ARM average fell, declining to 2.55 percent (0.3 point) from 2.59 percent.
Frank Nothaft, VP and chief economist for Freddie Mac, explained the dip in fixed rates was a reaction to increased optimism.
“Fixed mortgage rates eased this week to record lows on indicators of higher consumer confidence and lower wholesale prices,” Nothaft said. “Consumer sentiment rose in November to the highest reading since July 2007 according to the University of Michigan. Meanwhile, the core producer price index fell 0.2 percent in October.”
Fixed rates also fell in Bankrate’s weekly survey, though they didn’t break any records. The 30-year fixed average fell three basis points to 3.54 percent, while the 15-year fixed average fell only one basis point to 2.87 percent.
The 5/1 ARM remained unchanged from last week at 2.72 percent, Bankrate reported.
The site’s trend survey found analysts divided about where rates will go from here. One-third believe rates will increase, while one-quarter say there will be another drop. The rest—about 42 percent—don’t expect any major changes as investors wait for a sign from policymakers.
“There are many unresolved, large issues: the fiscal cliff, the European Union and disappointing corporate earnings as starts,” said Dick Lepre, senior loan officer at RPM Mortgage. “Until there is resolution, or at least something passing for resolution of the fiscal cliff issue, markets will be filled with uncertainty. Uncertainty keeps rates low.”
“Uncertainty keeps rates low”. That is retarded. Dick Lepre must be retarded. The large issues thing he got right, tho. 15% rate is great when you’re only going to pay a couple years anyway, ha ha. Uncertainty keeps rates high, and governement keeps official rates low whilst hiding bank fees and insurance costs under the rader. Hmmm. So rates are high, like the real cost is diff from the advertised price. I’ve bought in Moscow before and I noticed prices move worldwide every time, and those pesky big issues make me hesitate now, too. Not that I could buy anyway. Yestertday the guy at Greenlight said I have to have $60K in the bank before they’d refi my house, and I don’t. And what is this with my official rate being quoted as 3.75% for a refi when the fed rate is like 0%? No wonder I read this blog, trying to get a grip on this unphanthomable market.
I don’t know where he gets the idea that uncertainty keeps rates low. I suppose it does for Treasuries because uncertainly causes investors to flee to the security of Treasuries, but in the world of risk, uncertainly drives prices up, not down.
Ok, another ponzi news article.
Foreclosed Homeowners Getting Back In The Market
by Yuki Noguchi November 14, 2012
Buyers are coming back into the housing market after losing their homes during the financial crisis — returning to homeownership more quickly than lenders have typically allowed.
With millions of families with recent foreclosures on their records, some report that they are having luck buying a house — in some cases within three years.
Jason Strotheide, for example, bought his house in Charlotte, Mich., from his grandfather. After Strotheide refinanced the house to pay for renovations, payments increased, causing the family to rely more on ballooning credit. In early 2010, he and his wife filed for bankruptcy protection and lost their home to foreclosure.
“When we first walked away from the mortgage, I actually said that we’d never buy again,” Strotheide says.
With his debts wiped clean, Strotheide now rents, relies almost exclusively on cash and pays everything on the first of the month — which has boosted his credit score back up to nearly 700. He says he’d like to live more off the grid, eating his own farm produce and raising livestock. So in the spring — exactly three years after his foreclosure — Strotheide plans to buy another property.
“We’re looking for a place where we can get, maybe, five acres of land, a couple of outbuildings, a modest house and just enough space to grow the produce that we need for our family,” Strotheide says.
A Gray Area In Lending
Most lenders say the minimum waiting period to buy a home after a foreclosure is seven years, and private lenders say they haven’t changed their rules.
But under certain extenuating circumstances, Fannie Mae and the Federal Housing Administration will underwrite loans as early as three years after a foreclosure. And credit unions, which originate more loans these days, say they are often willing to work with individual borrowers.
All this means buyers like Strotheide are navigating an apparent gray area in lending. It’s unclear how many people there are like him. Banks, mortgage lenders and the National Association of Realtors say they don’t track the number of people who’ve come back after a recent foreclosure.
But Amber Hom, a real estate agent in Danville, Calif., says she’s helped three families with recent foreclosures buy new homes this year — about a 10th of her customer base.
“So many people … have been in foreclosure in the United States,” Hom says. “There had to be a way for them to come back and do it again. I mean, there’s just too many people.”
‘The Land Of Second Chances’
Hom even helped a family that went through bankruptcy and lost not one but four homes through foreclosure just three years ago.
“I didn’t think they were going to buy again for at least five to seven years,” she says. “I didn’t think they were going to be able to do it at all. Fortunately we found a lender who was willing to work with them, and they were able to purchase again.”
Hom says she isn’t surprised that people whose homes have been foreclosed on are finding ways to jump back into the market, “just for the simple fact that this is the land of second chances.”
But precisely how that second chance comes about can vary widely, depending on specific circumstances. Some homeowners find it difficult to get jobs with a foreclosure on their record, which, in turn, makes it harder to recover from financial hardship.
Others say banks won’t lend to them, even years later, so they turn to private financing arrangements. In those cases, buyers can pay as much as four times the going rate for a conventional mortgage.
Steve Riggs lost his home to foreclosure. Seven years later, without a green light from a bank, he asked his rental landlord in Desoto, Texas, to finance him instead.
The landlord agreed — at a whopping 12.9 percent interest rate.
“We had to take what we could get,” Riggs says. “And if they said 15 [percent], dog it, we’ll take 15.”
The squatters called the banksters’ bluff.
Another year of squatting, i.e., free housing on the taxpayers expense.
Time to make it the banks’ expense for giving out liar loans.
It seems like the higher one goes up, the less personal liabilablity.
Most business, the middle management and below would be fired and possible face criminal charges.
That’s very true. Every top executive at a major corporation has an insurance policy that pays out in the event they are convicted of anything. Prosecutors know this, so rather than fight a giant insurance company and it’s lawyers to go after these crooks, they soft-peddle and slap them on the wrist even when they are caught with serious offenses.
Nuclear winter in full effect. Another 15% is in the bag.
It looks like 2011 was the optimal year to buy for those that were able to find a quality piece of inventory. (I bought in late 2010 and it was difficult enough back then.) Expect the positive media coverage to only intensify in 2013 as positive YoY numbers continue to come out.
Yep. The YOY numbers will look great come February and March. They won’t be so good for the rest of the year as the base comparison will be higher. By early next year, any question of the housing market recovery will be greeted with harsh retribution and condescension among the financial media. Kool aid will begin to flow.
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At some point, those of us of who still believe in the value of contracts, save money, and have high credit scores (820+) are going to have just come together and simply stop paying our mortgages too. Only then will the importance of the fiscal cliff, the debt ceiling, the value of the dollar as a store wealth make any real sense to people. So much of the economic and financial trading models depends upon our constant yet small participation in the market place when it comes to dependability, I think we need change that.
At some point, those of us who are savers and have credit scores 810+ need to rethink what were doing exactly. Best is to default on our mortgages to send a message to the banks/fed that we will not stand for this.