Saturday, 19 September 2009 01:00

The ARE trying to kick the bad mortgages down the road, here's proof!

There have been a lot of theories and anecdotal evidence indicating that banks are letting defaulted mortgage borrowers stay in their houses in lieu of taking possession of said properties and recording the writedown on thier books, particularly once the property is sold at auction. The auction sale will actually set a hard market price for the property that cannot be fudged, and will reveal the amount of losses on said banks books from the (most likely severely underwater) mortgage.

Well, there is strong statistical evidence in Nevada (nearly 15,000 samples) that indicate that banks are postponing sales at auction, presumably to avoid the event mentioned above. Click the graphic below if you need it enlarged.

trustee_sales_report_august_2009.jpg

Hmmm! 3% of the homes have been sold to 3rd party's (usually the majority of sales go here),17% returned (sold) to the bank, 18% cancelled (this happens when the delinquency is cured in some fashion prior to the auction) - but the albatross here is that the vast majority have been postponed. I am not referring to a few dozen sales, we are talking nearly 50,000.

As you may know, Nevada is on of the big foreclose and default states - along side California and Florida. Click here (pdf nevada_august_trustee_report 19/09/2009,11:01 192.72 Kb) to download the source from this graphic with plenty of information to fill in the blanks.

Last modified on Saturday, 19 September 2009 01:00

11 comments

  • Comment Link alesher Sunday, 27 September 2009 22:53 posted by alesher

    I finally gave up on a house in town I had targeted that was "in foreclosure" but is just sitting there and not proceeding. Initial foreclosure notice went out a year ago and nothing since. I think it's true- they don't want to have it sold at auction and have to realize the "bad number". Kicking the can...

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  • Comment Link Reggie Middleton Tuesday, 22 September 2009 15:42 posted by Reggie Middleton

    My focus has been rather steady. Nevertheless, I think you should always question outside opinions. If you haven't done so in the past, you should definitely start doing so now. All of my work is derived from public sources and is easily verified and with enough intellectual horsepower and labor, reverse engineered. Feel free to follow up on it.

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  • Comment Link MSG Tuesday, 22 September 2009 15:30 posted by MSG

    You seem to be focusing on micro issues lately, makes me question sometimes - the quality of your opinion

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  • Comment Link gjervis Monday, 21 September 2009 23:57 posted by gjervis

    Seems the Fed is doing it also, delaying the Option ARM's resets

    http://www.businessinsider.com/john-carney-chart-of-the-day-monthly-mortgage-rate-resets-2009-9

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  • Comment Link gjervis Monday, 21 September 2009 16:05 posted by gjervis

    This is why i am short ZION's, even though they raised money recently, i don't think its still enough.

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  • Comment Link Kathy Monday, 21 September 2009 07:33 posted by Kathy

    We are actually within 45 days of auction and have planned it that way. We will be tranferring the money to bring our mortgage up to date in the next week but since we are dealing Deutsche Bank we are hoping they will sell our loan off. OneWest Bank(formerly Indymac Bank) is the servicer for Deutsche Bank. We filled out a loan modification package like they asked only to be advised by OneWest Bank that quote, "Deutsche Bank does not have any loan modification programs available at this time. Deutsche Bank, a foreign bank, doing business in the USA(they are one of the biggest foreclosurers here) had made the decision NOT to particpate in the HAMP program." So we are hoping another lender will pick up the loan.

    Just a FYI, my husband and I did not buy over too much house, we only have the firt mortgage, we never refinanced. It was simply a matter of being laid off and finding other employment that has given us less income.

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  • Comment Link Reggie Middleton Monday, 21 September 2009 01:29 posted by Reggie Middleton

    dussasr,
    There was a typo in my summary, but the graphic remains accurate. the fishy issue is that POSTPONEMENTS make up 62% of the activity in the areas above. I find that fishy. Cancellations (as described in my short missive and as you have pointed out) can be explained away by short sales, delinquency cures, bankruptcy, etc. but to see postponements make up the majority of what goes on at auctions raises a suspicious brow. After all, cancellations were only 18 percent of the activity.

    I bought distressed real estate in NYC and visited the courthouse steps a few times. In no way did I remember postponements ever amounting to anywhere near that much. you are right in that markets are geo specific, and it would make sense to get feedback from the market locals themselves, but this was sent to me by a market local.

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  • Comment Link dussasr Sunday, 20 September 2009 10:56 posted by dussasr

    Hi Reggie,

    I agree that there is still a lot of foreclosure pain ahead. However, I don't know that the data you've posted above is indicates that or not. I buy foreclosures and pre-foreclosure short sales in Indiana and have been doing so for about 4 years. Now, I don't know anything about the Nevada market, but the numbers you posted are not unusual for my county in Indiana.

    Sales are cancelled a lot due to the owner filling for bankruptcy or the bank receiving an offer to buy before the sheriff's sale (short sale). The cancelled sales could be an indication that the banks are doing a better job of completing short sales before the sheriff's auction!

    Also, in my county in Indiana only about 10% of the houses are ever sold to 3rd parties at the auction. The banks typically take the houses back and then sell them as bank owned properties (REO) through a realtor. The banks will usually get a better price for an REO than they will at the auction since REOs can be properly marketed and sold with title insurance, buyer financing, etc.

    To get an interpretation on what the numbers you posted actually mean you might want to talk to a short sale/foreclosure buyer in the Nevada area. It could just mean that the bank is more willing to deal (offer short sale discounts) and is doing more short sales before the auction. Good luck and keep up the good work!

    Steve Dussault

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  • Comment Link NDbadger Saturday, 19 September 2009 21:49 posted by NDbadger

    seem very optimistic for the large banks. there are people out there with $5/shr estimates on JPM. It's true the Fed is shoveling huge subsidies their way, but the losses are going to be tremendous. Given JPM's derivatives exposure and commensurate risks, I don't see how anyone can responsibly own this thing.

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  • Comment Link Reggie Middleton Saturday, 19 September 2009 19:01 posted by Reggie Middleton

    Now you see why I am so bearish on the financials. Bear market rally or not, many, if not all of the larger one's are toast without major - an I mean - major overhauls. The window dressing draped across the front may have allowed for stock rallies and the secondary capital raises, but nothing has changed from last year save the assets deteriorating even further while the leverage employed marginally lessened, and in some cases actually increased significantly.

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  • Comment Link Ned Saturday, 19 September 2009 15:49 posted by Ned

    Doesn't this 'game of postpone' simply transform banks to zombie status? If yes, wouldn't Wall Street's lofty earnings estimates for future years be that much more likely to be too high?

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