[olecapt]

Originally Posted by Slim10

Foreclosure rates has up there for some time now.

See Feb 08 report (then Las vegas was 3rd).
Detroit foreclosures highest in the nation - Feb. 13, 2008

It definitely not 5% every month. Otherwise you can safely say that every prop in LV is already foreclosed.

The key is "rate" and realtytrac does not indicate how it tracks its "rate". Not all foreclosure filings translate to foreclosures. Many are releases from defaults/liens once a foreclosed prop is sold. The question is how many props are actual default filings (which are future indicators) and this link below with the breakdown indicates that its a lot lower.

Percentage of valley residences in foreclosure - Tuesday, Oct. 27, 2009 | 2 a.m. - Las Vegas Sun

More importantly, sales turnover is also very high (4.5-5% of all props per year). It means that foreclosure inventories are being cleared as it comes in. Something like 70% of all home sales are foreclosed prop every month.

There are neighborhoods that have more than 25% foreclosed homes which have already transacted since '07 ie cleared from inventories. There aren't many foreclosed units left in those neighborhoods.

So the banks' aren't really holding on to foreclosed props and that's why its not on their books.

There's still more foreclosures to come but barring another massive economic collapse resulting in unemployment jumping to 30%, it should be past the high watermark.

It is one of the shames of all this that there are no good numbers. Trying to get to exactly what is in or is not in the Realtytrac numbers is simply impossible. They are doing some simple a$$ data scrape from the recorder and district court and have no real idea of what it means.

RealtyTrac is in fact being investigated by the LA Times for the site being used to scam readers into subscribing with other services while thinking they are simply signing up with RealtyTrac. Just another scummy internet company.

[Slim10]

Sadly, I was almost one of those suckers who tot RT could provide access to "pre-market" foreclosures. Eventually didn't sign up when I found the recorder site so no loss. From a business standpoint, imho, its a smart play on greed though.

RT may be technically correct in saying ~47k forecl filings/qtr. The question is what is the breakdown of those filings.

Note the sun's source (in the link posted) is actually based on raw data which is ~19,000 filings over a 2 month period. Extrapolated, its could be only ~27-28k in terms of actual default/TDS (trustee deed sale) filings quarterly and the figures appear consistent with the ~3k foreclosed homes per month entering the market. The remainder 20k could be liens, releases etc which anyone who uses the recorder site would know is also classified as foreclosure docs. Also, there are always duplicate filings ie liens, defaults then nts then releases.

If that's the case, again, it would support the assumption that LV's market has hit its price floor.

[RCCCB]

While the banks have an interest in keeping the inventory for accouting reasons, you aren't going to see more than a trickle of homes. At some point the accounting trick of "Future Value" has to have a negative end.
How long can you keep using a 45k horme in fact and call it a 230k home on your books?

Something has to give IMO.

[Slim10]

The stats certainly don't support it being a trickle. More like a steady flow but a flow that is lessening.

The accounting is not as suggested though. It either remains as a $230k loan to customer or becomes a $45k foreclosed asset. Banks won't want it to remain a $230k loan cos they have to classify it as a NPL or non-performing loan which looks even worst as its a larger figure as a proportion of the total loan liabilities and hence affects bank survival (ie banks get closed too!). Banks have to set aside funds for NPLs.

Something has already given. It almost killed the US banking sector. That's why banks needed the massive recap program + 120+ banks are going to fail this year.

[Kaiminani]

Originally Posted by Slim10

The accounting is not as suggested though. It either remains as a $230k loan to customer or becomes a $45k foreclosed asset. Banks won't want it to remain a $230k loan cos they have to classify it as a NPL or non-performing loan which looks even worst

I don't understand why then the whole easing of requirements for mark-to-market accounting was such a big deal. If taking advantage of the relaxed requirements actually causes additional hardship, why all the hoopla about the changes in the first place? Where's the benefit?

[Slim10]

Mark to market was a good idea in good predictable times but becomes subjective when times become unpredictable.

Problem was no one knew (and still don't) how much distressed properties were worth during the downturn. If banks take a too negative number, then they get a call from FDIC. If they put too high a number, then it becomes fake.

Also, dynamically, prop prices were moving down so fast that if one took $X this quarter, it becomes $X-10% within a couple of months. It makes it difficult to say that banks or anyone were accurately reflecting market price (so the rule wasn't doing what it was supposed to do). And you can't expect bean counters to count beans every day just to keep up a current count of how much thousands of beans are worth.

It had a real impact too. When negative equity becomes too high, banks will just call on the borrower to make up the difference or face foreclosures. Hence the wave of foreclosures in the periods of 2007/2008.

The naysayers thinks that by easing mark to market, it allows banks to artificially inflate the asset value. May be true but that also means banks won't foreclose as fast than if the bean counters think the assets were going down in value. I don't think the verdict is out on whether it was a good or bad move yet.

[adolpho]

There is an even bigger boatload of homes that the banks are not taking back, where the owner hasn't paid in a year, or so.

[olecapt]

How would you know that?

It is intriguing but I know of no way to tell. I actually know of an example but I suspect this one is simply a screw up in the CW to BofA transition.

I also however know of dozens of shorts that ended up foreclosed and they did not sit there for a year.

[tony soprano]

Originally Posted by Slim10

It had a real impact too. When negative equity becomes too high, banks will just call on the borrower to make up the difference or face foreclosures. Hence the wave of foreclosures in the periods of 2007/2008.

Do you have any documented instances of banks calling in non-deliquent home loans due to negative equity? I have to say that I haven't heard of a single such case, but then again I haven't actively looked for any either.

[adolpho]

Maybe only on a HELOC, Tony. Otherwise they can't make a 30 year loan callable unless it was stated in the original loan agreement.