REOs Leased by Bank Considered Shadow Inventory?

RobertLarsen_IHB

RobertLarsen_IHB

New member
If a bank is leasing out a property that they own, is that considered shadow inventory as well?



Until recently, I didn't even think that banks lease out their properties. I'm sure that the majority of the larger banks don't, but I think it might become more common practice for smaller banks.
 
Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?
 
[quote author="25inIrvine" date=1252822348]Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?</blockquote>


U9002678



426 Harbor Island Dr, Newport Beach



I have no clue about the laws regarding the amount of time sitting on the banks books. Any RE lawyers in the forum?



And,



S588138



51 duet, Irvine
 
<strong><em>Now one home is merely an example but there have been a group of people that actually deny the existence of shadow inventory all together, an argument that makes you feel as if you are talking to someone who still believes the world is flat.</em></strong>



From <a href="http://www.doctorhousingbubble.com/shadow-inventory-revisited-silent-alt-a-mortgages-southern-california-reo-and-the-great-public-swindle/">Dr. Housing Bubble</a>
 
[quote author="RoLar_USC" date=1252822867][quote author="25inIrvine" date=1252822348]Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?</blockquote>


U9002678



426 Harbor Island Dr, Newport Beach



I have no clue about the laws regarding the amount of time sitting on the banks books. Any RE lawyers in the forum?



And,



S588138



51 duet, Irvine</blockquote>
I won't speak to the legal aspects of banks doing that as I'm not a lawyer but I do have accounting/audit experience so I'll talk a little about that as well as having worked in banking for several years. Banks obtain short term deposits which allows them to lend out a multiple of 10x their deposit base. They need to align the duration of their assets (loans) with their liabilities (deposits) and as such banks are not in business to be real estate owners because it freezes up their ability to make new loans. Not sure if you learned about this but during the S&L days many Savings and Loans began taking equity stakes in commercial real estate properties and we all know how that ended. So in summary, bank regulators (OCC, OTS, FDIC, etc) would not allow banks to hold a significant amount of homes as assets on their books.
 
It's already counted in shadow inventory. The question is: should we exclude it.
 
"Now one home is merely an example but there have been a group of people that actually deny the existence of shadow inventory all together, an argument that makes you feel as if you are talking to someone who still believes the world is flat."



That's a moronic statement. No one, and I mean no one, denies the existance of shadow inventory. To do so would mean properties foreclosed last week or last month are not headed to the market. That statement is so stupid it's not funny. The question - the only question - is the number.



How could anyone come up with such a statement, and better yet, how could anyone regurgitate it?
 
[quote author="awgee" date=1252828667]<strong><em>Now one home is merely an example but there have been a group of people that actually deny the existence of shadow inventory all together, an argument that makes you feel as if you are talking to someone who still believes the world is flat.</em></strong>



From <a href="http://www.doctorhousingbubble.com/shadow-inventory-revisited-silent-alt-a-mortgages-southern-california-reo-and-the-great-public-swindle/">Dr. Housing Bubble</a></blockquote>


No one denied Shadow Inventory here. Meaning that there are a lot of properties not yet listed, but on the banks balance sheets. The argument, if you would like to get into it, is what should constitute shadow inventory and what the total number is.



I listen to Dr. Housing Bubble just about as much I listen to Dr. Penny Stock. Are they the same person? Because much of what they write is worthless.



I regress, but your quote has nothing to do with this thread.
 
[quote author="USCTrojanCPA" date=1252829066][quote author="RoLar_USC" date=1252822867][quote author="25inIrvine" date=1252822348]Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?</blockquote>


U9002678



426 Harbor Island Dr, Newport Beach



I have no clue about the laws regarding the amount of time sitting on the banks books. Any RE lawyers in the forum?



And,



S588138



51 duet, Irvine</blockquote>
I won't speak to the legal aspects of banks doing that as I'm not a lawyer but I do have accounting/audit experience so I'll talk a little about that as well as having worked in banking for several years. Banks obtain short term deposits which allows them to lend out a multiple of 10x their deposit base. They need to align the duration of their assets (loans) with their liabilities (deposits) and as such banks are not in business to be real estate owners because it freezes up their ability to make new loans. Not sure if you learned about this but during the S&L days many Savings and Loans began taking equity stakes in commercial real estate properties and we all know how that ended. So in summary, bank regulators (OCC, OTS, FDIC, etc) would not allow banks to hold a significant amount of homes as assets on their books.</blockquote>


So maybe they are allowed to hold a small percentage, like 1-5%? Probably no more than 1%, at most.
 
[quote author="RoLar_USC" date=1252833232][quote author="USCTrojanCPA" date=1252829066][quote author="RoLar_USC" date=1252822867][quote author="25inIrvine" date=1252822348]Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?</blockquote>


U9002678



426 Harbor Island Dr, Newport Beach



I have no clue about the laws regarding the amount of time sitting on the banks books. Any RE lawyers in the forum?



And,



S588138



51 duet, Irvine</blockquote>
I won't speak to the legal aspects of banks doing that as I'm not a lawyer but I do have accounting/audit experience so I'll talk a little about that as well as having worked in banking for several years. Banks obtain short term deposits which allows them to lend out a multiple of 10x their deposit base. They need to align the duration of their assets (loans) with their liabilities (deposits) and as such banks are not in business to be real estate owners because it freezes up their ability to make new loans. Not sure if you learned about this but during the S&L days many Savings and Loans began taking equity stakes in commercial real estate properties and we all know how that ended. So in summary, bank regulators (OCC, OTS, FDIC, etc) would not allow banks to hold a significant amount of homes as assets on their books.</blockquote>


So maybe they are allowed to hold a small percentage, like 1-5%? Probably no more than 1%, at most.</blockquote>
I would think the lower the number the better. The other problem with banks managing bank owned real estate assets is that is takes a lot more manpower (via a larger asset management/special assets dept) than it does just managing the performing loan asset. Besides, there aren't many bankers out there that have asset management experience (takes a different set of skill sets than making loans).
 
"No one denied Shadow Inventory here."



It was just a blatant attempt at painting your opponent as irrational.
 
[quote author="USCTrojanCPA" date=1252834276][quote author="RoLar_USC" date=1252833232][quote author="USCTrojanCPA" date=1252829066][quote author="RoLar_USC" date=1252822867][quote author="25inIrvine" date=1252822348]Do they have an unlimited amount of time that they can lease it for? Or is there some sort of rules and/or laws where they must get it off their books in X amount of days?



Also, can you give an example of an address that is doing this? DThey typically one year leases or month to month?</blockquote>


U9002678



426 Harbor Island Dr, Newport Beach



I have no clue about the laws regarding the amount of time sitting on the banks books. Any RE lawyers in the forum?



And,



S588138



51 duet, Irvine</blockquote>
I won't speak to the legal aspects of banks doing that as I'm not a lawyer but I do have accounting/audit experience so I'll talk a little about that as well as having worked in banking for several years. Banks obtain short term deposits which allows them to lend out a multiple of 10x their deposit base. They need to align the duration of their assets (loans) with their liabilities (deposits) and as such banks are not in business to be real estate owners because it freezes up their ability to make new loans. Not sure if you learned about this but during the S&L days many Savings and Loans began taking equity stakes in commercial real estate properties and we all know how that ended. So in summary, bank regulators (OCC, OTS, FDIC, etc) would not allow banks to hold a significant amount of homes as assets on their books.</blockquote>


So maybe they are allowed to hold a small percentage, like 1-5%? Probably no more than 1%, at most.</blockquote>
I would think the lower the number the better. The other problem with banks managing bank owned real estate assets is that is takes a lot more manpower (via a larger asset management/special assets dept) than it does just managing the performing loan asset. Besides, there aren't many bankers out there that have asset management experience (takes a different set of skill sets than making loans).</blockquote>


On a side note, WOW! What a game!
 
[quote author="NewportSkipper" date=1252830932]"Now one home is merely an example but there have been a group of people that actually deny the existence of shadow inventory all together, an argument that makes you feel as if you are talking to someone who still believes the world is flat."



That's a moronic statement. No one, and I mean no one, denies the existance of shadow inventory. To do so would mean properties foreclosed last week or last month are not headed to the market. That statement is so stupid it's not funny. The question - the only question - is the number.



How could anyone come up with such a statement, and better yet, how could anyone regurgitate it?</blockquote>


STOP WITH THE NAME CALLING AND DEROGATORY COMMENTS. THIS IS THE LAST WARNING YOU GET! UNDERSTOOD?
 
[quote author="graphrix" date=1252840290][quote author="NewportSkipper" date=1252830932]"Now one home is merely an example but there have been a group of people that actually deny the existence of shadow inventory all together, an argument that makes you feel as if you are talking to someone who still believes the world is flat."



That's a moronic statement. No one, and I mean no one, denies the existance of shadow inventory. To do so would mean properties foreclosed last week or last month are not headed to the market. That statement is so stupid it's not funny. The question - the only question - is the number.



How could anyone come up with such a statement, and better yet, how could anyone regurgitate it?</blockquote>


STOP WITH THE NAME CALLING AND DEROGATORY COMMENTS. THIS IS THE LAST WARNING YOU GET! UNDERSTOOD?</blockquote>




Are you kidding me? What name calling? I said Dr Housing Bubble's statement was moronic, not even that he is. He is allowed to call people flat-eathers but no one can call him out on it? Are we now protecting all third parties around the world? Are you ready to uphold that standard yourself? Right now, you're not upholding any standards whatsoever, as evidenced by the constant harassment of BLTServ and others. Your own moderator, SoCal78, has said you have a double-standard. It looks like you are trying to create a situation where you drive certain people away. You really, really don't like challenge of any kind here - that is not a sign of strength in your arguments.
 
The common definition of Shadow Inventory I have seen is "Shadow inventory is housing units that are not making it onto the public market for one reason or another."



So would I count those homes being leased as Shadow inventory I would say yes. Banks are not in the property management business.
 
[quote author="trrenter" date=1252876980]The common definition of Shadow Inventory I have seen is "Shadow inventory is housing units that are not making it onto the public market for one reason or another."



So would I count those homes being leased as Shadow inventory I would say yes. Banks are not in the property management business.</blockquote>


You are correct and these homes are counted in shadow inventory. But the conversation about shadow inventory is meant to guage the threat of an onslaught of inventory. Homes that are rented long term do not constitute a threat.
 
[quote author="NewportSkipper" date=1252877389][quote author="trrenter" date=1252876980]The common definition of Shadow Inventory I have seen is "Shadow inventory is housing units that are not making it onto the public market for one reason or another."



So would I count those homes being leased as Shadow inventory I would say yes. Banks are not in the property management business.</blockquote>


You are correct and these homes are counted in shadow inventory. But the conversation about shadow inventory is meant to guage the threat of an onslaught of inventory. Homes that are rented long term do not constitute a threat.</blockquote>


No the question from RoLar was:



<blockquote>If a bank is leasing out a property that they own, is that considered shadow inventory as well?</blockquote>


Then there was a lot of bickering and name calling and the question was never answered.



I never saw in Rolars question if this would lessen the impact of the onslaught of inventory.



So I can answer that as well. I don't think a few banks leasing out properties instea of selling them will lessen the impact.



I will change my mind though if Wells Fargo and B of A start a leasing program.



I doubt they will.
 
[quote author="RoLar_USC" date=1252833148]I <strong>regress</strong>, but your quote has nothing to do with this thread.</blockquote>


<blockquote>re?gress (r-grs)

v. re?gressed, re?gress?ing, re?gress?es

v.intr.

1. To go back; move backward.

2. To return to a previous, usually worse or less developed state.

3. To have a tendency to approach or go back to a statistical mean.

v.tr. Psychology

To induce a state of regression in.

n. (rgrs)

1.

a. The act of going or coming back; return.

b. Passage back; reentry.

2. The act of reasoning backward from an effect to a cause.</blockquote>


<a href="http://www.thefreedictionary.com/regress">http://www.thefreedictionary.com/regress</a>



I agree. Your participation in the IHB has grown increasingly ignorant of facts that hurt your paycheck and light on objective cites that prove your point, but it is also my opinion you simply made a mistake and aren?t trying to call yourself the village idiot.



Irony. I <strong>digress.</strong>



<blockquote>di?gress (d-grs, d-)

intr.v. di?gressed, di?gress?ing, di?gress?es

To turn aside, especially from the main subject in writing or speaking; stray. See Synonyms at swerve.</blockquote>


<a href="http://www.thefreedictionary.com/digress">http://www.thefreedictionary.com/digress</a>
 
[quote author="trrenter" date=1252877738][quote author="NewportSkipper" date=1252877389][quote author="trrenter" date=1252876980]The common definition of Shadow Inventory I have seen is "Shadow inventory is housing units that are not making it onto the public market for one reason or another."



So would I count those homes being leased as Shadow inventory I would say yes. Banks are not in the property management business.</blockquote>


You are correct and these homes are counted in shadow inventory. But the conversation about shadow inventory is meant to guage the threat of an onslaught of inventory. Homes that are rented long term do not constitute a threat.</blockquote>


No the question from RoLar was:



<blockquote>If a bank is leasing out a property that they own, is that considered shadow inventory as well?</blockquote>


Then there was a lot of bickering and name calling and the question was never answered.



I never saw in Rolars question if this would lessen the impact of the onslaught of inventory.



So I can answer that as well. I don't think a few banks leasing out properties instea of selling them will lessen the impact.



I will change my mind though if Wells Fargo and B of A start a leasing program.



I doubt they will.</blockquote>


You are right, the minimal shadow inventory will not be affected by some of those becoming rentals.
 
You must log in or register to reply here.
Back
Top