REOs will rise 50% in the next 4 months.

<strong>I'm certain there wasn't any alt-A, and certainly no Jumbo-prime lending in Irvine!</strong>





<blockquote>

While subprime delinquencies jumped 25% from January to June 2008, Jumbo Prime delinquencies rose 72%.</blockquote>


<blockquote>

Overall, delinquencies on 2007 prime jumbo loans rose to 3.22 percent in July, while Alt-A loan delinquencies increased to 14.56 percent, S&P;said. Defaults on subprime loans from last year hit 31.25 percent.</blockquote>


I love mr. mortgage!





I hear the rumble of the crashing surf! Yes, that's right, the wave of foreclosures is rolling in to Irvine
 
<strong>Prime foreclosures exceed subprimes for the first time</strong>



<blockquote>HOPE NOW?s monthly data shows that during July, foreclosures were initiated on 105,000 prime borrowers and 92,000 subprime borrowers. Prime foreclosure starts in July were well more than double the 51,000 recorded one year earlier, and up almost 10 percent from June; in comparison, subprime foreclosure starts in July were up 22 percent from one ago, and up 10 percent month-over-month as well.</blockquote>


http://www.housingwire.com/2008/08/28/prime-foreclosure-starts-surge-past-subprime-in-july/
 
Mr. mortgage site continues to be informative: <strong>At least 70% of my clients in Southern Calif are upside down. </strong>



<blockquote>We are definitely not at the bottom yet. I?ve been doing mortgages for 20 plus years and its NEVER been close to what

its like right now. At least 70% of my clients in Southern Calif are upside down. A lot of those have 5 and 7 year fixed rates and cant do anything about it. Clean A paper clients with good income and good credit and they know they?ll be in for a change when it goes adjustable, so they are just waiting to see if the market turns around before their loan adjusts.



Almost anyone that has a first and second are out of luck as none of the 2nds like to cooperate with a refinance. Thats one of the biggest challenges. So the values being down and the 2nds not cooperating are the two biggest issues i?m seeing with my clients who are all A plus paper clients. First time buyers are strong right now though, so thats good.</blockquote>




Seems to indicate that we are in for a lot more inventory over the next year
 
[quote author="freedomCM" date=1223280560]Mr. mortgage site continues to be informative: <strong>At least 70% of my clients in Southern Calif are upside down. </strong>



<blockquote>We are definitely not at the bottom yet. I?ve been doing mortgages for 20 plus years and its NEVER been close to what

its like right now. At least 70% of my clients in Southern Calif are upside down. A lot of those have 5 and 7 year fixed rates and cant do anything about it. Clean A paper clients with good income and good credit and they know they?ll be in for a change when it goes adjustable, so they are just waiting to see if the market turns around before their loan adjusts.



Almost anyone that has a first and second are out of luck as none of the 2nds like to cooperate with a refinance. Thats one of the biggest challenges. So the values being down and the 2nds not cooperating are the two biggest issues i?m seeing with my clients who are all A plus paper clients. First time buyers are strong right now though, so thats good.</blockquote>




Seems to indicate that we are in for a lot more inventory over the next year</blockquote>


The thing that is really going to kill pricing is the recent increase in jumbo rates. The REOs will force a lot of sales at market bids, and the huge increase in jumbo interest rates are going to lower those bids significantly.
 
<em>"so they are just waiting to see if the market turns around before their loan adjusts."</em>



I hope their loan does not adjust within the next four or five years.
 
[quote author="IrvineRenter" date=1223282819]The thing that is really going to kill pricing is the recent increase in jumbo rates. The REOs will force a lot of sales at market bids, and the huge increase in jumbo interest rates are going to lower those bids significantly.</blockquote>


I have been looking at a couple of neighborhoods recently and one of them is rather amazing. The REOs are listed and selling in the $400K (low to high). The non-REOs in the same neighborhood (with slightly better locations within the neighborhood and upgrading) are listed and in escrow for the $700Ks (and up). I understand that location and upgrades can certainly make a difference, but I wonder how an appraiser will be able to explain a $300K difference absent those upgraded places being wallpapered in gold.
 
[quote author="EvaLSeraphim" date=1223293042][quote author="IrvineRenter" date=1223282819]The thing that is really going to kill pricing is the recent increase in jumbo rates. The REOs will force a lot of sales at market bids, and the huge increase in jumbo interest rates are going to lower those bids significantly.</blockquote>


I have been looking at a couple of neighborhoods recently and one of them is rather amazing. The REOs are listed and selling in the $400K (low to high). The non-REOs in the same neighborhood (with slightly better locations within the neighborhood and upgrading) are listed and in escrow for the $700Ks (and up). I understand that location and upgrades can certainly make a difference, but <strong>I wonder how an appraiser will be able to explain a $300K difference absent those upgraded places being wallpapered in gold</strong>.</blockquote>


<img src="http://smokethatherb.files.wordpress.com/2008/03/hit.jpg" alt="" />
 
<blockquote><strong>Free Rent for All</strong>



It increasingly appears that the only answer that the banks and our elected officials can come up with in the face of the foreclosure crisis is FREE RENT.



At the moment we likely have more than 400,000 households in California that are making no housepayment. There are 280,000 in some stage of foreclosure, and 120,000 or more that are not making payments but are not yet in foreclosure. From the time the homeowner stops making payments, until they are forced to leave can easily be a full year. If you take the original loan amounts at a reasonable 6% interest and the fact these owners have likely stopped paying property taxes as well, we are talking a cool $1B/mo in free rent statewide (which is likely artificially propping up the state economy now that they can spend it on other things).</blockquote>


http://www.foreclosuretruth.com/blog/sean/free-rent-all
 
So how many non-rental housing units are there in CA? 8M?



<strong>So only 1:20 are living rent-free</strong>





How many of those are in Irvine? The OC?
 
from CR:



Tanta posts that Shelia Bair's Indycrap loan mods aren't going so well.



In the comments:

<blockquote> In Foreclosure Now...Indy Mac writes:

yes, Indy Mac contacted me about my 75k HELOC that i haven't paid since May 08...wanted to to a mod.

I called them 1.5yrs. ago needing to do a short sale....no cooperation from them at all.

Now I'm on the road to foreclosure...haven't received an NOD from them though. Got one from the 1st mortgage holder early Sept.

When N.O.T. comes I file BK and buy more time....I'm all for f-ing the lenders/banks....whatever.

An acquaintance was foreclosed on....house (775k)didn't sell at auction....big surprise.

His lender offered him $2500 to move out in 30-45 days and leave the house undamaged.

He's already sold closet doors, stove...and will be getting that check too.

This is beach area...Orange County ,Ca.

Paulson/Bernanke have no idea what's coming in So. Cal. (million dollar mortgages not $50,000 mortgages defaulting).

In Foreclosure Now...Indy Mac | Homepage | 10.23.08 - 5:15 pm | # </blockquote>


<strong>

I wonder just how many similar situations we will see in the next few months</strong>
 
<blockquote>Sen. Christopher Dodd (D., Conn.), the Banking Committee chairman, said he was considering a new round of legislation after the November election to address problem mortgages, including changes to allow bankruptcy judges to rewrite them. "I think we've come to the point again where...legislatively we have to try this again and probably some other ideas," he said. </blockquote>


<a href="http://s.wsj.net/article/SB122477138431362499.html">http://s.wsj.net/article/SB122477138431362499.html</a>



Nancy Pelosi, Barney Frank, Chris Dodd and Obama - This combination worries me!



<a href="http://www.nytimes.com/2008/10/19/business/19cisneros.html?hp">http://www.nytimes.com/2008/10/19/business/19cisneros.html?hp</a>
 
[quote author="WestparkRenter" date=1224888384]Sen. Christopher Dodd (D., Conn.), the Banking Committee chairman, said he was considering a new round of legislation after the November election to address problem mortgages, including changes to allow bankruptcy judges to rewrite them. "I think we've come to the point again where...legislatively we have to try this again and probably some other ideas," he said. </blockquote>




I don't know what all the fuss is here. All other creditors get screwed in BK, for some reason the banks are special?



In any event, it's not like the Judge will make arbitrary decisions. The Judge can only lower the mortgage balance to the current value of the property. Most likely the party in BK wouldn't be make the new payment and the property will revert to the lender. My prediction is that people are making a big whooy over something that wouldn't affect that many people.
 
Thanks Gretchen:



<blockquote>Securitization trusts hold $1.5 trillion of subprime and alt-A loans. As of late August, according to figures from the Securities Industry and Financial Markets Association, <strong>roughly $400 billion of the loans were delinquent</strong> and $1.1 trillion were current on interest and principal payments.</blockquote>


Unfortunately, but not unusually, the rest of her article is a load of crap, that ends with this

<blockquote>

Under the Patrick-Taylor plan, homeowners would also be helped. Future delinquencies might be reduced, and the downward spiral of home prices could be curbed.</blockquote>


<a href="http://www.nytimes.com/2008/11/16/business/16gret.html?pagewanted=2&_r=1&ref=business">http://www.nytimes.com/2008/11/16/business/16gret.html?pagewanted=2&_r=1&ref=business</a>
 
here's a nice turdlet from CR:

<strong>

How are those mortgage mods doing to prevent REOs?</strong>



<blockquote>"Lender Processing Services processes the 650,000 loans that the FDIC manages through its control of IndyMac. Company executives discussed what's happened since modifications began with analysts at Keefe, Bruyette & Woods and the <strong>results are uninspiring.</strong>

"Industry evidence indicates that in a majority of instances loan modifications simply delay the timeline from default to foreclosure but don't prevent them from taking place," Nathaniel Otis and William Clark, analysts at KBW, wrote in a note to investors on Tuesday.

Of the IndyMac mortgages modified by the FDIC so far, <strong>25% went delinquent after just one post-modification payment </strong>and more than half were delinquent again after several post-modification payments, Lender Processing Services told the analysts. "</blockquote>
 
<strong>Irvine, land of the gentry: Prime qualified house buyers buying expensive houses</strong>



<blockquote>About <strong>7.5% of prime jumbo mortgages</strong> -- high-quality home loans too large to be sold to government-backed Fannie Mae and Freddie Mac -- were at least <strong>60 days late or in foreclosure,</strong> according to LoanPerformance. That was more than three times the level of a year earlier.</blockquote>
 
[quote author="freedomCM" date=1227668531]<strong>Irvine, land of the gentry: Prime qualified house buyers buying expensive houses</strong>



<blockquote>About <strong>7.5% of prime jumbo mortgages</strong> -- high-quality home loans too large to be sold to government-backed Fannie Mae and Freddie Mac -- were at least <strong>60 days late or in foreclosure,</strong> according to LoanPerformance. That was more than three times the level of a year earlier.</blockquote></blockquote>
Looks like the <a href="http://www.marketwatch.com/news/story/fed-bolster-consumer-lending-tune/story.aspx?guid={C3B72C58-6CB5-4DB1-B986-8A65E005FDE4}&dist=msr_12">$800 Billions</a> will be useful after all!



Link won't work... http://www.marketwatch.com/news/story/fed-bolster-consumer-lending-tune/story.aspx?guid={C3B72C58-6CB5-4DB1-B986-8A65E005FDE4}&dist=msr_12
 
IR linked to the T2 partners report today.

http://www.calculatedriskblog.com/2008/12/t2-partners-why-there-is-more-pain-to.html



nice summary in the comments section



<blockquote>12th percentile writes:

I recommend reading the whole report.



CR - you get credit on slide 47 for comments on CRE



Here are some scary numbers about Option Arm recasts from the report



1 - 83% of Option ARMs from '04-'07 were no doc liar loans



2 - 65% of Option ARMs are currently underwater



3 - The average Option ARM payment increases 63% upon recast.



4 - Many of these loans allowed you to pay less than interest so the loan value will be 110-115% of the original purchase price.</blockquote>
 
<span style="font-size: 13px;">The Mortgage Meltdown</span>

<object width="325" height="250"><embed src="http://www.youtube.com/v/youtube" type="application/x-shockwave-flash" width="325" height="250"></embed></object>
 
<strong>Look at the change in the value of the REOs last month:</strong>



<img src="http://1.bp.blogspot.com/_pMscxxELHEg/SW4N643NAkI/AAAAAAAAEMI/0oSmz8sy6_8/s1600/CaliforniaForeclosureDec08.jpg" alt="" />





Nov ~15k REOs for ~$7B =~$450k each



Dec ~15k REOs for ~9B =~ $600k each





Them REOs are moving up the food chain!
 
I would have to agree that REO's will increase significantly. The one thing we don't have is data on is how many people had their adjustable postponed until 2010. I know someone who's loan was supposed to adjust in 2008 and the bank automatically (without any documentation, refinance, etc.., just a phone call) had the bank agree to postpone until 2010. I'm not sure how widespread this is but unless the banks do it again, we are going to see another boom in foreclosures.
 
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