The Foreclosure Dump

[ericlp]

http://www.cnbc.com/id/41059824

It's coming, no question.

Today's report from RealtyTracserves as a warning to big banks, Fannie, Freddie and local communities; The foreclosure glut is coming, and they'd better be ready to get rid of that glut in a big way.
2010 saw a record number of bank repossessions, over a million, even with a big drop in volume toward the end of the year, thanks to the robo-signing scandal and ensuing foreclosure freezes.
"Early indications in January were that this robo-signing related delay will be over by the end of first quarter if not sooner," says RealtyTrac's Rick Sharga. "I think we're going to see a significant spike in foreclosure activity early in 2011, and that will contribute in part to 2011 being a record year."

Sharga estimates as many as a quarter of a million foreclosures that should have happened in 2010 will now be pushed into the 2011 numbers, and added to an already huge supply of bank owned properties. The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively. While REO sales make up about one third of all sales in the current market, there is an estimated 3 year supply.

Interesting read... I thought this crap of bailing out banks and foreclosures was kinda over with. I guess not! Hmmm, I guess there are still a lot of deals to be had. It amazes me how this debt and loss of banks (that are too big to fail) can keep going on and on...Forever it seems. So much for hope and change.

 

[piasabird]

They should wait till about April or May when it is warm and then kick them all out at once. At least they will not freeze to death that way. Send them down to rebuild louisiana. Give them a free week of vacation in Florida if they will move out immediately. This can be the kindler gentler foreclosure and people in florida need some work too.

 

[her209]

The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively.

Are those losses taking into account the changes to the Mark-to-Market Accounting Rule changes?

 

[piasabird]

There is a house down the street from me sitting empty. It has some kind of notice on it. I think the banks should have put all the houses on the market at once so prices will drop even further. If the banks cant pay the taxes on the houses, foreclose the banks too. Force them to lower prices.

 

[RbSX]

This is going to be insane, everyone is so leveraged and underwater already. What happens when hundreds of thousands of backed up inventory floods the market with properties when there is little demand.

YIKES.

 

[piasabird]

We need to start splitting up some of the large Mega-banks. We need a freeze on all big bank mergers.

 

[Patranus]

We need to start splitting up some of the large Mega-banks. We need a freeze on all big bank mergers.

Why?

 

[boomerang]

Thank you Barney! You too Chris.

 

[JockoJohnson]

This is going to be insane, everyone is so leveraged and underwater already. What happens when hundreds of thousands of backed up inventory floods the market with properties when there is little demand.

YIKES.

What will happen is that I can finally get a house for what it is really worth. Too many dumbfux trying to sell their houses for a higher price than what they are worth. If they want to sell in this economy, they better be prepared to not get as much as they think they should.

I have seen houses in the market for well over 9 months to 2 years. I've looked at quite a few but they seem to want too much. It's fun watching the price drops over time. And this is in Philly suburbs, an area that isn't doing too bad.

 

[Jaskalas]

The Federal Debt is $14 trillion. How expensive do you think it would have been to simply buy each and every home loan and to simply hand ownership to the residents?

The country might have still been broke, but at least it would have homes for its people. We may need to rethink calling ourselves a great nation, let alone the greatest.

 

[drebo]

Prices in central California are still about 30% higher than they should be, especially in more recently developed areas. I was looking at a 6 year old 3 bedroom, two bathroom house that sold for $180k last year. My sister bought a 3 bedroom, 2 bathroom house that was 12 years old for about $120k. I look forward to when prices drop down to market-sustainable levels.

The only people who will be hurt are the people who bought houses as an investment or borrowed too much against their house. Seeing as though those people are, in no small part, responsible for the bubble and ensuing burst, pity is not forthcoming from me.

 

[drebo]

The Federal Debt is $14 trillion. How expensive do you think it would have been to simply buy each and every home loan and to simply hand ownership to the residents?

The country might have still been broke, but at least it would have homes for its people. We may need to rethink calling ourselves a great nation, let alone the greatest.

I must have missed it...when did home ownership become a constitutionally guaranteed inalienable right?

 

[RbSX]

The Federal Debt is $14 trillion. How expensive do you think it would have been to simply buy each and every home loan and to simply hand ownership to the residents?

The country might have still been broke, but at least it would have homes for its people. We may need to rethink calling ourselves a great nation, let alone the greatest.

Some people deserve it. If the nation bailed them out they'd never learn.


I hate to be the jerk that says it.

 

[Jaskalas]

I must have missed it...when did home ownership become a constitutionally guaranteed inalienable right?

I'm not saying it is a right, merely reflecting on some other use for that debt which would have actually done some good.

 

[RightIsWrong]

Some people deserve it. If the nation bailed them out they'd never learn.


I hate to be the jerk that says it.

Then why doesn't that same "tough love" lesson need to be applied to those that allowed this to happen in the first place, the banks?

They made unwise loans to people that shouldn't have been given them, created a fake market to trade these highly volatile commodities (CDOs) and then took hundreds of billions of dollars of taxpayer money on top of that, doled out their seven and eight figure bonuses to the same people that put them in that position and then also got 0% loans from the government.

I guess personally responsibility doesn't apply to corporations because they aren't a person...unless it comes to donating to politicians' campaigns so that they can get more favorable legislation..THEN they want to be considered persons again.

 

[RbSX]

Then why doesn't that same "tough love" lesson need to be applied to those that allowed this to happen in the first place, the banks?

They made unwise loans to people that shouldn't have been given them, created a fake market to trade these highly volatile commodities (CDOs) and then took hundreds of billions of dollars of taxpayer money on top of that, doled out their seven and eight figure bonuses to the same people that put them in that position and then also got 0% loans from the government.

I guess personally responsibility doesn't apply to corporations because they aren't a person...unless it comes to donating to politicians' campaigns so that they can get more favorable legislation..THEN they want to be considered persons again.

I'm not saying the banks are immune. It should have happened to them too.

Sometiems things need a fresh start rather than a coat of fresh paint.

 

[Trianon]

Then why doesn't that same "tough love" lesson need to be applied to those that allowed this to happen in the first place, the banks?

They made unwise loans to people that shouldn't have been given them, created a fake market to trade these highly volatile commodities (CDOs) and then took hundreds of billions of dollars of taxpayer money on top of that, doled out their seven and eight figure bonuses to the same people that put them in that position and then also got 0% loans from the government.

I guess personally responsibility doesn't apply to corporations because they aren't a person...unless it comes to donating to politicians' campaigns so that they can get more favorable legislation..THEN they want to be considered persons again.

From what I've seen banks use every possible way to AVOID modifying loans, so they can do foreclosure/short sale and collect the difference between loan value and sale price from the government + claim tax credit for "losses". So you are not going to see banks hurt by foreclosures themselves unless bad mortgages are going to be put back to them "en mass", and they would have to maintain foreclosed properties for years until they sell.

 

[Jiggz]

It only proves the bank bailout was never meant to correct the source of the housing problem, instead it just prolonged the agony and the inevitable is finally here. IMO, the only way to fix this problem is to actually just "bite the bullet", which means let the housing market find its own price level. Temporarily supporting unrealistic prices as the bailouts did will not solve it. There will be a lot of losers but not for long. Soon the price will stabilize and bottom out, then start it's way up again. The housing market can't go up until it hits bottom! And temporarily supporting it like bailouts is just prolonging the inevitable.

 

[shira]

The Federal Debt is $14 trillion. How expensive do you think it would have been to simply buy each and every home loan and to simply hand ownership to the residents?

The country might have still been broke, but at least it would have homes for its people. We may need to rethink calling ourselves a great nation, let alone the greatest.

And within three months, a good percentage of those "gifted" with clear title to their foreclosed houses would re-finance and go on spending sprees. And three months after that those losers would lose their houses again. Except that in that scenario, we'd also have hyperinflation driven by all the extra money in circulation.

 

[Fern]

The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively.

Are those losses taking into account the changes to the Mark-to-Market Accounting Rule changes?

The way I read it, those amounts are the value of forclosed homes the banks now hold, not losses.

Fern

 

[Fern]

-snip-
.....created a fake market to trade these highly volatile commodities (CDOs)..

I don't think there is anything inherently wrong with CDO's etc.

The market for those existed, only afterwards did mark-to-market become required. IMO, it was m-t-m that introduced a tremendous amount of volatility.

Reminds me of my sig; at least particially in response to Enron we implemented something with horrible unintended consequences.

Fern

 

[Trianon]

It only proves the bank bailout was never meant to correct the source of the housing problem, instead it just prolonged the agony and the inevitable is finally here. IMO, the only way to fix this problem is to actually just "bite the bullet", which means let the housing market find its own price level. Temporarily supporting unrealistic prices as the bailouts did will not solve it. There will be a lot of losers but not for long. Soon the price will stabilize and bottom out, then start it's way up again. The housing market can't go up until it hits bottom! And temporarily supporting it like bailouts is just prolonging the inevitable.

True, better horrible end and restart, than neverending horror...

 

[Tequila]

The Federal Debt is $14 trillion. How expensive do you think it would have been to simply buy each and every home loan and to simply hand ownership to the residents?

The country might have still been broke, but at least it would have homes for its people. We may need to rethink calling ourselves a great nation, let alone the greatest.

Ooh yea what a great idea. I want so badly to hand over my hard earned money to the idiots that bought at the height of the boom with 0% down and those with 20k salaries buying McMansions. Oh yea I'd just love to fork out money to those who thought home prices would go up forever and refused to live within their means. YEA BABY! NOT!

They remind me of the idiots that were buying stocks left and right at the height of the dotcom bubble. Back when Coca-Cola was had a PE of 70 and 1% yield. I heard all the stupid excuses especially the same one I heard of the housing boom mainly "but everybody is doing it!"

We need to get those who can't afford to live in houses back in apartments, splitting rent amongst room mates and drive home prices down for those who did have the discipline to save. I know it sucks to rent, I had to do it many years ago but then you save up the money and this time you buy a house when you can actually afford it with a down payment and try to live within your means.

Tough love isn't easy but it's the only way people will learn and to prevent it from happening again.

 

[Jhhnn]

Ooh yea what a great idea. I want so badly to hand over my hard earned money to the idiots that bought at the height of the boom with 0% down and those with 20k salaries buying McMansions. Oh yea I'd just love to fork out money to those who thought home prices would go up forever and refused to live within their means. YEA BABY! NOT!

The desire to own a home didn't change. Prior to the Bush Admin and the housing bubble, people who really couldn't afford it just couldn't get a loan. That's really very straightforward.

Previously, the "idiots" you mention (and the rest of us, indirectly) were protected by the fiduciary duty that the mortgage industry were obligated to exercise wrt their own stockholders and to the investors who ultimately bought the MBS created to support modern home financing. "Idiots" didn't change. People willing to prey on them and on investors were simply allowed to do so. Hell, they were encouraged to do so by the Bush Admin and Greenspan's FRB with their deregulate cut red tape cut reserve requirements creative financing low interest rates hedging eliminates risk anything goes ownership society attitude.

About the time that sensible people started to think twice, the Bush Admin was leading the cheers.

Like I said- "Idiots" haven't changed. The fact that Repubs regained the HOR in 2010 just shows how many there really are in this country.

 

[Darwin333]

We need to start splitting up some of the large Mega-banks. We need a freeze on all big bank mergers.

We kinda gave them a shitpot of money to help them buy their competition for pennies on the dollar not long ago.