Foreclosure Crisis Year Five

            It would be tempting to entitle this post the Permanent Foreclosure Crisis.  The newly released National Delinquency Survey (2^nd quarter 2010) from the Mortgage Bankers Association is not encouraging.  Even MBAA’s usual positive spin had to be tempered:  “. . . the downward trend we saw through most of 2010 has stopped.  Mortgage delinquencies are no longer improving and are now showing some signs of worsening.”

             Foreclosure starts are still at triple pre-crisis levels, albeit down from a peak of quadruple their normal levels reached in 2009.  The total foreclosure inventory remains stuck at around 4.5%, a level also first reached in late 2009, a level that is about five times pre-crisis levels.  Total past-due mortgages have eased a bit from the crisis high in the first quarter of 2010, from 14.7% back to 12.9%, but are still at one out of every eight homeowners with a mortgage (compared with one in twenty in normal times.) 

             Meanwhile total mortgage modifications in June were down by half from their peak level in March 2010, meaning that the efforts to restructure home debt are losing steam, while the machinery to foreclose and sell more homes at 60% losses into a oversaturated market grinds on.   Total outstanding mortgage debt remains at unsustainable levels in excess of $10 trillion, inching down at about 1% per quarter, while home values continue to erode much more rapidly.   Present policy is clear:  the housing debt bubble will be deflated via an agonizingly slow process of foreclosures and a vain hope for a rebound in home prices.  The consequences of present policy are also clear – stagnation in the housing market, and hence the general economy, for the foreseeable future.

Comments

[Nancy]

Defend your homes America. The banks passed around the promissory notes to multiple parties, collecting money and fees, using them as collateral, over and over and over. They lost track of the trail and now are making up all the "evidence" to foreclose on your homes. The more who fight back, the closer will get to resolving this crisis, keeping families in their homes, and removing predatory banks from their powerful stranglehold on our politicians and law enforcement.

[Richard Isacoff]

Foreclosures will continue until people can pay for their homes or until MBS investors decide that debt restructuring at the collateral level may produce a higher return than owning residential housing. One immediate problem is that the tranches of investors who make the decisions are protected against loss.

The second is that to write-down/mark-to-FMV the securities with a forecast that would withstand scrutiny would cause deep losses in investment funds.

As for modifications, they are tied to the rate of foreclosures but in a perverse way. Modifications are driven by the ROI for the investors, not by the ethics, morality, or toothless HAMP regs in place currently. If the ROI dictates "foreclose" - that's it, regardless of the "collateral damage" - people not house in this case. Why does the ROI call for foreclosure? Prices have slowed in their decline. Investors can take the props into REO and wait a little while for prices to move up. MORE IMPORTANTLY, a redeployment of the money is critical so "today's loss is better than tomorrow's".

Richard Isacoff
rii@isacofflaw.com

[Foreclosure Freeze]

Absolute accurate perceptions written in a very detailed manner on this page when it comes to gain some knowledge in regard to foreclosed properties. Foreclosures surrounded some of our states as economy hit people badly. Government should announce a workable plan to keep things in control.

[sports good]

One immediate problem is that the tranches of investors who make the decisions are protected against loss...As for modifications, they are tied to the rate of foreclosures but in a perverse way. Modifications are driven by the ROI for the investors, not by the ethics, morality, or toothless HAMP regs in place currently. If the ROI dictates "foreclose" - that's it, regardless of the "collateral damage"