Lenders 'doing everything possible to delay foreclosure'

ForeclosureRadar, the online seller of mortgage default data, has more evidence of a foreclosure backlog in its monthly data, released today:

In May, a record 111,824 California homes were scheduled for foreclosure sales, but just 16% were auctioned. By comparison, last May, sales were held for 49% of homes slated for foreclosure.

Of last month's postponed foreclosures, 40% were delayed at the request of the lender; an additional 33% were postponed by agreement between the lender and borrower.

ForeclosureRadar CEO Sean O'Toole's take on this: “The data actually shows that lenders are doing everything possible to delay foreclosure. The reality is that we have very few homeowners being foreclosed on when viewed as a percentage of those scheduled to be foreclosed on, in default, delinquent, or upside down in their mortgage."

Notices of default -- the first stage in foreclosure, which occurs when a borrower has missed several payments -- were down 4% in May from April and down 3% from the same month a year ago, to 40,870 filings statewide.

Foreclosures taken to auction were down 30% in May from a year ago, to 17,871. Of those homes, 84% had opening bids set below the outstanding loan amount. The average opening bid for these properties was 59% of the loan amount. For instance, if a house with a $100,000 mortgage went to auction, the average opening bid would have been $59,000.

Of homes going to auction in May, 88% were taken back by the lender. When a home is not sold to a third-party bidder at auction, the lender takes it back, typically to sell on the open market or through private auctions.

The top 10 counties in foreclosures, per capita: Merced, Stanislaus, Yuba, Riverside, San Joaquin, Solano, Kern, Madera, San Bernardino, Sacramento. San Diego ranked 27th, Ventura 38th, Los Angeles 44th and Orange 46th.

San Francisco had the fewest foreclosures, per capita. Aren't they special ?

--Peter Y. Hong

Comments

[Laker]

From my view of this and following many properties in the SFV area i can say that NTS auctions are delayed about 3 times on average. Every delay is 60-90 days forward. The NOD itself is sometimes filed about 5-6 months after no payments are mailed. Even after foreclosure sale, the REO in many cases have the previous owner living now rent free delaying evictions for another 60-90 days minimum.
I spoke to a person in a management company that deals with REO sales and he told me that in many of the cases, the lender is not the owner of the loans, so to get REO sold from the moment if has no payment by the owner involves 3-5 parties that every one pulls different direction.
You have the servicer, note holder, 1st lien and 2nd in many cases. Then you have the asset management company, the disposition company, and the investors in many cases that need to approve those sales....
So it is very backlogged, very jammed, complicated....

[LA-Architect]

Yeah... definitely a bottom in the house prices.... RIGHT. Isn't this price fixing and market manipulation???

Please, I'm so disgusted with the endless moratoriums that just let these people live payment free for a year of more. The responsible people who waited on the sidelines for a house that they could afford have been rightly screwed.

[J.W.]

If the general public would STOP thinking that every other week is the bottom of the housing crash and get over their GREED mentality, sales would grind to a trickle and this would force the manipulators to free up their properties. As long as there's a sucker willing to buy, they're just keep playing this game. If everyone would stop buying for two or three months, you would see a crap-load of property hit the market at real market prices. I lived in SoCal for 30 years and watched this ridiculous mindset that "you better buy now because they're only going to get more expensive" permeate the general population. I sold my property and left four years ago and I can assure you that the CA mentality does not exist everywhere. Real estate agents around here make $35-$60k per year and drive Chevrolet's, Ford's and Toyota's and actually have to work to make a sale. And buyers do not bid up the price on houses.....they offer much less than the asking price and the seller negotiates DOWN, not up. It's a whole different world and if and when the general population of CA wises up, the prices will finally come down to where they really should be: (where income equates to housing prices). I miss living in SoCal but I am Sooooo Happy that I left this foolishness.

[farinhite_451]

If only all the people waiting for prices to return to normal could ban together and bring a class action suit against the banks for price fixing. I mean really, doesn't this type of behavior violate anti-trust laws or something? Price fixing is illegal. When do these dead houses become liabilities on the banks' books? What is the legal avenue to force these homes on to the market? Any lawyers out there?

[Laker]

J.W
Sale of a home at price X, means that this is THE market price, you want it or not.
If someone is willing to pay a million dollars and you are willing to pay 600K, that doesn't mean the market price is 600K but a million!
You might not like it, but that is another story.
The price of houses in CA is mainly driven by leverage, availability and cost of money and demand. When you have stated income SISA and NINJA loans, you bet the price would triple.
In fly over states, where there is no real demand, there is not need to fight over properties as there is enough supply to meet demand. So prices aren't pull high and not need for crazy leverage.

[LA-Buyer]

Well... I would imagine lenders do not want to sell the foreclosed houses all at once because they do not want to drive prices down. Given that banks can borrow money for free from the Fed and their cost of money is almost zero,, they are certainly under no pressure to sell any of their foreclosed homes. The cost of holding them on their books is minimal while selling them will result in further losses... and as they wait, hyperinflation may soon take care of thier problem.

[LA]

Let's see. 111,864 people not paying their mortgages in California. If the average payment were about $2,235., lenders are losing $250,000,000 a MONTH in California.

A quarter of a billion dollars a month. Gone.

Not a good time to be a lender.

[socalinvestor]

Backlog + Greed + Credit Crunch = The Situation We Have Today

[Hangemhigh]

Interesting comments, Laker. Now we have the 90 day moratorium on foreclosures effective yesterday. The problem is if the banks wrote down all of the loans that are defaulting, they would be essentially, insolvent. That, and the floor would drop out of home prices completely. The banks are just buying time, but eventually the crap will hit the fan.

[LA-renter]

Exactly, LA-Buyer.

I could care less whether lenders want to provide our neighbors with free shelter for a few months or a few years.

What bothers me is that the federal government puts the "health" of the financial industry before all.

The unfair cost to us all --the guilty and innocent alike-- is NOT higher home prices, it is the enormous, laughable --at least to the Chinese-- government debt and coming inflation.

[Daphne Doesn't]

the banks can postpone trustee sales (and they are holding REOs off the market too, once they get them) for as long as they want. it's only going to prolong the bloodletting, and postpone the ability of the housing market to get back to normal.

so many desperate buyers are believing the mass media's 'green shoots' babble and thinking they should buy now. we are nowhere near a recovery in employment, and without higher wages and more jobs, people can't afford homes. they are weighed down by personal debt as well.

like it or not, the market will decline until it reaches traditional price to rent and wage ratios. we have another 30% in price declines to go in LA--minimally. the banks and our society created this debacle out of sheer GREED. is it any wonder that they are acting true to form now in cleaning up the mess they made?

[Dave]

The banks lobbied Congress and had the "Mark to Market" rules eliminated in March. If they hadn't been changed, then the banks would have had to write down the value of their loans to the actual value of the property. Now that they don't have to, they are in no hurry to sell the foreclosure, since this would result in booked losses for the banks.
Forbes has an interesting interview with Andrew Beal, founder of Beal Bank, who was smart enough to avoid the financial implosion. According to Beal "Half the country's banks--4,000 in all--would be bust, he says, if they marked their loans to what the loans would fetch in an auction. He says banks are fooling themselves by refusing to mark busted assets down. "Banks are on a prayer mission that somehow prices will come back and they won't have to face reality," Beal says. And that reality, according to Beal, is going to get a lot worse. "Unemployment is going over 10%, commercial real estate hasn't even begun collapsing and corporate credit defaults are just getting started," he says. His prediction: depression, without bread lines this time, thanks to the government safety net, but with equal cost to society."
We are nowhere near the bottom, my friends, despite what Jim Cramer is saying.

[Roger Ramjet]

Isn't this fun! Pizza delivery boys turned morgage brokers, deillusional home buyers, criminal investment bankers, and wall street greed hounds. You made your bed baby, now it is time to lay in it. This is only the beginning folks. As it was said in the movie, Jurassic Park, " hold on to you butts, ladies and gentlemen....

[Steve]

"Lenders doing everything possibe..." is not a nobile cause. They love the event of adding the late payments to the new prinicipal. No matter to the new reduce loan modification payment. Modify means new loan which means new note and the principal has gone higher for the sucker trying to save their home. But the idea back fires. So they hold off even longer trying to negotiate.

Those of you crying, "No fair. The banks are'nt kicking people out fast enough so I can have my pick of the litter."

That's like saying seniors are'nt dying fast enough so I can collect an inheritance. Your sick! Get some help!

[Ace]

Why do the banks even bother filing a notice of default if they are only foreclosing 16 percent of the time? It doesn't make sense to me. I don't agree that the banks are 'doing everything possible to delay foreclosures' in order to keep the demand high. Delaying the foreclosures by a few months will not keep the demand high.

Unless there is another housing bailout in the process, delaying a few months isn't going to matter much in the grand plan.

[problemwithcaring]

I have family members that work at all levels of what was a very large West Coast Home Loan corporation and is now a very, very large East and West Coast Home Loan corporation.

Loan processors and customer service agents had been forbidden repeatedly in staff meetings from faxing short sale documents to mortgagors and instead told to mail them out. This policy change by their new overlords, of course, upset and confused the agents and processors , as their bonus compensation is based on the number of loans they get to current, by either by closing out or receiving "JITs" for (Just in time payments).

So there was a little push-back from these working-class folks on the floor. Still seeking their bonuses, many continued to expedite eligible people's short sale request - which granted, still wasn't a lot - by faxing them. They simply didn't see an issue with following all the rules and still efficiently processing documents.

About a month ago, they received a memo from management saying anyone caught faxing requested loan documents would be terminated.

What does it all mean, besides bonuses are down? I dunno, but interesting nevertheless.

[Brian]

Steve it's called capitalism. You've been in CA too long. I don't want to subsidize these deadbeat losers.

I want to swoop in and feast on the scraps with money I've diligently saved the lady five years.

Kick these loses out, I'm moving in baby!

[sfvrealestate]

A Realtor I know who does a lot of foreclosures and has several REO properties in the pipeline. He has not been authorized to list any of them for sale yet by the institutional owners. This has been going on since at least April.

[rosiehazzard]

Check out http://obamamortgage2009.blogspot.com or obamamortgage2009.blogspot.com There needs to be a program for the elderly but not quite to retirement age for mortgage modification when the have lost their job during this particular recession. I made a decent wage because I put my time into a company and now have no job. I am looking at $10 - to $12 hr jobs after working all my life. You can't make a mortgage payment on that kind of money. I will eventually lose my home.