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Foreclosure Backlog Hits 30 Months As Option-ARM Cliff Arrives; Average Delinquency Period 537 Days

Tyler Durden's picture




 

Following today's Case Shiller confirmation that housing is due for many more month of pain, a press release from LPS confirms that the pain will be very prolonged, and home prices will declining for a long period of time. To wit: "The February Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that while delinquencies continue to decline, an enormous backlog of foreclosures still exists with overhang at every level. As of the end of February, foreclosure inventory levels stand at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time. Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home values." That is assuming Banks manage to bribe enough people to allow them to get back to foreclosing on tenants with improper loan docs (something we have no doubt will happen). And possibly far more troubling is that the Option-ARM trap is finally slamming shut: "February’s data also showed a 23 percent increase in Option ARM
foreclosures over the last six months, far more than any other product
type.
In terms of absolute numbers, Option ARM foreclosures stand at
18.8 percent, a higher level than Subprime foreclosures ever reached. 
In addition, deterioration continues in the Non-Agency Prime segment.
Both Jumbo and Conforming Non-Agency Prime loans showed increases in
foreclosures and were the only product areas with increases in
delinquencies."

There is some marginal good news... for banks:

The data also showed that banks’ modification efforts have begun to pay off, as 22 percent of loans that were 90+ days delinquent 12 months ago are now current. Timelines continue to extend, with the average U.S. loan in foreclosure now having been delinquent for a record 537 days, and a full 30 percent of loans in foreclosure have not made a payment in over two years.

Based on all this, it is surely time for Cramer to have another prophetic call like this one from 2008 that housing has finally bottomed.

h/t Credit Trader

 

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Tue, 03/29/2011 - 12:23 | 1113138 alien-IQ
alien-IQ's picture

this is definitely the news that will send the DOW over 13k and the S&P over 1400.

Tue, 03/29/2011 - 12:40 | 1113192 camaro68ss
camaro68ss's picture

this news equels Bulls for the market baby! ride That bitch until the end! Up Up and away Bitchez

Tue, 03/29/2011 - 13:23 | 1113353 whatsinaname
whatsinaname's picture

what about all those articles on yahoo finance - "rents spike higher as housing stabilizes" ??

Tue, 03/29/2011 - 22:02 | 1115329 TwoShortPlanks
TwoShortPlanks's picture

Cramer went to Yahoo Finance dude!

Tue, 03/29/2011 - 12:25 | 1113139 Oh regional Indian
Oh regional Indian's picture

Now that is a cliff and this is a runaway train.

Ouch straight ahead. All as per plan. Anyone still doubting ole Terrence McKenna's thesis needs to get into it. It's really telling the story here.

ORI

http://aadivaahan.wordpress.com/2011/03/11/axis-trembles/

Tue, 03/29/2011 - 12:36 | 1113175 Michael
Michael's picture

What a BORE: Bank Owned Real Estate.

Tue, 03/29/2011 - 13:32 | 1113382 Manthong
Manthong's picture

I have a back yard solution to the situation. I ran 400 Amp service to power the induction furnaces in my native American smelt lodge. Over molten pots of Ag and Au I absorb the heat and vapors as I cast the metal into more fractional and fungible form and am purified in body and spirit. I also sip from the jug of the spirits, eat the Oolichan (smelt) from the local lake and become one with the spirit of the smelt as I smelt. As the long count winds down (along with my positions), I embrace the specie die out for as the Mayans knew, all things are cyclic.  

Tue, 03/29/2011 - 14:25 | 1113613 bbq on whitehou...
bbq on whitehouse lawn's picture

A rain drop is cyclic, a tree's life is cyclic, but a man's life is a trail. Not everything is a cycle; as some men seek to leave more then their footprints, and others less. The opening of an Act, is no more the end of a play, then it is a beginning of one.

Spirit is community by another name.

Ps. Women are a whole other story. :)

Tue, 03/29/2011 - 17:31 | 1114499 Manthong
Manthong's picture

Our lives might just be a skidmarks on the scivvies of the cosmos, I'm OK with that.. I was specifically referring to specie as in fiat. :D

Tue, 03/29/2011 - 12:26 | 1113140 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

ARM cliff, bitchez!

Really though, if ARMs have to renegotiate on higher rates you can kiss your Keynesian system good bye!  QE 4 EVA!

Tue, 03/29/2011 - 13:34 | 1113246 Threeggg
Threeggg's picture

It's not the rates, it's the value of that property at the time of the 3 or 5 year roll. Commercial realestate has to reflect occupancy during valuation/appraisal ........That will be your trouble.

People and businesses will pay the higher interest rates, but trying to find someone to "even write" an uncollaterized loan (ain't gonna happen) is another story.

Example: Mr. Joemall bought the shopping center for $50 million in 2008 with a 95% occupancy, Now he has an occupancy of 60% and the mall is only worth $35 million

So the question is who is gonna roll that debt ?

Answer: Nobody ! Not even mentioning the derivatives written under the original loan when Joemall default's because "not one" financial Institution will "Roll" with him. 

Prepare, it's going to get lonely Biatchez !!!!!!!!!!!!

Tue, 03/29/2011 - 13:54 | 1113473 NotApplicable
NotApplicable's picture

Every commercial property around me is ending up in the hands of one of the local developer oligarchs, only to remain empty.

Tue, 03/29/2011 - 14:19 | 1113591 TruthInSunshine
TruthInSunshine's picture

A lot of that stuff is going to the FDIC, also, and most of the time, they don't advertise the fact (they will if they think they can do a quick turnaround sale, and raise some cash, through the Dallas FDIC desk).

It's sort of surreal, because most people would never even come close to guessing how many of the 'normal' commercial properties they see are either now owned or in proceedings to be owned by the FDIC (or the Fed; Red Roof Inn is but one example).

Tue, 03/29/2011 - 12:57 | 1113262 Dr. Porkchop
Dr. Porkchop's picture

Uncle Benny in the alley has what you need.. just stick it in your ARM and everything will be cool..you dig?

Tue, 03/29/2011 - 12:26 | 1113141 Piranhanoia
Piranhanoia's picture

LPS. Now spokeshole for industry?  They create documents from whole cloth and pretend they are real.  And Case Shiller shills for LPS statements?   

If either has made a truthful statement in the last decade, I would be most suprised.

Tue, 03/29/2011 - 12:28 | 1113152 RobotTrader
RobotTrader's picture

CRB Index at "Do or Die"

Oil stocks doing great, gold stocks are still sucking wind.  Still too early to tell which way this will break.

Tue, 03/29/2011 - 12:35 | 1113174 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

SLW [cough, COUGH]

Tue, 03/29/2011 - 12:31 | 1113155 dasein211
dasein211's picture

EU insolvency.
US insolvency.
Japan insolvency.
Massive liquidity injections.
Near nuclear apocalypse.
Housing still coming like a tsunami.
Worldwide uprising.
Banking insolvency.

What the fuck is it gonna take. Nothing less than an asteroid I suppose.It is the utmost surreal to watch this all and see it not collapse. Maybe the PTB are too powerful...
I wanna make money but it seems the best I can hope for the foreseeable future is to barely preserve it.

Tue, 03/29/2011 - 12:38 | 1113186 ivana
ivana's picture

Think we are all in same boat. Problem is that powerz and their utilities have control on almost all markets. Worse than that - they do not see any "obstructions" on the way ... since most of players obey.
Preserving values will not be easy since their target is inflation.

The only hope for asteroid-kind-of-change (for quick wins) will be some unprecedented hostile move from chinese, russians, taxpayers and ??? others which are on the other side of system

Tue, 03/29/2011 - 12:46 | 1113208 Cdad
Cdad's picture

Oops...and here come the the bear capitulation posts [from short timers] tagging onto Robo's constant 12 month bullish chart nonsense...confirming the coming "surprise sell off" that NO ONE can see coming.

For those of you who have very little imagination [eh hem Wall Street bankers], get your Iphone cameras ready.  Point them at yourself and press the button to mark the surprise that you are about to feel....

 

Tue, 03/29/2011 - 12:40 | 1113187 ivana
ivana's picture

-

Tue, 03/29/2011 - 12:46 | 1113211 Long-John-Silver
Long-John-Silver's picture

Buys asteroid futures

 

/JK sarc

Tue, 03/29/2011 - 12:48 | 1113229 A Man without Q...
A Man without Qualities's picture

My theory is that the system is so screwed, there is simply no way to "allow" values to fall to the "correct" levels.  The governments, in collusion with the banks, have engaged in a gross fraud upon the people, repeatedly offering all sorts of wondrous things to placate the sheep, using all sorts of accounting tricks to make things look semi-solvent and relying on the banks to find a market for their paper.  The financial system has grown rich "managing" our money, which in reality means skimming off the top for years, relying on their ability to prop up asset prices at phony values to disguise the amount of theft that's been going on. Of course, all of this really took off with the emergence of the derivatives market, which allowed you to skim for years into the future, but pocket everything today.  

If things were to reach their true clearing price, everything would stop and the people would come looking for those they feel responsible for perpetrating the fraud.  Therefore, it needs to be propped up, for dear life, for as long as possible - this is what you are up against.  

In fact, it seems to me the way the system will cover up all their crimes is literally killing the currency by which everything is measured.  

Tue, 03/29/2011 - 13:39 | 1113397 Temporalist
Temporalist's picture

The short explanation of all that you just wrote is "QE."

Tue, 03/29/2011 - 15:47 | 1113944 Max Hunter
Max Hunter's picture

I'll buy that.. If the RE market were to reflect the inventory and labor market, everything would fall like a house of cards.. You're right, they can't let it happen.

Tue, 03/29/2011 - 12:31 | 1113156 buzzsaw99
buzzsaw99's picture

Over a year of free rent. Nice.

Tue, 03/29/2011 - 12:32 | 1113157 SilverRhino
SilverRhino's picture

Sitting here wondering why I'm still playing the game with a 4.9% fixed 30 year.   Maybe I should just stop paying and see what I can get from CitiMortgage.

Tue, 03/29/2011 - 14:01 | 1113514 NotApplicable
NotApplicable's picture

Well, if you aren't desiring to move then what benefit can it provide? It isn't like you are going to be able to live there forever without someone eventually foreclosing on you.

I would think that living under the constant threat of eviction would cause quite a bit of stress. Every single time someone came to your door, fear of the inevitable consequences would emerge. I couldn't imagine doing it for more than two years.

If you're looking to bail though, then perhaps it could be workable.

Tue, 03/29/2011 - 19:43 | 1114975 Fearless Rick
Fearless Rick's picture

Gotta tell ya, living in a house that you neither own nor pay on is a bit of a nuisance. On the other hand, my situation is a bit different. I inherited this property, and my two siblings didn't want anything to do with it, so I moved in, rented out my F&C home and am doing just fine.

The issue is the taxes, which I have allowed to run, simply as a hedge against the banksters. They know the house is worth 30% less than their mortgage, is in need of repairs and has unpaid taxes.

My situation is well, come 2012 - 9 months from now - the country could foreclose for unpaid taxes, but I could pay them. Or, I could take that money and just move on, find a similar property for less, nearby if I like, or far away.

Meantime, I'm inching up on two years of no payments and just passed the 1 year anniversary of the foreclosure action. Have heard bupkiss from the bank. They're still at square one.

I don't disturb their sleep, that plan having worked to perfection thus far (why poke a sleeping bear?). At some point, they may come along with their phony documents and try to push ahead, and I may sue for fraud or take the case to the federal level via recision.

It's fun and I don't worry about the knock on the door or the mail. Eventually, I suppose something will change, but, maybe not. Quiet title or 10 years to adverse possession. Both look pretty good right now.

Nearly debt free in the meantime. What's not to like?

Tue, 03/29/2011 - 14:08 | 1113542 trav7777
trav7777's picture

you may be the wrong color to receive any modifications...

Tue, 03/29/2011 - 21:23 | 1115218 mkkby
mkkby's picture

I realize you do this just to push people's buttons and entertain yourself.  But seriously, loan mods are a curse.  It's just to keep you locked into paying interest to the banking cartel.  And in non-recourse states a mod generally takes away your protection against judgements beyond taking the collateral.  Bad stuff.

Tue, 03/29/2011 - 12:32 | 1113158 mmlevine
mmlevine's picture

Anyone think that ALL of these loans have a loan loss provisions?  It use to be that after 90 days delinquent, the loan had to be considered non-performing and reserved 100%.  But heck, that was back in the 1990's.

The Great Ponzi continues...

Tue, 03/29/2011 - 12:32 | 1113167 buzzsaw99
buzzsaw99's picture

The more underwater a person is the less likely they are to foreclose. Double plus good!

Tue, 03/29/2011 - 12:37 | 1113184 Jerry Maguire
Jerry Maguire's picture

It's all good.  We'll just become a nation of squatters:

http://strikelawyer.wordpress.com/2011/03/28/squatting/

Or, we could have a jubilee, restore sound money and go on prosperously from there.

http://strikelawyer.wordpress.com/2011/01/15/us-constitution-28th-amendm...

Nah.  Too simple.  And what would the banksters be able to do to co-opt it all to their own purposes?

 

Tue, 03/29/2011 - 12:39 | 1113188 Yield2Greatness
Yield2Greatness's picture

This is likely to start the next great depression.  People are already leery enough, and this will send them into panic mode.

Tue, 03/29/2011 - 12:47 | 1113222 Long-John-Silver
Long-John-Silver's picture

What makes you think we are not in a Great Economic Depression?

Tue, 03/29/2011 - 12:42 | 1113196 TruthInSunshine
TruthInSunshine's picture

I've often wondered if one of the reasons that the MERS broken chain of title fiasco is even more of a bizarre, guarded type battle is that The Federal Reserve is saddled with a few hundred billion (or more) in residential mortgage backed securities, and that if MERS was rule on as being illegal (from a title transference standpoint) by the judiciary (it actually has by a few state and federal courts), then the Federal Reserve would face massive losses on their residential MBS assets.

Tue, 03/29/2011 - 12:57 | 1113255 MachoMan
MachoMan's picture

Why is that?  If declared invalid, the losses would flow backwards to the entity who created the securities...  eventually resulting in the entity most close to the eventual turnip with a pretty big bag.  In other words, the holding institutions sue on back the entire chain for selling toxic securities...  My guess is TBTF entities would be on the hook given their predecessor was the initiator, who is now defunkt/bankrupt.  As it should be...

Tue, 03/29/2011 - 13:29 | 1113357 TruthInSunshine
TruthInSunshine's picture

What would the Fed do? Sue the originators that it took possession of the MBS from, on a put back?

The same lenders it's (still) trying to prop up and save - even if we know many of them are already zombified?

You see where I'm going with this.

Tue, 03/29/2011 - 13:48 | 1113452 MachoMan
MachoMan's picture

This is why they haven't moved much, yes, I understand.  But, we must adhere to the legal formalities of separate entities.  As a result, and out of a rudimentary fiduciary duty, all holders of toxic MBS must seek putbacks where available/damage has occurred.  I think the holding entities are required to put them back...  and either they put them back on down the line or they eat the turds when due from the class actions (european municipalities, snicker).  I think they have an obligation to pass the cost on down the line to the predecessor purveyors...  and I think they certainly have an equitable, if not legal, basis for doing so...

The thing to realize is that all will not become due at once...  basically, the lawsuits can be dragged out over years...  and, after the appeals process on virtually all of them take hold, the system will have already collapsed from other disease.  Maybe they have to pay up a few...  maybe they get sweetheart settlement agreements whereby GSEs, the FED, et al, decide to split the costs of putbacks...  who knows...  but, any which way, I think this whole process takes longer to come to fruition than the dollar has in remaining lifespan...  it's kind of like old people smoking and eating fast food...

Tue, 03/29/2011 - 14:25 | 1113609 TruthInSunshine
TruthInSunshine's picture

It's true that winding down of the assets will take some time (or a hell of a lot of time, IMO), but the problem the Fed and the TBTF Banks are facing with some of the MERS challenges alleging broken chain of title is that they get some solidly reasoned court opinions that begin to shape a clear trend against them in the courts, and then if the federal courts also agree on matters where federal law + property law are involved (e.g. bankruptcy proceedings), you have the possibility of some very significant adverse law being handed down, with even the chance the Supreme Court grants cert and renders an opinion that's highly deferential to property law and recordation law (affirming it as an In Rem matter) - the SCOTUS could do this by denying cert, also.

Tue, 03/29/2011 - 15:11 | 1113789 MachoMan
MachoMan's picture

There isn't and should be any disagreement on this point...  it's a certainty.  But, the issue is who, on down the line, really has liability?  Does the end purchaser of a security get to sue a pseudo sovereign?  Is this why they've been dumped on an arm of the state?  Are all of the chain of sellers jointly liable to the end purchaser?  If adequate disclosure was made to the buyer and the seller did not have knowledge of any falsities, what is the cause of action?

It seems to me that everyone other than the original packagers of the securities would be together in the lawsuits as plaintiffs...  I suppose there might be some cross claims, but generally speaking, I think a fractured plaintiffs side would make it more difficult to recover (more confusion of an already complex issue) and they'll likely opt to keep any differences at bay until a determination is made otherwise... 

Further, if the original packagers of the securities are now defunkt/bankrupt, what redress do the end users really have?  If recission is a possibility, then the bag holders will be the last sellers, closest to the packagers...  this may or may not be a TBTF...  In other words, the TBTF have probably assumed quite a bit of liability via M & A or out of original action, but I suspect only a portion of the potential putbacks are even capable of being thrown upon the TBTF institutions...  they'll only have liability insofar as intermediary institutions (hopefully having a predecessor bagholder with deep enough pockets).  But, obviously, any additional hiccups to an already insolvent institution are to be avoided at all costs...

Also, I don't think the failure of MERS is necessarily marginally detrimental to the banks...  all it will require them to do is file a breach of contract action on the note and proceed to a quick judgment...  and then enforce the judgment quickly...  all of these procedures shouldn't be very difficult...  and without mortgage issues to deal with, most of the new defenses for debtors are easily avoided...  the only issue is whether or not third parties have intervened in the lien priority...  but, with a lien already filed of record, the likelihood of seconds, thirds, etc., is probably not as high...  essentially, and subsequent creditor would have to rely upon the guess that the predecessor liens are not only invalid, but will also not be redeemed or redeemable via any other action in the meantime...  I suspect that even with our rampant moral hazard, this is probably not quite the issue many expect it to be...  [the securities side is totally different though].

Tue, 03/29/2011 - 20:03 | 1115035 Fearless Rick
Fearless Rick's picture

Macho, many thanks for all the high-falutin' cogitation on the issues, but really, you don't know jack when you make statements like this:

hopefully having a predecessor bagholder with deep enough pockets

Do you actually believe that a TBTF bank is looking down the chain of title for somebody with deeper pockets? Laughable, indeed. BofA is on the hook for Cuntrywide failures, plain and simple, and there's no way out. Why do you believe this has gone on so long. The banks are screwed, screwed and screwed.

There are a couple thousand venues across the country trying to deal with these issues, mostly state Supreme Courts, like here in NY, and all the rules have nuance. The legal bills are astronomical. The banks are going to get jack. Same with the note holders, whoever they may be. Homeowners are in the cat-bird seat because they actually live in, maintain and pay taxes on the properties in many cases. The banks are NEGLIGENT to a very large degree, something lawyers and judges like to bring up in hearings on these matters.

How far one can take fraud as an action for negligence is a case I'd like to pursue.

Your reasoning, on the other hand, is that of a rank amateur with no experience in these matters. Stick to something you might actually know something about, whatever that may be.

And remember, while the banks sought to separate the note from the mortgage via MERS and securitization, the put-backs and the property in question are completely intertwined. You can't kick somebody out and still expect to make money.

Wed, 03/30/2011 - 10:50 | 1116836 MachoMan
MachoMan's picture

I didn't say whether their hope (or the analysts' hope) was well founded...  I don't beleive it is and I already made mention that none of it applies if they picked up direct liability via M & A...  I think you've taken the statement out of context.

And we're also talking about two broad categories, securitization and fundamental real property law...  this leads to different analyses...  for example, it is possible to have a putback of a mortgage security (let's say from a naive scandinavian municipality to a TBTF) without deciding to destroy the security, e.g. recission.  The question is who has the liability for creation?  And does merely being an intermediary for the sale of the security impose liability?  Obviously it depends on the cause of action, but the nuances of the security law are above my pay grade...  this is literally the most difficult area of the law where the real sharks play (unfortunately as all taxpayers know too well by now). 

As for the real property side, I'm in the trenches every day, advocating all sides of the process...  In fact, I have a case on appeal at the moment (representing BFP at foreclosure sale) whereby the debtor alleged the sale was conducted improperly and void...  we won at trial...

The foreclosure cases need to be broken into two categories, those pending and those already decided.  For those cases that have been decided, the issue is FRAUD, not negligence.  The person seeking to invalidate a judgment must typically prove standing to attempt to do so.  One of the requirements is to prove a meritorious defense...  in order to do so, the debtor would essentially need to show that he/she was not in default...  the most notable exception to the requirement of showing a meritorious defense is when a judgment rendered by default is VOID...  disputes over a void judgment typically arise over proper service, but may also arise out of a fraud committed on the court (not on the debtor).  In the foreclosure cases that invalidate foreclosure decrees, they've determined that a fraud was committed on the court via robo-signed documents, false affidavits, etc.  In other words, negligence on the part of the bank is NOT typically a sufficient reason to invalidate a foreclosure decree...

Now, negligence may very well be an important issue for prospective foreclosures...  However, the negligence would largely be self inflicted by the banks...  meaning, all they've done is ensure they cannot foreclose on their liens...  (actually that the dumbasses who bought the mortgages cannot foreclose, but at least not a harm to the debtor).  The real issue is how do you ensure a release of the liens on your property?  Well, practically speaking, if there was but a single mortgage filed against your property, and you receive a release from the mortgagee (the only party you had privity of contract), then you're pretty much at the finish line...  It may be possible for some scandinavian municipality to pop up in 10 years and claim an interest in your property, but this would seem to be more properly a cause of action against the assignor of the mortgage, not the original mortgagor...  (and practically speaking, you're going to have home court advantage on every case).

I also think that there are numerous ways to properly conduct prospective foreclosures...  especially if the prospective plaintiff list gets whittled down to only a few banks...  essentially, they can all be plaintiffs against the debtor and will not run afoul of lying to the court...  whoever is not decided to be the holder can nonsuit their foreclosure claims and can simply sue to recover the proceeds of the sale from the holder (in the same lawsuit, presumably).  And, of course, the note is always there for a breach of contract action...  (open and shut case).  The only question is whether there have been intermediary lien filers... 

PS, fraud and negligence are separate causes of action...

Tue, 03/29/2011 - 13:24 | 1113358 Joe Davola
Joe Davola's picture

TBTF - yeah, they're gonna be the bagholders.

Tue, 03/29/2011 - 13:31 | 1113377 gina distrusts gov
gina distrusts gov's picture

the TBTF banks own the fed, kill one the other dies the printing press will be no help as the dollar will be worth less than a sheet of scott ass wipe.

Tue, 03/29/2011 - 12:44 | 1113205 RobotTrader
RobotTrader's picture

Hardly anybody in L.A. is paying their mortgage now if they are underwater.

Most guys I know have lived mortgage-free for 15 - 21 months now.

Any wonder why consumer spending is going through the roof?

Tue, 03/29/2011 - 12:51 | 1113236 Long-John-Silver
Long-John-Silver's picture

Any wonder why consumer spending is going through the roof?

People would demand payment of daily wages before lunch so that could buy before prices increase during the time of the Wiemar Republic currency collapse.


Tue, 03/29/2011 - 12:56 | 1113251 A Man without Q...
A Man without Qualities's picture

Ok, now assuming these have been securitized, the simple question has got to be where is the cash coming to make the payments on the notes? If they are retained mortgages, you just put it as interest accrued, but if it's in note form, the payment has to be made until the foreclosure has occurred.

Tue, 03/29/2011 - 13:05 | 1113289 alien-IQ
alien-IQ's picture

and what could possibly go wrong with that scenario right?

Tue, 03/29/2011 - 13:45 | 1113417 Bastiat
Bastiat's picture

Most guys I know have lived mortgage-free for 15 - 21 months now.

Hanging with the high rollers, eh?

 

Tue, 03/29/2011 - 14:32 | 1113626 TruthInSunshine
TruthInSunshine's picture

I don't 'hang' with him, but a guy who used to do work for me (subcontractor) has a house  that cost him over 800k to build, he did 100% financing on it in 2005, and he hasn't made a mortage payment to BofA in almost 4 years.

The house might be worth 400k now (maybe), and they've only filed hits to his credit and a notice of delinquency.

Tue, 03/29/2011 - 15:01 | 1113761 Bastiat
Bastiat's picture

No offense, TIS. Was just taking a jab at high-roller Robo who apparently knows so many people who levered up and bought the top.    Four years is amazing--that's a lot of money.  

Tue, 03/29/2011 - 15:15 | 1113806 TruthInSunshine
TruthInSunshine's picture

No offense taken.

Robo always sells at the top (after the fact we will learn about it from him) and buys at the bottom (after the fact we will learn about it from him).

 

Tue, 03/29/2011 - 13:48 | 1113448 Careless Whisper
Careless Whisper's picture

@ Robo

this "gurl" has lots of good reasons why she isn't paying the bank.

http://www.youtube.com/watch?v=aO8hecX2prQ

 

Tue, 03/29/2011 - 12:48 | 1113226 Seasmoke
Seasmoke's picture

why they dont just do PRINCIPAL REDUCTIONS is the great mystery of the 21st century......there is no other way out !

Tue, 03/29/2011 - 12:54 | 1113245 Long-John-Silver
Long-John-Silver's picture

A Mexican style currency devaluation is coming.

Tue, 03/29/2011 - 13:00 | 1113266 buzzsaw99
buzzsaw99's picture

give the deadbeat a$$holes who caused this mess a do-over. Wonderful idea!

Tue, 03/29/2011 - 13:06 | 1113290 francis_the_won...
francis_the_wonder_hamster's picture

The only "way out" is to write down the bad debt and let the market settle.  That is, and always has been, the only true solution to a debt bubble.  We all know why this isn't being done.

Tue, 03/29/2011 - 20:08 | 1115052 Fearless Rick
Fearless Rick's picture

The banks caused the mess, buzzkill.

Tue, 03/29/2011 - 13:19 | 1113334 chunga
chunga's picture

That's easy -- the "servicers" won't allow it. Ironically, they're often the only party to the transaction with zero skin in the game.

How about this for economic stimulus? Hit the reset button for everyone...not just the deadbeats in default. Given all the money that has vanished...I think it would be the most fair to all.

NPV for everyone.

Aside from the Wall Street marauders everyone got a haircut....with a weed-wacker.

Tue, 03/29/2011 - 13:55 | 1113471 MachoMan
MachoMan's picture

What about the renters who wanted to rent because they knew they couldn't afford a house and/or didn't want to speculate via credit on the housing market?  Either everyone or no one.

Tue, 03/29/2011 - 15:15 | 1113807 chunga
chunga's picture

I agree with you 100 percent. Whatever the solution -- it must be equitable for all...

The US is in a dark place, where the absolutely most reckless, irresponsible bankers — who made the most reckless, irresponsible decisions — are receiving massive government subsidies.  The price tag will be picked up by future generations.

That is, we are collectively putting our children into deep hoc lest bankers suffer the sting of a firm slap by the invisible hand, all the while whining that the free market continues to function.

Bankers, along with their supporters in government, tried to portray the interests of Wall St. and Main St. aligned.  They aren’t.  There hasn’t been a “class war” from the middle class towards the rich, but there’s been a ferocious one the other direction.

Tue, 03/29/2011 - 15:38 | 1113912 MachoMan
MachoMan's picture

The bankers aren't the only ones on the teet...  unfortunately.  I really can't envision any "fair" resolution to the matter...  even if the prols unite, they'll have never been faced with the beast staring back at them in the mirror...  I don't think the judiciary can sort it all out either...  I guess the best resolution is the one that makes us all the least happy?

Tue, 03/29/2011 - 15:56 | 1113979 chunga
chunga's picture

Can't argue with that either. If there is an equitable resolution I do think we are obligated to try to find it. Mr. Banzai had a great post yesterday re: "unknown unknowns". This has been made so deliberately complex. Just take one element -- the tax exempt REMIC window. What a maze of rabbit holes we have on our hands.

The MERS "Secret Mortgage Society"....I have this strange feeling that in many situations where MERS is not involved it's even worse.

Tue, 03/29/2011 - 16:23 | 1114149 MachoMan
MachoMan's picture

If fair resolution is impossible given the complexity of the system (also the reason for its ultimate failure), then are we looking at a simple repudiation of all debts/jubilee and new start (aka the reset button being pressed)?  If so, how do we "level" the new playingfield post jubilee to ensure that whatever supposed capitalist ideals we endeavor to codify end up being something other than a continuation of the wealth gap presently imposed?  Sure, a reset will pull down plenty of the 1% ers, but how do we reasonably identify the purveyors/profiteers of a corrupt system?  Is it the entire lot?  Who didn't play the game fairly?  Does it matter given their inevitable lead into the next race?  How does the new playingfield ever become level given the disproportionate educational and experience levels of the citizenry?  What do we do with a large, permanent structural unemployment level?  Do we ban increases in technology/productivity if it means more dependents?  Do we stop tourists/immigrants?  How do we find reasonable, diligent, and capable people who want to attempt to objectively answer the issues and implement viable change?

Too many questions... 

Tue, 03/29/2011 - 16:49 | 1114310 chunga
chunga's picture

Hank Greenberg is probably laughing his balls off right now. Spitzer took him down I think in 2005. Then Spitzer got himself taken down for his lust for expensive hookers.

Tue, 03/29/2011 - 20:18 | 1115077 Fearless Rick
Fearless Rick's picture

Ah, Macho, now you're beginning to see the light. This is an ENORMOUS PROBLEM, threatening to change the way of life for just about every American.

From my perspective, the easiest resolution would be to appoint mediators - give some lawyers something to do - set some guidelines for keeping people in their homes. Start with NPV at 25-35% below market rates. If the home-dweller can make payments, then the banks take a well-deserved haircut, but get something, usually better than nothing.

If not, the home-dweller has to move and the bank takes the property. Simple, easy, everybody gets a square deal. The moral hazard is that people paying their underwater mortgages will want a similar deal and they should get one. Mark it down, write it off, put this crap behind us. The banksters get the usual get-out-of-jail-free card and yes, we have the massive reset, but, the dollar will be main beneficiary and who knows? Maybe some of these people with new leases on life might just start up businesses and employ a few of their neighbors.

It would be better than the massive clusterfuck we now have. 

Wed, 03/30/2011 - 10:57 | 1116914 MachoMan
MachoMan's picture

The answer is to let the banks eat the properties, if they can seek recourse against the debtors, then the debtors file bankruptcy or otherwise eat their strategic defaults.  When the dust settles, the former debtors either rent or buy vastly depreciated property (and thus presumably cheaper/more affordable).  And no, lawyers don't need any more handouts...  if you're needed, then you get to work, otherwise, no soup for you.

What is beginning to happen is that when the banks cant move properties, they can rent....  this should have been happening from the beginning.  If they can't take the haircut and compete against themselves selling houses, then rent the inventory...  if you can't find any takers, then charge less rent.  You bought the asset, now deal with it.

In the end, states are going to force the banks' hands and shadow inventory via property taxes...  good luck with those loss reserves.

Tue, 03/29/2011 - 12:55 | 1113248 tahoebumsmith
tahoebumsmith's picture

As you can clearly see nothing has changed since the start of this depression. The only thing that has changed is now the banks are willing to kick the squatter can even further to avoid the losses. The option arm time bomb has been ticking for some time and is just starting to go off. The difference between many of these borrowers and the subprime borrowers is they will just walk away on a strategic default and jingle mail the keys back to the banks. Expect the shadow inventory to increase two fold over the next six to eight months as the banks will try to hide the situation from the general public. They will continue to trickle properties out to investors at firesale prices and cause housing prices to continue their death spiral. If I recall this whole crisis was caused by bad mortgages? Well nothing has changed other then their ability to cover up the toxic mess their greed got them into. Maybe the should consult Japan on the Nuclear disaster seeing how they can pretty much bury any toxic waste that comes their way. Is the FED going to come to their rescue again and buy up another trillion in toxic MBS? Is Fannie and Freddie going to go deeper into the Abyss? Of course they are because now they will divert the losses onto the backs of the taxpayers through the Fannie conduit. Remember that the government now backs more the 80% of the mortgages in America and as this situation esculates and they run out of ways to cover it up, our credability will continue to be compromised. The only thing that has changed since DEC 07 is the amount of fuzzy math and deception that is now taking place. We have more people in foreclosure then we did when the recession began and we now have deliquencies squatting some 500+ days before any action is taken. Imagine what the economy would look like if all these people were forced to pay their mortgages instead of buying plasma TVs or eating Big Macs or Chipolte? Now that the can has been kicked into the corner and we have spent some 15 TRILLION DOLLARS trying to bury the terd, the truth is coming out. Home sales were at a record low last month and inventory keeps getting bigger. I wouldn't be surprised if they just let people squat forever to try and hold back the tsunami that is rolling in. Expect home prices to continue their collapse at least another 30% and you probably won't see a bottom for at least another 5+++ years. This is not going to work itself out in a timely fashion as more people just jump on the squatters wagon due to their mortgages going underwater. Once again another residual afteshock from the bubble Wall St. inflated and made billions on. Now they are making billions as the government assists them in their massive cover up. In the end we will be left with a pile of worthlessness and a mound of debt that will never be able to be paid back...NEVER...  

Tue, 03/29/2011 - 13:24 | 1113360 Threeggg
Threeggg's picture

The option arm time bomb has been ticking for some time and is just starting to go off

You nailed it here ! for the next 2 years this will be a Tsunami. I would imagine by November it will be Chronic.

http://www.urbandictionary.com/define.php?term=chronic

Tue, 03/29/2011 - 15:51 | 1113961 defn8Dog
defn8Dog's picture

Way back in 2008, MBS was something like 4x the underlying, which makes it on its way to 6x now, but really, these are just abstractions and everything will be fine. 

Tue, 03/29/2011 - 12:57 | 1113252 chunga
chunga's picture

LPS ought to know...their subsidiary (DOCX will create a shiny new collateral file for a mere $95 quatloos).

LPS’ DocX Price Sheet is Public!

They might have changed the name by now to something more friendly....like "Ally".

Ooops....that one is taken already.

Tue, 03/29/2011 - 12:56 | 1113257 defn8Dog
defn8Dog's picture

Ahhh... option arms.  Name your price.  Those were good times.

http://www.youtube.com/watch?v=laot_Eomr3s&feature=related

Tue, 03/29/2011 - 12:59 | 1113268 Sudden Debt
Sudden Debt's picture

In Belgium there is a common trick to avoid being charged for delinquency on your bills.

Just pay every 6 days 25 euro, and banks are legally forced to restart all the procedures. If you go over 7 they got you by the balls.

I know people who make a sport out of it.

 

Tue, 03/29/2011 - 13:02 | 1113277 defn8Dog
defn8Dog's picture

They also eat raw horsemeat in Belgium.   

Tue, 03/29/2011 - 13:04 | 1113286 the not so migh...
the not so mighty maximiza's picture

horse tar tar,, yummy

 

Tue, 03/29/2011 - 13:08 | 1113295 monopoly
monopoly's picture

That is good Robo. Yup, and at some point it all stops, and hope there is a chair left. Until then, BTFD. Simple.

 

 

Tue, 03/29/2011 - 15:04 | 1113769 Kickaha
Kickaha's picture

Thanks for the link.  That guy should run for office.

But, "Naive" (?)

The plan from the outset was dictated by the degree of the crisis.  The banks were completely insolvent.  So enact make-believe accounting as a short-term fix, give the TBTF bank a massive ocean-going container ship overflowing with money, tell the public it was for lending, then look the other way when the money goes straight to the proprietary trading desks for securities speculation.  Rig the markets and let bagholders finance the TBTF banks.

It's the bank's and the Fed's equivalent of mom and pop, hopelessly in debt, coming in to some money and then blowing it on Power Ball tickets, since that is the only freakin' chance they have to fix their financial problems, except the banksters think they know all six numbers in advance of the drawing.

Meanwhile, the uberrich hoard cash and position themselves to swoop in and buy real assets for pennies on the dollar, and CNBC scratches its collective head and wonders why dividends are not being increased to make these stocks stand out in the current bull market.

Tue, 03/29/2011 - 13:15 | 1113312 Boilermaker
Boilermaker's picture

Well, that explains the Saturn V launch of REITs today (like every day).  What a wonderful reversal from an opening sell-off...again...and again....and again....and again.....and again....

 

Tue, 03/29/2011 - 13:23 | 1113354 lsbumblebee
lsbumblebee's picture

Cramer's other credentials include calling the bottom in tech stocks in 2000. He also won the "shit-eatin grin award" for the most obnoxious show on teevee.

http://www.itulip.com/awards.htm#Cramer

Tue, 03/29/2011 - 13:35 | 1113386 TruthInSunshine
TruthInSunshine's picture
The Winners of the New World - TheStreet

By Jim Cramer 02/29/00 - 09:42 AM EST

Editor's Note: James J. Cramer is the keynote speaker at the 6th Annual Internet and Electronic Commerce Conference and Exposition, held today at the Jacob Javits Center in New York City. We're running the full text of that speech here.

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.

OK. Here goes. Write them down -- no handouts here!: 724 Solutions (SVNX), Ariba (ARBA_), Digital Island (ISLD), Exodus (EXDS), InfoSpace.com (INSP_), Inktomi (INKT), Mercury Interactive (MERQ), Sonera (SNRA), VeriSign (VRSN_) and Veritas Software (VRTS_).

We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over -- and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don't even have earnings per share, so we won't have to be constrained by that methodology for quarters to come.

Tue, 03/29/2011 - 13:42 | 1113414 mrcybermac
mrcybermac's picture

I have to admit this pisses me off.  Why do these people get to live in a house (I'm in an apt) for free for 2 years while they save $30,000???  I have to actually work, for a very long time, to save that kind of money, and the system is in essence just giving away free income to those who are freeloading in "their" houses that they obviously never owned in the first place.

Tue, 03/29/2011 - 13:49 | 1113449 Threeggg
Threeggg's picture

Thats because they are entitled to it as Americans.

Didn't you get the Memo/Momo

Tue, 03/29/2011 - 13:57 | 1113481 MachoMan
MachoMan's picture

Because they've figured out how to embrace moral hazard or, at least, tolerate doing so...  like you will shortly.

Tue, 03/29/2011 - 14:14 | 1113563 trav7777
trav7777's picture

same boat since I sold my house.  If you don't pay rent the sheriff comes and puts your shit in a trailer or on the curb.

If you don't pay your mortgage, the Fed prints money to throw at the bank that owns it.

Problem is now is that anyone who wants to "buy" at this point forward is locked out of this scam; they will demand substantial money down unless you are the right color or right demographic. 

So for the people who overbought in the good school districts and whatnot, party on.  Everybody else gets to suck it

Tue, 03/29/2011 - 14:29 | 1113619 TruthInSunshine
TruthInSunshine's picture

Already done.

86% of new loans originated are FHA guaranteed, and they've increased appraisal standards, credit standards (FICOs of 720+ need only apply) and are requiring more conventional desposits.

Tue, 03/29/2011 - 16:59 | 1114360 Rockfish
Rockfish's picture

FICO 640+

Tue, 03/29/2011 - 17:00 | 1114364 Rockfish
Rockfish's picture

FICOs of 720+ need only apply)

 

FICO 640+

Tue, 03/29/2011 - 16:31 | 1114200 Calmyourself
Calmyourself's picture

If your in a good shcool district in most cases you get tossed quick.. I will continue to make my payment no matter what as the bank will make money tossing me..  Damn I'm disadvantaged by a lack of moral hazard..

Tue, 03/29/2011 - 15:53 | 1113965 SilverFiend
SilverFiend's picture

You could do the same.  You just have to have the balls to move into a vacant house.  There are two in my neighborhood that no one has checked on in 18 months.

Tue, 03/29/2011 - 22:37 | 1115448 Moon Pie
Moon Pie's picture

Unless of course the 'freeloader' lost more than $250k in real (not paper) equity because Countrywide juiced her local market wildly.  Maybe then it would make sense that she is taking her overtaxed income and fighting the bank in court.

Tue, 03/29/2011 - 13:42 | 1113415 Bicycle Repairman
Bicycle Repairman's picture

This housing overhang will join the rest of the overhang in "market to whatever the banks say it is" land.  When the cashflow ramifications of this policy emerge, the FED will use taxpayer money to make the banks whole.

Tue, 03/29/2011 - 14:11 | 1113550 T-888
T-888's picture

Possible hope for the SRS!?! LOL

Tue, 03/29/2011 - 15:00 | 1113747 Boilermaker
Boilermaker's picture

It's a pure comedy to see the daily action in IYR and RMZ along with their components (and, of course, SRS and DRV).

How in the hell they can continue to perpetuate the fraud is beyond me.  But, they sure to god won't stop it and are just hitting the throttle harder at every attempted sell off.  Today is another wonderful example like so many others.

It simply has to be the MOST fraudulent and propped up POS sector anywhere.

 

Wed, 03/30/2011 - 06:57 | 1116256 Bicycle Repairman
Bicycle Repairman's picture

Compare a graph over time of Proshares inverse ETFs to their "non-inverse" counterparts.  What you will find is that their performances are not mirror images.  The inverse ETFs are fatally flawed investment vehicles.

Tue, 03/29/2011 - 14:28 | 1113623 bbq on whitehou...
bbq on whitehouse lawn's picture

For the next 10 years not every property will have a bid. Im not sure if that is yet priced into the market. But it will be.

Tue, 03/29/2011 - 15:10 | 1113797 BigSkyBear
BigSkyBear's picture

Stealth Stimulus...Bitchez!

Tue, 03/29/2011 - 19:29 | 1114650 Two Face
Two Face's picture
From an article also dated today, here is the MSM spin on the option ARM reset time bomb:  http://realestate.msn.com/blogs/listedblogpost.aspx?post=80e61db9-43f5-4ca1-876d-442e24deeed2
Tue, 03/29/2011 - 18:31 | 1114742 eureka
eureka's picture

Crawl to the bottom of the rabbit hole and behold:

The answer to all your questions, cause of all evil -

EMPIRE; Empire needs bubbles, banksters make them.

Homes were never worth what they sold for.

Just like tech companies weren't and aren't.

Empire, networks of the relentlessly greedy,

create all bubbles and busts.

Say Amen, worship your nation & matter.

Or, enlighten yourself, free your mind.

 

Tue, 03/29/2011 - 22:11 | 1115364 TwoShortPlanks
TwoShortPlanks's picture

You people think the Housing Market's bad now, just wait until the post QE Credit War sets-in...it's gonna be Mexico from Guatemala to the Arctic Ocean.

If you live within this region, please recite, "dos cervezas por favor, mi amigo pagar!"

Do NOT follow this link or you will be banned from the site!