Charting The 'Housing Recovery' Subsidy: Foreclosures Slide To Five Year Lows

Tyler Durden's picture

A month ago, when RealtyTrac posted their latest US foreclosure numbers for the month of August, we presented what we called was the "Foreclosure Stuffing" thesis, explaining the explicit subsidy by the banks for the housing market, whereby the entire foreclosure process has now ground to a halt, and in doing so removing millions in inventory flow from the distressed end market, forcing limited buyers to chase what supply there is, and in the process boosting prices of existing inventory higher. In other words a traditional inventory removal-based subsidy. It is therefore not surprising that today RealtyTrac reported the latest foreclosure data, and lo and behold, just as we expected, the great foreclosure collapse has taken another leg lower, with the total number of foreclosures for the month of September sliding to 180.4K, a decrease of 7 percent from the previous month and down 16 percent from September 2011, and the lowest in five years!

Needless to say, this is a housing subsidy process by the big banks, pure and simple, because while the robosigning scandal halted foreclosures, the resulting settlement was supposed to fix the situation and unclog the foreclosure pipeline. It never did. The result is a complete halt of the critical foreclosure pipeline at the national level. Even RealtyTrac's attempt to spin the news in a favorable fashion fails miserably: "We’ve been waiting for the other foreclosure shoe to drop since late 2010, when questionable foreclosure practices slowed activity to a crawl in many areas, but that other shoe is instead being carefully lowered to the floor and therefore making little noise in the housing market — at least at a national level,” said Daren Blomquist, vice president at RealtyTrac. “Make no mistake, however, the other shoe is dropping quite loudly in certain states, primarily those where foreclosure activity was held back the most last year."

There is spin, and then there is reality. The reality is shown below.

Just foreclosure starts:

And the ultimate reason: days to foreclose in various states, with California on top of course, is now nearly 3 years. From RealtyTrac:

U.S. properties foreclosed in the third quarter took an average of 382 days to complete the foreclosure process, up from 378 days in the previous quarter and up from 336 days in the third quarter of 2011. It was the highest average number of days to foreclose going back to the first quarter of 2007.


The average time to complete a foreclosure increased substantially from a year ago in several states where recent legislation and court rulings have extended the foreclosure process. These states included Oregon (up 62 percent to 193 days), Hawaii (up 62 percent to 662 days), Washington (up 62 percent to 248 days) and Nevada (up 42 percent to 520 days).


The average time to foreclose decreased from a year ago in 15 states, including Arkansas (down 49 percent to 199 days), Michigan (down 15 percent to 226 days), Maryland (down 9 percent to 541 days), California (down 8 percent to 335 days), and New Jersey (down 4 percent to 931 days).


New Jersey documented the second longest state foreclosure timeline in the third quarter behind New York, where the average time to complete a foreclosure was 1,072 days for properties foreclosed during the quarter. Florida registered the third highest state foreclosure timeline, 858 days — down slightly from 861 days in the previous quarter — and Illinois registered the fourth highest state foreclosure timeline, 673 days.

One wonders just how very busy Wells Fargo must be to make sure nobody has a real bearing on its balance sheet in order to keep people who have stopped paying mortgages in 2009 still in their houses, and living mortgage free.

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malikai's picture

Texas never really had the big housing bubble. And from my friends still living there, prices didn't fall much at all either. Austin/Dallas, that is. Not sure about Houston or SA. And nobody in their right mind would live in Amariller, so that place doesn't count.

redpill's picture

We've covered this before, but the main reason for the continued decline in foreclosure activity is because banks would rather settle delinquency with a short sale. This is because:

1) they realized they don't actually have the proper paperwork to foreclose in most cases

2) foreclosed homes get trashed (google "sharpie parties") and require a lot of renovation or fetch an extremely low resale price, so there is no financial advantage in directly taking possession of the property

3) a short sale is much more politically popular than a foreclosure and the end result on their balance sheet is essentially the same

holdbuysell's picture

RP - I'd add that the insolvent banks with mark to myth mortgages on their balance sheets have zero incentive to foreclose and expose this fact when they can simply park them in the 'to be purchased by the Federal Reserve' bucket where they'll get to swap the bad mortgages for freshly printed par to boot.

Biosci's picture

Bingo.  End of the line on foreclosures, and a market floor to boot.  Bernanke wins?

redpill's picture

It adds to the reason that the stated 2.6 million backlog in foreclosures is never going to come to fruition because the process will never be completed.  The bank will either agree to a short sale or unload the paper to the Fed, who will never foreclose.

In terms of foreclosures that have actually happened, there have been about 6 million of them since 2005, and 5.5 million of them have already been sold back into the marketplace.  That leaves us with about a half million homes in shadow inventory which eventually will have to be absorbed, but if done slowly enough it shouldn't crash prices since they are now fueled by QEternity. 

SafelyGraze's picture

how to vaporize 1.2 trillion in underwaterness ?

restructure/writeDown and reduce the asset side of the balance sheet? nuh uh

flush the foreclosure embolism and clear the market with sales? sales to whom? existing homeowners with no savings and no credit? foreigners?

if, say, foreigners (who hold 5T in treasurys) sold their treasurys to convert to cash and clear a clogEstate foreclosure market, that starts a dreaded drop in bond prices. while also increasing the velocity of domestic money. and inflation. 

1,200,000,000,000/(40,000,000,000/month) = 30 months

Catullus's picture

Austin's housing bubble never popped because of the student loan bubble.

Dallas is having their bubble right now. Housing prices are completely out of whack with rents.

LawsofPhysics's picture

Yeah!!  The banks are saved!!!  Wait what?!?!

ziggy59's picture

See y'all of little faith..and lost hope.


If reality aint good and true, become creative and make believe, and when all else fails...

BS yer brains out!

DeadFred's picture

I'm in the market now and our agent says wait a bit, there's a lot more inventory coming up soon. Since this is the last report before the elections perhaps things will loosen up now? Or do I have to wait until the banks year end numbers come through. Waiting on reality is frustrating at times.

toady's picture

You need to get a different agent. Only looking at current listings is absurd. You need to look for unkempt yards and the tell-tale white paper taped to the window that says 'this property is managed by xxxxxx for xxxxxxx bank'

Your new agent needs to be able to cut through the bull and get you the property (if you like it) at a short sale or otherwise heavily discounted price. After all, you are helping the bank move their distressed property without going through a burdensome foreclosure process.

toady's picture

I gotta say, the BS method appears to be successfully holding the line in Phoenix.

I keep tabs on a few neighborhoods and the pattern is the same. 20 to 30% vacancy rates and only 5% marked for sale. That is usually just one house in a 20 to 30 house neighborhood. The one sells every 3-4 months, then another is listed. Unfortunately, another usually goes vacant.
Its become a solid pattern over the last year or so....

I suppose the single for sale sign is the key aspect. If there were 5 or 6 in the same small area it would look like the crisis was still happening.

LULZBank's picture

Tylers got scared and came up with a positive story. LULZ

phyuckyiu's picture

How is insolvent banks holding onto shadow inventory a positive story? Back to the script kiddies on 4chan for you.

Mercury's picture

So, the housing bubble victim line now goes something like this:

The big evil banks forced me into a house/mortgage I couldn’t afford using math and stuff, then I stopped making monthly payments, then…well nothing happened and I’m still living in the same place, essentially at a lower level of expense than if I originally bought something I could “afford”.

LawsofPhysics's picture

Hey dipshit, go look up do diligence.  Don't loan money to losers to fucking begin with.  And, as a bank, if you do choose to make those loans (and give yourself big bonuses from fees on those loans), then you should eat the fucking losses, not the fucking taxpayer.

Doing do diligence was the only real fucking work bankers used to actually do (if you still consider creating money out of thin air a job).


Mercury's picture

Yeah, I got it. Thanks.

The point is it's looking more and more like a big win for the technically insolvent homeowner/"victim".

LawsofPhysics's picture

Depends if that homeowner is still employed or not and where that house resides.  I'd argue that an insolvent "homeowner" in south central L.A. is not in a "good" situation.

Either way, that which is not sustainable, won't be sustained.

My point is simple, nothing will change unless there are real consequences for bad behavior AT ALL LEVELS of society.

Having your bonus or salary go from 20 million to 10 million, is not a real fucking consequence.

FYI- do some math and tabulate all the obligations/future liabitlites of the earth as well as all the assets.  You realize quickly that the earth is insolvent.  This is and has always been about power and control, period.

phyuckyiu's picture

Oh the irony of calling someone a dipshit, then spelling due diligence wrong in the next sentence. And spelling it wrong twice, just in case we gave your dumb ass a pass the first time.

waterhorse's picture

I guess I shouldn't ask about the irony of the spelling of your handle?

Omen IV's picture

MERCURY - NO YOU DONT GET IT !    All homeowners are victims with and without a mortgage regardless of their economic circumstances - Why?


the idea that some will now fuck the banks or get some relief is what everyone is supposed to do -why?

because the banks are a unit of organized crime!  fucking the system to the point where 10's of millions dont pay their mortgages is self correcting - in that civl disobedience is the only way to change the corrupt system when organized criminals control the government

that is exactly what happened in the late 60's - Hell no we wont go! - ended the Vietnam War - not the politicians -they had massive insurrection on their hands and they ended the draft --- today the mantra should be:  

Hell no we wont pay !

get with the program and wake up !




waterhorse's picture

So what if its a "big win" for Joe Schmoe?  I'd rather he win than the likes of Blankfeind, Moynihan or Dimon who gamed the system for trillions in corporate welfare.  TBTF had their chance to play by the rules.  Instead they came up with their own control fraud schemes (securitization and REMIC fraud, LIBOR fraud, MERS fraud, robosigning, etc.) and now get bailed out with QE, ZIRP, TARP, trillions per GAO audit and YOU are worried about Joe Schmoe "gaming the system".  Oh, brother.

Blankenstein's picture

Because it is only some "Joe Schmoes" that get a big win.  Some of us "Joe Schmoes" stayed out of the market because housing prices were way out of line with incomes and instead saved money.  Then there were many others who either had a home and didn't need a new one or were renters who didn't want to buy.  Now savers are getting killed and the bank and bubble time house buyers are getting bailed out and the "big win". Yeah, bail out irresponsible people, that should go a long way for turning the greedy, entitilement society we have around.  

serog's picture

Your post reeks of due due

Chump's picture

Ah man, so all this has been your fault. Instead of due diligence these damn bankers all thought there were just out doing diligence. Diligently doing some maths and making paper profits while stuffing paper losses up our cornholes.

Thanks a lot ya jerkoff.

SafelyGraze's picture

"nothing happened and I’m still living in the same place"

good point. 

case 1: you "own" something called "property"

case 2: someone else owns the property and "allows" you to "use" it

except for invisible and philosophical subtelties (like at-the-pleasure-of-a-third-party) they are practically indistinguishable 

for as long as the third party pleases

MachoMan's picture

Actually, homeowners OWN the property...  by definition...  others simply have a lien on the property.  This distinction becomes incredibly obvious when observing the problems the purported lienholder has when attempting to foreclose on the house...  a failure to do the paperwork properly, practically results in the extinguishment of the lien.  Ergo, the homeowner keeps ownership.

You can't eat your cake and have it too...  either the banks own everything or they can't foreclose because they lack standing...  pick your poison.

bunnyswanson's picture

This is how it went down.

In the housing industry bubble, loans were given out hand-over-fist.  The spiel went like this:  You and your lovely family are eligible to buy a home.  An ARM will get you into the house.  It will allow you to afford your mortgage until you refinance into a fixed rate when interest rates fall, leaving you with a monthly payment which will fit into your budget.  (the IO payment plan also offered and accepted with same blueprint - refinance later into a FIXED rate).


The house is bought.  Two years later, the value collapsed when the bubble burst, as designed.  Refinance was fucking impossible.  The adjustments on the amount due each money on the mtg went up just as people were losing their jobs.


and THAT is why so many were left with houses too expensive.  Yes, there were investors.  Yes there were documentless loans given to big dreamers or dumb asses. 


The housing industry was looted just like the rest of America.  The equity from homes was also tapped out by many who, at the time, had sound jobs and a method of repay.  But that soon ended when THEIR JOBS ENDED.


So fuck you on behalf of families across this sorry nation where thieves in 10,000 suits have their dicks up the asses of politicians who have BEEN ON THEIR KNEES for a decade (and making great money while down there...TALK ABOUT THAT for a second and leave the families of America alone.  They've had generations of wealth ripped out from under them. 



ziggy59's picture

Tyler, Difficult time getting here... You piss off or on anyone lately?

RSBriggs's picture

Linked to by Drudge.  "Drudgedotted"

GolfHatesMe's picture

That's because this is the only place to get the truth, and Therapy when we all hit our


LULZBank's picture

You'll know when its time to go on your last boating trip and head for the hills...

Benjamin Glutton's picture

Denial of severance Bitchez!!!

Cognitive Dissonance's picture

Only 97 days to foreclose in Texas? I thought homeowners had lots of guns down there?

<Have gun, will (now need to) travel (since I am presently homeless).>

MachoMan's picture

Even gunowners know when they default on a home loan.

CoolBeans's picture

The real estate industry is full of sh*t from top to bottom - they will never release an honest report about inventory, foreclosures, sales, etc. Housing likely won't normalize for another generation and all the manipulation in the world won't change that.

MachoMan's picture

Normalization is a myth...  it's an objective reality unknowable by humans.  There is either bubble blowing or overshooting to the downside...  the data is ALWAYS manipulated.  If you want to know what the weather is like, stick your head outside...  don't put too much faith in the idiot on tv.

JPM Hater001's picture

Noodle this.  When the market rout hits what will we think about housing collapse then.

Housing deflation is a Bugger and we are not even close to the bottom.

Lucius Cornelius Sulla's picture

Driving to work last week I was behind a Metro bus with a realtard advertisement on the back of it.  In big black bold letters it proclaimed, "THE MARKET IS BACK!" and beside it were the faces of two RE douchebags.  This market is far, far away from a bottom...

Marley's picture

Two concepts; "mark to market" and "zero interest loans". Bought and paid for by the U.S. Citizens. Real breathing people. Execute psychotic corporations. Close all loopholes for corporations and the rich. I know the rich hear these words in their nightmares, "I'm coming to take "your" money away. woooooooooooooooooo oooooooooo ooooooooooo"

AlphaHunter001's picture

One more thought to consider, as home prices increase it would make sense for banks to try and hold on to some of these properties, as they're now a rising asset.

When you see PE firms like Blackstone raising billions to invest, these guys aren't stupid but incredibly smart - I would take a page and go with the trend, the bottom is in and housing is going up so load up on financials that are levered.

We all know that in 10 years homes will be worth more. As so many of guys say, inflation is coming - if so that pushes up all assets, including gold and housing... last time I checked housing is an asset LOL

LMAOLORI's picture



They actually don't even have to hold on to them they make good money selling them to investors in fact they are fighting with the GSE's right now because they want the business. (the homes they have left anyway remember trillions of dollars worth have already been dumped on the taxpayer). I wonder how many foreclosures the banks actually have left now?

Freddie's Foreclosure Plan Hits Roadblock


Freddie Mac FMCC +0.80% is engaged in a tug of war with both its regulator and Wall Street over a plan to provide loans to investors that are buying homes in foreclosure to rent them out.

The government-backed mortgage giant is pushing to finance such investors to help jump-start a housing recovery. But the Federal Housing Finance Agency has put those plans on hold, concerned Freddie's cheap debt would make it difficult for banks to compete for the growing number of buyers of foreclosed homes, people familiar with the proposed financing said. The FHFA also worries Freddie's involvement would deepen the government's role in the nation's real-estate economy.

Banks want to keep Freddie out of the financing market, and have told the FHFA that they can provide ample loans to investors. Bankers say an FHFA decision to sideline Freddie could drive investors toward their loans and other services, generating fees

"If [Freddie] came along and offered funding, and it was on better terms, in all likelihood, the funding business would end up in their hands," says Steve Abrahams, a mortgage analyst atDeutsche Bank DBK.XE +3.63% . "The odds of it crowding out private participation are pretty high."

Tensions over the initiative underline the conflicts within a housing market still recovering from its worst crisis in decades, with Freddie and its larger sibling, Fannie Mae banks and investors pulling in different directions. In addition, policy makers say they want to shrink the mortgage giants' role, but some economists have argued that any short-term steps the firms take to stimulate housing demand could make it easier to accomplish that long-term goal.

Freddie's financing proposal is targeted to more established players with property management experience, not to investors looking to buy several foreclosed homes.

Investors have raised billions of dollars in equity to buy homes to then rent out. But debt, often a cheaper alternative, has remained scarce.

By financing these purchases, Freddie could boost demand for foreclosed homes, investors say. Rising home prices would lift profits at Fannie and Freddie, which are selling tens of thousands of foreclosed homes every quarter.

"Financing from Freddie would be the greatest economic stimulus," says Aaron Edelheit, chief executive of American Home Real Estate Co., which owns more than 1,500 houses and is actively buying more. "You'd have the greatest land grab you've ever seen." (much more at link)

About that land grab

A Huge Housing Bargain -- but Not for You

Dr. Engali's picture

The big banks around here have a large back log of foreclosures. The only loans they will make are Fannie or Freddie loans. If it's not a loan they can sell to the government they won't make it.

Harbanger's picture

Real estate is completely area specific so it's hard to generalize.  I guess supply and demand always applies, some people are moving to certain big Citys looking for work and it's driving up housing prices.  I thought for sure I'd lose money on an investment condo I bought in NYC in 2005 for 350k and the broker tells me last week I can sell it for 500K.  I had him list it for 499k, I'm selling while I still can.

CoolBeans's picture

I sincerely hope it works out for you and you get a buyer who can get financing to pay the full asking price.

But, in most cases real estate brokers are walking bullsh*t factories.  I can't believe the stuff they tell prospective sellers (and the few buyers) around here.

Dr. Engali's picture

Delete...double post. The servers are driving me nuts.

101 years and counting's picture

when you can package all those foreclosures into steady stream of money from ben, why would you foreclose? just sell the mortgage to ben at 100 cents on the buckaroo and let him eat the losses. all he has to do to cover it up...print more money which is his goal anyways.