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Meet The Monster Of The Housing Market: Presenting "Vampire REOs" Where Half Of Americans Live Mortgage-Free

Tyler Durden's picture





 

Over a year ago, in addition to the money-laundering aspect (confirmed previously) and the REO-To-Rent scramble by PE firms and hedge funds (which is now over as PE become active sellers of apartment rental properties), we highlighted the third implicit subsidy to the housing non-recovery: Foreclosure stuffing. We explained this scheme by banks to limit the amount of available for sale inventory as follows: "since the properties not entering the foreclosure pipeline are effectively kept out of inventory, even shadow inventory, and thus the distressed end market, the monthly drop in foreclosures has acted as a form of subsidy to the housing market, as month after month less inventory than otherwise should, enters the market.... What this has resulted in is a logical increase in prices of the properties that are on the market." Today, the mainstream has finally caught on, and courtesy of RealtyTrac has come up with its own name for this subsidy: Vampire REOs.

In a press release overnight, the foreclosure tracking service RealtyTrac, observed that a stunning 47% of bank-owned homes are still occupied by their previous owners who were foreclosed on, creating "vampire REOs."

Vampire REOs are bank-owned homes that are still occupied by the previous homeowner who was foreclosed on. On the surface these properties often will look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try to recoup their losses on soured loans.

The vampires are particularly acute in Miami (64%), Houston (65%), Los Angeles (61%) which have nearly two thirds of bank-owned properties falling into the "vampire REO" category. This means that in order to generate a housing scarcity, millions of deadbeat Americans have been given a carte blanche to live mortgage-free, in some cases for years, and in a state of default in their existing homes, as the banks have no incentive to actually clear out the properties to which they have title, making home purchases for everyone else - those who have the funds and are willing to purchase a home - impossible due to artificially los supply and artificially high prices.

Putting the problem in perspective, Emmett Laffey, CEO of Laffey Fine Homes International said that "The New York metro area is experiencing a spike in mortgage defaults, however, there are very few vacant foreclosures or bank-owned properties that are languishing on the market." “Typically these types of properties are sold well within 30 days of hitting the market,” he added. Except when they never make the market.

Of course, now that home prices have been artificially boosted courtesy of just this foreclosure process "stuffing", "banks likely wish to sell these homes sooner rather than later as home prices have been rising" predicts RealtyTrac.

However, therein lies the dilemma: since the primary driver of home price appreciation has been fake scarcity, either due to Vampire REOs or Zombie foreclosures (the far more traditional homes that are still languishing in the foreclosure process but have been vacated by the homeowner being foreclosed), the second that banks unclog the foreclosure pipeline exit and begin selling this uber-shadow inventory, the entire facade of the fake housing non-recovery will begin to crumble as one after another bank scramble to hit the highest bid possible, before some other bank does so.

Expect the broader mainstream media to begin reporting on this phenomenon in another 6-8 weeks, about the time when the Y/Y increase in home prices is solidly rolling over, and the usual 18 months delay behind Zero Hedge.

Finally, those curious to see how many foreclosed homes are being occupied mortgage free in their metro area, the following interactive chart from RealtyTrac has the answer.

Source: RealtyTrac

 


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Thu, 10/03/2013 - 09:49 | Link to Comment SheepDog-One
SheepDog-One's picture

Isn't this old news....like 4 years old at least? Who doesn't know that many are living mortgage-free?

Thu, 10/03/2013 - 09:51 | Link to Comment Motorhead
Motorhead's picture

Good morning, bitchez!

Thu, 10/03/2013 - 10:32 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

In Houston, the housing market is pretty hot right now.  An acquaintance just sold a 7 figure home after getting multiple offers above the asking price the first week it was on the market.  I saw the offers, first hand.

I would rather be selling, now, than buying.  That is for certain. 

It is as if it is human nature to buy high and sell low.

Thu, 10/03/2013 - 10:46 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

It is absolutely human nature to do that. When prices are high the anti depressant addled masses buy for fear of missing the boat, and when the shit hits the fan they get scared into selling. I sold my place last year and am patiently waiting for the shit to hit the fan. In the prevous regard my wife is getting increasingly indignant about us buying a house in a hot market we can't afford preferably one where every fucking light in the house stays on all day and night.

Thu, 10/03/2013 - 11:04 | Link to Comment Ying-Yang
Ying-Yang's picture

Tennants of Vampire REOs could then be called:

Zombie Sharecroppers

But history states "On the whole, sharecropping was not as economically efficient as the gang agriculture of slave plantations."

So how about Zombie Plantations?

Thu, 10/03/2013 - 11:30 | Link to Comment SafelyGraze
SafelyGraze's picture

we would evict these deadbeat squatters, but then property prices would plummet and therefore so would property tax revenues

so instead, we provide fire and police and trash service to them. for free. because that way we keep property values high. and that helps us collect taxes. 

from the people who own homes and pay mortgages and taxes.

they are our little worker bees! 

go do some more work, little worker bees!

hugs,
the national association of mayors and city councils 

Thu, 10/03/2013 - 11:48 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

I wonder... does the fact that the fed is buying all these MBSs mean that all the banks have to do is sit and stall, and the taxpayers eventually are left on the hook?

Thu, 10/03/2013 - 12:36 | Link to Comment JoeSexPack
JoeSexPack's picture

Yes, until they can't.

 

The end will be when the Fed's $$$ is no good.

 

Or when millions of solvent mortgage payers intentionally default to live rent free a few years.

 

 

Thu, 10/03/2013 - 12:40 | Link to Comment JoeSexPack
JoeSexPack's picture

Another play is default & force the lender claiming ownership to prove they have clear title in court.

 

Of course most don't. They need clear chains-of-transfer, notarized & registered at local courts, for their alleged loans to use real property as collateral.

 

That didn't happen with most of the MBS selling & robo-signing fraud.

 

Borrowers can claim adverse possission after 7 years in CA.

 

Call their bluff!

Thu, 10/03/2013 - 12:43 | Link to Comment smlbizman
smlbizman's picture

not to this degree sheepdog...ive have wittnessed ina micro fashion, but not from a macro view...

Thu, 10/03/2013 - 14:33 | Link to Comment ATM
ATM's picture

That won't cause the Fed's money to be no good. It will become no good when people lose faith in it.

But what it will do is cause the Fed to be unable to do what they say they can do - sell assets to combat inflation. If what the Fed owns when inflation starts cropping up the Fed needs to own something of perceived value to tradefor cash. They won't be able to. They will then get a double whammy of sorts - they won't have the ability to quell inflation by soaking up cash in the system and that will quicken the belief in the value of the currency.

The Fed is stuck. All they have are unanswered prayers. God help us. 

Thu, 10/03/2013 - 15:44 | Link to Comment Elliptico
Elliptico's picture

Don't be silly.  There are no mortgages in the MBS. 

Thu, 10/03/2013 - 14:38 | Link to Comment Singelguy
Singelguy's picture

The services are not provided for free. The banks have already foreclosed and are legally the owner and as such responsible for the property taxes. If the bank does not pay the taxes, the municipality has the right to sell the property at auction for back taxes owed. The squatters are being subsidized by the banks, NOT the municipality. The banks believe it is a good deal. Not only are property values pushed artificially higher but the squatters are more likely to maintain the property and prevent looters from stripping it.

Thu, 10/03/2013 - 16:12 | Link to Comment prodigious_idea
prodigious_idea's picture

Not to quarrel, but banks pay the past due taxes on almost any property worth owning - squatter or not.  Banks don't want tax liens and it's cheap insurance at 1-2% of the "value".  Not sure where you get trash service for free.

Thu, 10/03/2013 - 11:42 | Link to Comment El Diablo Rojo
El Diablo Rojo's picture


I'd love to buy a home, but this market with zombies, vampires, criminals (real estate agencies, banks) have re-inflated the prices completely to 2006 levels here in beautiful Temecula. I have been waiting patiently, the Mrs., not so much. It is incredibly frustrating and disheartening. With QE going indefinitely and that money being handed to criminals who can buy the type of house I would like with cash, I am left renting for another year. I would like to buy a house on an acre plus so I could get a milk cow like you have HH, probably settle for a goat. Have ample room for a real garden, not the small one I currently have. I refuse to be a slave or indentured servant, so I am left to dreaming.

Oh well, guess I will buy another faulty boat.

 

 

Thu, 10/03/2013 - 11:46 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

You should buy now. While a clogged foreclosure pipeline has propped up prices, artificially low interest rates make it more affordable. Imagine if prices drop by 20%, but the Fed loses control of the long end of the curve and interest rates go up 50%. Poof, you're paying more for a cheaper house.

Thu, 10/03/2013 - 14:54 | Link to Comment long-shorty
long-shorty's picture

was that meant as MDB-style parody, nucular?

Thu, 10/03/2013 - 14:34 | Link to Comment tip e. canoe
tip e. canoe's picture

tip: only get a goat if you got a large piece of acreage.  otherwise, they'll eat EVERYTHING.

with 1-2 acres, try some chickens in a rotating paddock instead.   excellent primer here:

http://www.richsoil.com/raising-chickens.jsp

 

Thu, 10/03/2013 - 14:40 | Link to Comment ATM
ATM's picture

Damn right they'll eat everything, including the paint off your truck.

Thu, 10/03/2013 - 14:40 | Link to Comment The Boognish
The Boognish's picture

I'm a fellow Temecula resident but I was fortunate enough to buy my house in '97 when prices were still very low here. House prices are rising again to ridiculous levels but there are at least four houses within a few block of mine which have been sitting vacant for years. Also it seems you can still rent a house here for much less than a housing payment.

I see no reason to believe that the housing market won't crash here again. Not many local jobs, big employers like Abbot Labs laying off major portion of the work force and with gas prices going up the cost to commute is killing people here. If interest rates go up a little more I expect the prices here will plummet. Wait it out or you will find yourself in an overpriced house that you won't be able to sell in the future if you need to move.

Thu, 10/03/2013 - 10:54 | Link to Comment auntiesocial
auntiesocial's picture

In Orange County in prestigious Coto De Caca our friend is living behind gates in a 2M spread rent free... he has been doing it for 18 months playing games with the bank, filing BK then dragging it out, at some point the carousel ride will end but for now he is living the dream in a phat ass mansion for free socking away money when the game is over. 

Thu, 10/03/2013 - 12:36 | Link to Comment shovelhead
shovelhead's picture

I remember the very first Cowboy shoot in Coto De Caca when there were only a few houses there.

My buddy called it a future yuppie ghetto.

Thu, 10/03/2013 - 16:21 | Link to Comment prodigious_idea
prodigious_idea's picture

That is exactly the strategy.  Go delinquent, file BK and start saving.  I don't think the bank can/will foreclose on an asset listed with the BK Trustee.  And then at the end, cut a cash-for-keys deal.  But cancel your homeowner's insurance too since the bank will pay the premium.  Apologies to those who believe they're subsidizing this strategy but keep in mind that the bank has paid the taxes, insurance and real estate commissions which should make you feel better about sticking it to the banks.

Thu, 10/03/2013 - 11:17 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

San diego is hot as well. Three homes in a friends neighborhood sold quickly 700k+, cash. This is in an average McMansion area, nothing fancy. RE agents tell me it's primarily foreign, mostly China. Though I begged him not to, a friend of mine bought locally and is struggling to pay his $2500/ mo mortgage. He has now rented out 2 rooms just to make payments. I thought he should have stayed in his trailer, it was pretty nice. He told me living in the trailer was $1000/ month which was good because many areas in San Diego were $1200-$1500! What an eye opener for me. In the early 80s we live in a trailer for $150/ mo. And people belittle kids living in their parents basement? This just can't end well.

Miffed;-)

Thu, 10/03/2013 - 12:42 | Link to Comment shovelhead
shovelhead's picture

Poor guy.

Wait til those crap SD muni wraparound bonds need to be paid. Prop taxes are going to double.

 

Thu, 10/03/2013 - 13:58 | Link to Comment Freddie
Freddie's picture

The joke is we don't "own" our homes.   The county owns them.  If people can survive or have a business in a rural area - they are better off.  The taxes in rural areas are so low.   The property taxes in a place like New Jersey are insane.

Thu, 10/03/2013 - 15:31 | Link to Comment MisterMousePotato
MisterMousePotato's picture

Further to yours, Miffed ...

A month or two back, someone commented here that there is no way that Americans could compete with [he said "Chinese," but it probably applies to many if not most if not all Asians] in that the Chinese feel absolutely no shame or embarrassment about living in any space for free or as close thereto as possible to save money.

Why would anyone pay rent? And I see figures daily here of up to $2500 a month in Manhatten and even in my little Sierra Foothills town we're talking $800 - $1200 and more.

I may be kinda small time in my thinking, but I think that's a lot of money, and it adds up over time.

I hope my daughter grows up to have enough sense to live with us until she has saved enough money to achieve real independence; viz., buy a place outright and not have to send monthly tribute to Wells Fargo or whomever.

Renting is nuts. At least anything more than a trailer for $150/month.

Thu, 10/03/2013 - 16:37 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

In 2000 we bought our 2700 sq ft home that had a 1500 sq ft basement. Its on 10 acres, fully fenced and has a great well. The only 2 downfalls are it's 42 miles away from my work and it is located 1/2 mile up a steep dirt road that's devilishly hard to scale in winter.Numerous neighbors have gotten stuck. I flipped my husbands truck once trying to do it.

The home is beautiful with panoramic views but no one would buy it because of the road. So the owner knocked off 100k and we bought it, being well within our budget. Our mortgage is $1000/month. We pay 2k just to pay it off sooner. There is nowhere anyone could find a comparable home today on the market and we're smart enough to stay put even with high gas prices. Children today are so screwed. High student loan debt and mortgage insanity. And people are wondering why they stay at home?

Miffed;-)

Thu, 10/03/2013 - 14:36 | Link to Comment tip e. canoe
tip e. canoe's picture

miffed, on that note, just bought this book today:

http://www.shelterpub.com/_home_work/HW-book.html

check out some of the photos.   cool shit.

Thu, 10/03/2013 - 15:00 | Link to Comment Miffed Microbio...
Miffed Microbiologist's picture

OMG Tip E, so cool! I must admit I have strange fascination for alternative houses especially Earth homes. Whenever we travel in Cali I just have to stop and visit the missions. Just being inside one I get a strange sense of peace, grounding and tranquility. It can be over 100 deg outside but inside a pleasant 75 deg. I've asked Mr M if we could bulldoze our home and put one up. He's told me he's added it to the list of things I've requested ;-). Of course, living in earthquake Cali, this type of home may not be appropriate.

Miffed;-)

Fri, 10/04/2013 - 12:24 | Link to Comment tip e. canoe
tip e. canoe's picture

you should check out EarthBag architecture

http://calearth.org/

tried & tested in Cali, and approved by the Au-thor-i-tays of the State.

maybe experiment building a small chicken coop first before you hire the bulldozer?

;~)

Thu, 10/03/2013 - 11:47 | Link to Comment astoriajoe
astoriajoe's picture

That would put Houston in line for a stronger hurricane season in '14, no?

Thu, 10/03/2013 - 14:19 | Link to Comment Ying-Yang
Thu, 10/03/2013 - 09:52 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

There's that "free" word again.

Thu, 10/03/2013 - 09:57 | Link to Comment SheepDog-One
SheepDog-One's picture

This was proclaimed to be what was driving 'retail spending' Q after Q....'you don't have to pay the mortgage on your house anymore, so look at all the other shit you can buy!' Is it just me...or is it crazy pills? Well anyway, I've known this for a long time....it's not just deja vu all over again.

Thu, 10/03/2013 - 10:02 | Link to Comment The Proletariat
The Proletariat's picture

In the new normal, all these vampires are buying gold and silver instead of paying their mortgage.  Of course this attributes to the decline in prices of gold and silver.

Surely this make sense to everyone....

Thu, 10/03/2013 - 10:20 | Link to Comment NotApplicable
NotApplicable's picture

The difference is that these houses have finished the foreclosure process.

Thu, 10/03/2013 - 10:37 | Link to Comment Son of Loki
Son of Loki's picture

The banks are bascially getting money from teh Fed so there is no incentive for them to move these houses and clear up the market.

Thu, 10/03/2013 - 10:53 | Link to Comment SheepDog-One
SheepDog-One's picture

Well yea of course.

Thu, 10/03/2013 - 10:35 | Link to Comment Eireann go Brach
Eireann go Brach's picture

NAR disputes this info and my realtor told me prices only go up!

Thu, 10/03/2013 - 09:52 | Link to Comment involuntarilybirthed
involuntarilybirthed's picture

That can't be good?

Who's paying the property tax/Insurance?

Thu, 10/03/2013 - 10:02 | Link to Comment The Alarmist
The Alarmist's picture

You and me, friend ... you and me.

Thu, 10/03/2013 - 10:08 | Link to Comment adr
adr's picture

Um, nobody. 

But if the state comes to seize the home, they would be taking it out of the shadow inventory. 

I think in this situation the property is essentially in limbo. The home isn't listed as being owned by anyone. If there isn't an owner to pay the tax, it never gets paid.

There are over 100 properties around me that are listed as pre-forclosure on Zillow. Meaning payments are behind by six months or more. I've driven by some of the homes, people are still living there, and the house isn't up for sale.

 

 

Thu, 10/03/2013 - 10:42 | Link to Comment doctor10
doctor10's picture

This will finally detonate the municipal bond market. When these properties do hit the market, the resultant decline in property tax revenus will bankrupt the cities and towns. Prolly why so much is being kept off the market as it is

Thu, 10/03/2013 - 11:36 | Link to Comment KidHorn
KidHorn's picture

If a bank forcloses on a property and are given title, they own the property and have to pay the taxes. Prior to a successfull foreclosure, the owners are repsonsible and if they don't pay, the property will have a tax lien that the bank will end up paying one way or another. Property taxes are always paid by someone.

Plus, property taxes are typically collected by the county, not the state. The state woudn't auction the home off, the county would.

Thu, 10/03/2013 - 14:08 | Link to Comment Freddie
Freddie's picture

Yes.  The banks pays.  The joke is the connected Fed banks get free money to pay the property taxes.  the co8unty always gets paid or they get the property.

There was a funny story not that long ago where a home owner bought a tax lien on a Bank America branch.  The homeowner sent in the sheriff to foreclose.   I think there is a video somewhere.

Thu, 10/03/2013 - 14:40 | Link to Comment tip e. canoe
tip e. canoe's picture

yes, but the homes aren't owned by the banks, they're owned by a thousand MBS holders, none of which knows what exactly they're holding.

me still thinks the FED has an army of interns in a deep dark basement somewhere untangling all the slice & dice.

Thu, 10/03/2013 - 21:27 | Link to Comment Meowzers
Meowzers's picture

That's one reason many listings are short sales. Banks purposely keep the "previous owners" present so THEY incur taxes and keep maintaining the property while the banks list the homes to find a new buyer. 

Thu, 10/03/2013 - 10:38 | Link to Comment MachoMan
MachoMan's picture

That's really complicated...  and largely depends on how the financing was structured/assigned and who owns it.

For the most part, the purported owner of the note is paying the taxes.  The loan originator is not and will not pay shit.  The problem gets to be when the purported holder doesn't pay and the originator is the only lender of record.  Needless to say, delinquency letters from the state to the originator of a loan that's been assigned 20x...  will just get tossed into the trash bin.  In more than a few jurisdictions, it's been determined that MERS isn't entitled to notice...  so, there's a chance of an epic fuckup.  Practically speaking, there is a material amount of shadow inventory that is at risk to be lost to the state for delinquent taxes.  [and even local loans that are never assigned can get delinquent if the bank doesn't have the proper procedures in place to handle the tax payments (this is something they never thought they would have to do after all, and it does bite some local banks)].

In the end though, this is the mechanism to clear shadow inventory, NOT eminent domain (unless and until the shadow inventory becomes a true health hazard, which tends not to occur for occupied houses).  Don't bet against local governments exacting their pound of flesh...  especially from out of town global financial corporations...

Thu, 10/03/2013 - 12:53 | Link to Comment shovelhead
shovelhead's picture

Round these parts, the county sells the tax leins and if owner of the prop hasn't paid to the buyer of the lien after 3 years the lein buyer files notice with owner and in 30 days takes possesion if not paid.

I bought a commercial building for a few grand back taxes.

The County is Honey Badger about prop taxes here. Can't see why it would be different anywhere else.

Thu, 10/03/2013 - 13:36 | Link to Comment MachoMan
MachoMan's picture

Our process is considerably different.  After 2 years of delinquency, the property is certified from the county tax collector to the state (a notice is provided directly to the homeowner AND published in the paper).  The property then goes into a pool of similar vintage properties, organized by county.  It takes about 2 more years for the properties to be auctioned (again, prior thereto the homeowner is provided notice and notice of the sale is published in the local paper).  The state land commissioner conducts a sale of all the same vintage properties for a particular county at a convention center, courthouse, or the like in that county...  You have to pay the back taxes + ~1/5 of the assessed value at the time of auction.  All interested parties (including creditors of the landowner) get 30 days to redeem by paying the back taxes only...  If they fail to redeem, then there's still a 2 year period in which they can file a lawsuit to contest the sale (however, they're rarely overturned, even when the state fails to follow proper procedure).  Any improvements made to the property before the litigation period runs do not enure to the benefit of the purchaser.  Any money paid to the state in excess of any recorded liens is given to the landowner.

Needless to say, the better practice is to approach landowners who are facing tax sale, have no liens, and work out a deal before hand...  If there are liens, then you'll likely have to notify the creditors yourself to ensure their time runs, because you can't count on the state to do so...

However, if properties are up for auction, but no one bids, then the longer they're dormant on the state's books, the shorter the litigation period and after 2 years, they can sell them for any "reasonable" value...  I think they're making quite a few changes to this process to "streamline" it, but change takes a while due to the grandfathering-in of properties and the ~4 year process.

Thu, 10/03/2013 - 13:08 | Link to Comment IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

That is the one hope for ever (at least somewhat) the real estate market.  Tax sale is the most efficient way to get these zombie properties out of limbo.  And unlike the banks, counties and municipalites have good reasons to pursue it.  And best of all it is a system that adheres to some principle of rule of law.

Thu, 10/03/2013 - 10:38 | Link to Comment Stoploss
Stoploss's picture

Nobody pays taxes on the properties. They are also ALL on the delinquent tax rolls, but never go to auction because they're occupied, so they get set aside, until they come across one that is not occupied, then auction it off.  Counties are collecting approx 1/3 of prop taxes, and only from current non delinquent  owners financial institutions, or out right prop owning yearly check writers.

So, five years in, we are no closer to resolution than the day this started.

Now you know why rates will stay low throughout the rest of our lives.

Thu, 10/03/2013 - 13:42 | Link to Comment MachoMan
MachoMan's picture

So, five years in, we are no closer to resolution than the day this started.

Our process to clear the system takes at least 4 years around here...  so, it's too early to declare the process as ineffectual or dead...  However, I do believe that a significant amount of the shadow inventory is current on its taxes.  In the end, it's cheaper to pay the taxes and let the landowner continue to occupy the premises than to recognize the loss and, possibly more importantly, open yourself up for lawsuits on the derivatives when the jockeying over title begins (or the bondholders take a bath).  Especially when someone else is picking up the tab on your dirty laundry...

Thu, 10/03/2013 - 14:23 | Link to Comment Freddie
Freddie's picture

All this shit just distorts the market so much.   2006 - we had to have fairness so everyone could have a home even illegals and the poor & people who are not responsible.   The money was too good so banks and mortgage brokers push to keep the party growing.

At that point when it cracked there should have been the big flush.  Nope.  Had to let people stay in their home and on and on.   By distorting the market - the problem drags on and gets worse.

Free markets work when you have a buyer and seller price.  You get back to equalibrium quickly - in almost all cases.  Shame there are not many free markets. 

Thu, 10/03/2013 - 11:00 | Link to Comment earnulf
earnulf's picture

Nobody is paying, so everyone thinks that somebody is and while anybody could, nobody would.

So the property goes on the delinquent tax roles after the first year, and after a second year, (at least around here) it can be bid on for the price of the delinquent taxes plus fees.   Then the property owner of record has to be notified that the property was purchased at auction and has a length of time to redeem it or else the purchaser gets the property.    After three years of unpaid taxes (four years since the first doesn't count) the property can be sold for back taxes and fees and you own it and can petition the Sheriff to evict the boarders who have been living in the property for the past four years rent free or you can see if they are willing to start paying rent.

Thu, 10/03/2013 - 16:25 | Link to Comment prodigious_idea
prodigious_idea's picture

Banks pay the taxes as soon as they're delinquent - in most cases.  Foreclosure has nothing to do with the bank's timing on paying taxes.  Prevents tax liens that cost extra to clear when they're ready to pay a realtor to sell the home.  They'll pay the insurance too.  Other than the RE commission, the cost is low relative to the value of the mortgage.

Thu, 10/03/2013 - 09:50 | Link to Comment TruthInSunshine
TruthInSunshine's picture

"There's Never Not Been A Better Time To Buy A Home, And This Include's The Present Time*."

*Message Sponsored By The National Association of Realtors.

Thu, 10/03/2013 - 10:00 | Link to Comment csmith
csmith's picture

All enabled by the free money funneled from the Fed to the banks. No need to even THINK about putting this stuff on the market as long as funding is free.

Thu, 10/03/2013 - 10:09 | Link to Comment Seasmoke
Seasmoke's picture

Snap. Crackle. Pop.

Thu, 10/03/2013 - 10:12 | Link to Comment MissCellany
MissCellany's picture

"the banks have no incentive to actually clear out the properties to which they have title,"

...or DON'T have title...

Thu, 10/03/2013 - 11:00 | Link to Comment rqb1
rqb1's picture

That pesky little fact.

Thu, 10/03/2013 - 10:59 | Link to Comment Boxed Merlot
Boxed Merlot's picture

...or DON'T have title...

 

 

Bingo.   Once a truly discerning judge recognized their Linda Green SOP, Blyth constructed, PERS marketed scheme destroyed the custodial trust the purchaser / resident gave to the financial institution he / she borrowed the purchasing funds from, the proper judgement is a no call. 

What should've happened is full prosecution for any / all individuals guilty of control fraud, including restitution and 3X punitive damages.  These institutions are Not TBTF, but the US needs to be.  Our judiciary needs to put their big boy pants on and get to work.

imo. 

Thu, 10/03/2013 - 10:15 | Link to Comment Hohum
Hohum's picture

So the vampire REOs make houses unaffordable for those with funds.   Yet these people still feel the need to buy.  If you can borrow, you can do it!

Thu, 10/03/2013 - 10:15 | Link to Comment Rubbish
Rubbish's picture

Just think if you're foreclosed on and the home sells for more than the 1st and the 2nd was bundled and sold off to iceland or someone. No one can produce a title lien and homeowner gets the excess bucks over the 1st mortgage. cha ching

Thu, 10/03/2013 - 10:41 | Link to Comment MachoMan
MachoMan's picture

home sells for more than the 1st and homeowner gets the excess bucks over the 1st mortgage.

You let me know when you catch that unicorn.  The issue is simple, the home isn't ever going to sell more than the first (if it was, then it wouldn't be in shadow inventory...  it would have been foreclosed long ago...  if you have ANY equity in your house, you will be booted the fuck out).  Further, even if it does, then you can bet your sweet ass the bank will have so many additional fees tacked on (administrative fees, agents of all sorts, attorneys fees, court costs, you name it) that any excess equity will be drained by all the middle men.  This is a pipe dream. 

 

Thu, 10/03/2013 - 11:30 | Link to Comment Rubbish
Rubbish's picture

Already caught it. Home had major structural damage and I refused to sell it on open market for fear I would get sued even disclosing the problems. It was a tear down imo. Auctioned to 3rd party in a frenzy bidding war on court house steps for more than 1st and 2nd. 2 yrs. no payment on 2nd, 9 months on 1st, no closing costs or RE fees, ok so it hurt my credit, I'm off to retirement, cha ching. Pocketed it all but 1st who didn't add any excess crap, 2nd never showed because there is no paper trail unless they robo'd, which "I" would have sued.

Thu, 10/03/2013 - 12:20 | Link to Comment MachoMan
MachoMan's picture

Are you arguing the exception or the rule?  [also an interesting first post...  looks like baiting the line to brag to replies?]

Thu, 10/03/2013 - 16:30 | Link to Comment prodigious_idea
prodigious_idea's picture

Guess somebody should have been more careful with the unicorn analogy.

Thu, 10/03/2013 - 10:16 | Link to Comment y3maxx
y3maxx's picture

...America needs to start a War, a really big one, "In the name of World Peace".
That'll take the focus off of these Vampire REO's and Zombie Foreclosures, the $147 Billion College Loan Bubble, 50 million Citizens on Food Stamps and a growing Unemployment Rate.

With Obama in charge, America's collapse is coming sooner than later.

GTF outa Dodge friends.

Thu, 10/03/2013 - 10:16 | Link to Comment asteroids
asteroids's picture

Blame the FED. If they weren't buying $40B of this crap every month, things would be a lot different.

Thu, 10/03/2013 - 10:19 | Link to Comment adr
adr's picture

Even if you only pulled in $1200 a month from a welfare program, that is a lot of cash if you aren't paying for a house. Especially with HEAP locking your energy bills at $20 a month.

You've got rich vampires and poor vampires sucking the life out of the middle class. I don't think there are many left to feed on though.

If the economy was is great that it can give you a record high stock market, how come there are so many people living for free in shadow inventory homes? Let alone the million dollar mansion squaters in Florida.

I'm wondering if anyone would notice if I found a vacant home where I need to move and just moved in. Start paying the property tax to the city, like I bought it, turned on the water and electricity, fix the broken stuff.

If the house is in the shadow inventory, it will probably never go up for sale. It might still be owned by some European piecemeal conglomerate that bought parts of a few thousand homes. Nobody will ever come to claim ownership.

God this country is fucked up.

Thu, 10/03/2013 - 10:43 | Link to Comment Son of Loki
Son of Loki's picture

But it's all free, adr. Cant beat that price. And with free food, free phone, free health care, they have it made.

Thu, 10/03/2013 - 11:07 | Link to Comment MachoMan
MachoMan's picture

What's left of the middle class will be hard as stone...  Those of us that are hanging in there are actively seeking to stop the swarms from feasting on us.  So, it's not just that the consumer is tapped out, it's also that anyone left with any sense is actively seeking to prohibit the blood suckers.

Thu, 10/03/2013 - 11:31 | Link to Comment Hongcha
Hongcha's picture

MachoMan speaks truth.  You have to become as wily as a serpent.  I am teaching myself all the ways to keep Nosferatu offa me.  I was a patriotic, tax-paying white citizen.

"You can't pluck a feather from an iron chicken."

Thu, 10/03/2013 - 14:46 | Link to Comment tip e. canoe
tip e. canoe's picture

wily as a serpent works wisest when gentle as a dove is also practiced.

nice homily on the iron chicken btw

Thu, 10/03/2013 - 16:34 | Link to Comment MachoMan
MachoMan's picture

I was a patriotic, tax-paying white citizen.

You're no longer white?

Thu, 10/03/2013 - 10:24 | Link to Comment orangegeek
orangegeek's picture

Back in the 1930s, many lived in homes without paying rent nor a mortgage.

 

The thinking was this - if someone is occupying the property, the likelihood of the house getting vandalized/torched goes down.

 

Detroit learned this lesson the hard way.

Thu, 10/03/2013 - 10:54 | Link to Comment SheepDog-One
SheepDog-One's picture

Yea but the difference is they didnt have crackheads or meth labs in the 1930's.

Thu, 10/03/2013 - 16:17 | Link to Comment ajax
ajax's picture

 

 

"Yea but the difference is they didnt have crackheads or meth labs in the 1930's."

They were alcohol and laudanum addicts back then. Cocaine was around as well.

Thu, 10/03/2013 - 11:35 | Link to Comment 29.5 hours
29.5 hours's picture

 

@ orangegeek,

"Back in the 1930s..."

I think that was true in many areas, but not because of bank policy. It was because community support and organization intimidated law enforcers from physical eviction.

 

 

Thu, 10/03/2013 - 10:32 | Link to Comment Son of Loki
Son of Loki's picture

It's all Free Stuff......Streets are paved with Gold in America.

And it's all free.

Thu, 10/03/2013 - 10:32 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

This would have all been solved via the market if they had reinstated Accounting standards when they bailed out the banks. Instead all the bailouts went to bonuses, the stockmarket and reserves and NONE when to solving this problem.

Thu, 10/03/2013 - 12:23 | Link to Comment hootowl
hootowl's picture

The bankster cartel is not going to play by their own rules.  Rules are for the ethical suckers that trepidly venture into the lawless purvey of the bankster cartels at their own risk.

 

Think of the Demoncraps and the Republicraps as the Gambino and the Tonnelli families and Bernanke, or his Tribal replacement, as Meyer Lansky, the Tribal capo assigned to keep the rank and file bankster thugs  and political puppets in line.

Thu, 10/03/2013 - 10:51 | Link to Comment Mediocritas
Mediocritas's picture

Easy solution.

Package all the shit up and offer it to the Chinese, Canadians and Australians in exchange for an equivalent amount of US TSYs, booking a loss in the process, but increasing the asset quality, while keeping the foreigners happy by letting them swap real land for crappy paper and keeping the Feds happy by not budging the exchange rate. Now use the "high quality" (cough) TSYs as collateral to leverage 20x more credit through the wonders of shadow banking and use that money to speculate wherever there's a hot market to cover losses. Food, water and healthcare are great because it's so easy to make money from people who just want to keep living...suckers! Those fools make a perma bid into every brutal ask, they just have no idea how to trade in a free market.

Or hey, just sell low and buy high (on credit) into hot Chinese, Canadian and Australian real estate to complete the Circle of Retard. What could possibly go wrong? /sarc

Thu, 10/03/2013 - 11:03 | Link to Comment evernewecon
evernewecon's picture

 

 

 

In health care, cost shifting's where

(essentiall all) unreimbursed cost of care

is/always has been shifted to everyone else.

 

That's everyone but the carrier picking up

the tab for a carrier-centric and thus

trickle down system.

 

The REO's in cost suspension are free to

the occupants and banks in terms of the 

latters' dead weight carrying costs because

the rest of us pick up the tab first through

free reserves, at the expense of our 

savings income.  Then, we pay for loss 

sharing.

 

Remember, though, for all that was 

invested going into the self-created

duplicitous bubble at the top by the 

banks, there was an equal dynamic 

of SELLERS of that bubble.

 

They've been held up in broad daylight

for the last 5 years.

 

First, the proceeds should be earning 

an income stream that those sellers had

to have calculated would be superior

after tax than paying rent.

 

Second, they pay for "loss sharing" 

benefiting the banks that have been

shaking them down.

 

They don't begin to "rate."

 

 

Reflecting on the AIG-Goldman Sachs rumble, 

this

 http://www.bloomberg.com/news/2012-09-10/big-banks-hide-risk-transformin...

then looks like the Feds knew the big 

banks would be doing that, so it 

works like a set-up, a real bona fide "set-up."

 

http://www.youtube.com/watch?v=FCfflhAHbT0

 

The banks also take over the "put up or shut up-

ability."

 

http://goo.gl/cgZfyq

 

Gaming theory matters in economics, and the bankers

were obviously trained in Atlantic City.

Thu, 10/03/2013 - 11:04 | Link to Comment nolaguy
nolaguy's picture

I'm being lazy, and didn't dive into the data.   But, did anyone see/find the number of "vampire REO's" vs listings?

Thu, 10/03/2013 - 11:23 | Link to Comment 29.5 hours
29.5 hours's picture

 

"deadbeat Americans have been given a carte blanche to live mortgage-free"

Deadbeat, eh? Sounds like a Tyler is all jealoused up. Deadbeat is the term that banksters use for ALL of us who are not qualified to be muppets.

 

 

 

Thu, 10/03/2013 - 11:26 | Link to Comment Hongcha
Hongcha's picture

I heard 'Deadbeat' is a term of art in the credit industry for people who do not carry a balance on their credit cards.

"And the rain descended, and the floods came, and the winds blew, and beat upon that house; and it fell: and great was the fall of it."

Thu, 10/03/2013 - 11:27 | Link to Comment 29.5 hours
29.5 hours's picture

 

@ Hongcha,

True. I'm a deadbeat in that way for sure.

On the other issue, lots of people stuck in those houses are good people in a bad situation. My sympathy is with them--not with the people who call them deadbeats.

 

 

Thu, 10/03/2013 - 11:34 | Link to Comment Hongcha
Hongcha's picture

Yes 29.5, I carry no scorn for those people.

Thu, 10/03/2013 - 15:27 | Link to Comment ajax
ajax's picture

 

 

Deadbeats? Did you say Deadbeats? Some historic American Deadbeats:

http://blip.tv/virginia-historical-society/a-nation-of-deadbeats-an-unco...
A Nation of Deadbeats: An Uncommon History of America's Financial Disasters

Pundits will argue that the 2008 financial crisis was the first crash in American history driven by consumer debt. But Scott Nelson demonstrates in his new book, A Nation of Deadbeats: An Uncommon History of America's Financial Disasters, that consumer debt has underpinned almost every major financial panic in the nation’s history. In each case, the chain of banks, brokers, moneylenders, and insurance companies that separated borrowers and lenders made it impossible to distinguish good loans from bad. Bound up in this history are stories of national banks funded by smugglers, fistfights in Congress over the gold standard, America's early dependence on British bankers, and how presidential campaigns were forged in controversies over private debt. Scott Reynolds Nelson is the Leslie and Naomi Legum Professor of History at the College of William and Mary. (Introduction by Paul Levengood)

- oh yeah, everything old is new again - or - "plus ca change..."

 

 

 

Thu, 10/03/2013 - 11:48 | Link to Comment Handful of Dust
Handful of Dust's picture

I used to live in Houston and went back to see a friend. I can tell you...houses there are mucho overpriced right now. Houstoin has seen some hard landings in the past going into serious recession and I see this happening with houses when the Bubble bursts. These prices [and property taxes] are not sustainable.

I don't know about LA, but Houston housing is a Giant Bubble.

Thu, 10/03/2013 - 15:32 | Link to Comment ajax
ajax's picture

 

 

Could the Houston (and Texas in general) housing price bubble have anything to with the fact that Texan sellers are encouraged to advertise their properties for sale through Southern Californian realtors? Can't be a coincidence can it?

Thu, 10/03/2013 - 16:43 | Link to Comment NihilistZero
NihilistZero's picture

LA (an moreover SoCal) is bubble central dude.  All these mythical "Chinese Cash Buyers" actually leverage out to buy more properties right after closing.  I'll take much schadenfreude in these Chinese Oligarch immigrants getting burned in 2015 when the pain of housing Bubble 2.0 sets in.

Thu, 10/03/2013 - 12:05 | Link to Comment IdiocracyIsAlre...
IdiocracyIsAlreadyHere's picture

Absolutely no sympathy for the banks here.  They don't want to take the effort to kick the occupants out and/or works better for them to let them stay for free and take care of the property for them - fine.  What sucks is that this allows them to continue to hide their shadow inventory and disguise the true state of their balance sheets.  We don't have a clear picture of how bad of shape these TBTF institutions really are - the reality is probably so bad it will likely shock even ZH readers.

As for people living in these places mortgage free?  Meh.  Yeah, it's unfair to those who actually pay their bills but lots of things are unfair anymore.  Bankster bailouts and bonuses bother me much more than some schmuck living in a house for free.  It's the bank's responsibility to evict him, not mine, and I simply don't give a shit about the minor freebies that trickle down to the peons anymore. 

Thu, 10/03/2013 - 12:36 | Link to Comment ghostzapper
ghostzapper's picture

I've said this here before and this is not rocket science.  Why on earth would anyone pay their mortgage if it is either directly or indirectly connected to a PD????????

QE has been (and more recently even more so) a method for PDs to dump toxic shit on the Fed.  it's like you have a piece of shit boat in your backyard with a loan on it for a balance of $20K.  you could sell it on the open market for $5K.  the fed comes in and says "we'll take that loan from you for the $15k balance" and prints the cash to do so.  you received a $15K handout welfare check.

if Bernankssss is doing this with the PDs then why on earth would anyone pay their mortgage since Benny is already taking that risk from the PDs anyways???  biggest moral hazard in the history of our planet. 

Thu, 10/03/2013 - 12:46 | Link to Comment Fezter
Fezter's picture

So the only thing keeping the municipalities from going bankrupt is the fact that the banks keep paying the property taxes. Banks and Municipal Labor Unions and TARP....Oh My....!!!

Thu, 10/03/2013 - 13:09 | Link to Comment shovelhead
shovelhead's picture

Either banks or private parties are paying taxes.

County Assessors give no free rides. Go to a county assessors office on tax lien sale day. It's mobbed with buyers.

Thu, 10/03/2013 - 13:52 | Link to Comment Those Fukerz Ha...
Those Fukerz Have R Money's picture

I have a neat Zipcode Zombie Zillow trick for you folks. (But then I need help from someone who can explain an IndyMac Trust that had 1520 homes in it in 2004, but as of last week only has 75 homes in it--and 18 of those are delinquent, in default, in BK, or in REO. Want to know what happens to trust when it gets completely emptied.)

But first, here's the Zillow trick that I promised:

Go to Zillow. Use the filter tool and filter for a particular zipcode, city, (or even a whole state, I think.). Then hit the "Blue Arrow of Shame" clickie-onnie thingie and let it take you to "pre-market."

To me, the most interesting ones are the ones that show up under "pre-market" and "foreclosed," (don't click on red foreclosed--red foreclosed means they are on the market.) You just want a screen full of blue arrows. But also interesting are the searches that also include the "pre-foreclosure/pre-auction" homes. (Also indicated with "Blue Arrows of shame.")

(You might want to filter out vacant lots and vacant land under "home type." (Also works by filtering for (1+) bathroom.)

Then it's fun to tinker with the "days on Zillow" tool.

Anyway, I have also found some old foreclosures that are even still vacant, but show up as "recently sold" from when they were actually auctioned off. (Those show up as yellow arrows--so they are all mixed in with regular "solds." Harder to glean info from those.) But the way you can spot those is usually by scrolling down to look at the sales history and you will usually find that they were placed on the market and taken off the market, placed on the market, taken off the market, (etc) in relatively quick succession. (Often will have a "pending" status for the entire 6-8 weeks they are on the market, but mysteriously never actually close. I think these might be Fannie/Freddie-involved houses.) 

But the "Blue Arrow of Shame" houses are waaay funner to examine. (I own a blue arrow of shame house. Free and clear. Shhhh....don't tell anyone, though--the property tax fairy paid my property taxes last year--hoping she does it again this year. Won't know til the 15th.)

Okay. Now--anyone out there who can help me with the IndyMac Trust question? I even have a cusip for the (tranche?)--it was the B-2 group of homes, which were originally subordinated Libor certificates. (cusip 45660N3E3.) Thanks in advance, guys!

 

 

 

 

 

Thu, 10/03/2013 - 14:24 | Link to Comment dizzyfingers
dizzyfingers's picture

Our village told us that bank-owned homes' taxes were/are paid by banks. Should we believe that?

Interesting comments at http://www.realclearmarkets.com/articles

"If the accounting in this article is accurate (and I have seen other credible reporting that generally agree with these data) then the reasonable conclusion is to find banks selectively discriminating on enforcing contract terms.  Or maybe being directed to selectively discriminate.  A very interesting possibility, one that would, in a normal world full of curious, justice seeking journalists, be investigated and reported on.  Instead we have crickets.  Interesting."

"If a million homes in the NYC area are delinquent to the point of warranting foreclosure action, and almost zero foreclosure action is ensuing, then the banks must know that they are going to give the delinquent borrowers a gift sooner or later, and see no need to bother them until the gift is all wrapped up for delivery.  If a gift in the form of debt relief will be delivered on this scale, it will have to go out to debtors everywhere, or the banks will be guilty of unfair practices, and that will not do.  If the debtors are getting a gift, the banks are taking a huge accounting hit, with only the Fed in a position to keep them solvent. After all, if  a bank fail, the Treasury and FDIC arrange for an institution take them over, and enforcing contracts on collections is more difficult to finesse.  The only end of this game that I can see is effective or actual nationalization of the mortgae market.  Maybe it already happened and was not reported? Why the lack of interest by the press?  Is it because the big fix and reckoning of our zombie monetary system is planned and on the way.   We shall see, and we probably will not like it."

 

Thu, 10/03/2013 - 15:23 | Link to Comment macambaman
macambaman's picture

No worries, "Ben the vampire slayer" will buy the Vampire REOs from the TBTF banks.

Thu, 10/03/2013 - 16:00 | Link to Comment malek
malek's picture

It's totally obvious the same is happening here in the SF Bay area (outside SF itself).

Thu, 10/03/2013 - 17:08 | Link to Comment Those Fukerz Ha...
Those Fukerz Have R Money's picture

Oops. Didn't know what green arrow meant. I clicked it. So one of my thumbs up in my earlier comment came from me. Sorry.

****

Can anyone 'splain the dying Trust thing to me, though? Or a collapsing cusip? (How do and where do cusips go to die?)

Was wondering, what with waterfalls and all, if there is some sort of hestancy to kill off the last loan in a cusip? Would that trigger losses for related cusips in the Trust? So, would there be a financial incentive to NOT kill off the last loan in a cusip? (Could that help, in part, to explain some of the Zombie REO phenomenon?)

In the Supplemental Prospectus for the PSA for the Trust, there is a clause that says (blah, blah, blah "until the class certificate balance thereof is reduced to zero.")

I don't think this particular cusip could be downgraded much farther. But I think it may possibly be in a potential group of crap for which Ocwen has agreed to purchase the MSRs.

Any ideas as to how I might get an answer to this? (I could offer up more specifics if necessary.)

Thanks, guys!

 

 

 

Tue, 10/15/2013 - 13:52 | Link to Comment ItsDanger
ItsDanger's picture

If these properties were owned by MBS or similar vehicle, the regular interest payment would have been missed already.  ie. default.  Yet I dont hear about these, is the originating lender financing the shortfalls?  These articles always present more questions than answers.  Sure we all know some people are living mortgage free after default.  Lets get actual $ amounts by region.  Delinquency status.  The comment that the state could seize the property is accurate although I assume it varies across the country.

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