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The American Foreclosure Process Has Ground To A Halt
Something funny happened in the aftermath of the US fraudclosure settlement, in which millions of backlogged housing units were supposed to enter the foreclosure process and begin the clearing of the nearly 9 million housing units in shadow inventory: nothing. Because as RealtyTrac disclosed overnight, in April the US saw a mere 188,780 foreclosures events of various type (NOD, auction, REO) take place. Why is this number significant? Because it is the lowest in 5 years, despite shadow inventory in the US now being virtually the highest ever. But, but, "this is precisely what the foreclosure settlement was supposed to prevent" one may ask... That would be correct. Next question. In other words, not only did banks get away scott free from being litigated to the 7th circle of hell, but for them the "profitable" business model continues to be one where house lending is largely irrelevant. And why not: with NIMs are record lows, banks couldn't care less if the houses and marked down loans against them in the asset pool go up or down. The real money is made elsewhere: like hedging the IG9. In the meantime for everyone else hoping to get a true clearing price on housing and millions in units in shadow inventory being finally absorbed by the market: good luck. Not only has the foreclosure process in America ground to a complete halt but as the second chart below shows, the time to liquidation once a property enters 60 day-delinquent status just hit an all time high: that's right, the average time during which a deadbeat can occupy a home without payment if they so choose is 31 months. Thank you central planning politburo and USSA.
From RealtyTrac:
Time from delinquency to liquidation - all time record.
As BofA explains:
A streamlined foreclosure process should result in faster liquidations, which means a pickup in the flow of distressed inventory into the market. This would weigh on prices in the near term, but speed up the eventual recovery. However, countering the efficiency on the part of servicers are the delays by courts in the judicial states. It takes 31 months for a loan to be liquidated once it becomes 60 days delinquent in judicial states versus 24 in non-judicial. There have been efforts to improve the process in states like New York and Florida, but the delays remain.
And finally, what does this really mean for that most important thing - prices. Well, as the chart below shows, one splitting housing into the four constituent categories: non-distressed (i.e., no motivated seller), through short-sale, move-in ready REO, and finally damaged REO (very, very, very motivated seller), the real price for the average home is between $100k and $250k. As more and more Americans, both at the individual and institutional level become motivated sellers, the more the dark blue line will drop lower toward the orange line at the very bottom.
Sorry "housing bottom" callers: you were wrong. Again.
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Yeah, mine (property tax, insurance) just got bumped. Big surprise there.
Cocksuckers.
Here's a real life story of one of my clients (I am a bankruptcy attorney):
Home value ($250k), rental value $2k/month
Total debt ($550k)
She was just granted the following Loan Mod:
3.850 fixed rate, 35 years
2% teaser in years 1-5 (no neg am)
All arrearages added to principal, all late charges and foreclosure fees waived
Monthly payment years 1-5: $1776 (almost all of which will be deductible)
Monthly payment years 6-35: $2200
In effect, as a "homeowner" in name only, she has just been allowed to rent her home at below market rates, get a tax deduction for her rent and property taxes that other renters don't get, get a free call option on inflation, and continue to be protected from eviction by all of the laws in place that allow foreclosed homeowners to receive 22 months of occupation for free vs 45 days for the average tenant.
Oh, and don't forget that taxpayers subsidize this process by cash incentives given through HAMP to banks that agree to these sorts of modification.
Me? I have never missed a payment in 20 years, my home is worth six times my small mortgage, and yet I can't refinance because the balance is too small for most lenders and I am self-employed. So I'm stuck paying 5.50% for the next 15 years.
Actually, property tax is fed/state deductible anyway (so that's a wash) and here they are paying the muni taxes every month instead of twice a year or whatever which is not to their advantage. PMI?
But otherwise, not bad....who says the American Dream is dead?
Thanks for the real life example.....hard to believe (well, not really these days).
I'll bet this asset ($550 mortgage) is still carried at almost full face value on the bank's books. All in the name of confidence....pathetic.
I recall my father's comments on the depression in the 1930's - he said the real problem was that all the politicians focused on was building confidence (never actually dealing with the mess THEY had created). It took the total destruction of Europe, Japan, China etc to accomplish what the corrupt, useless political "leaders" failed to do.
I think the same will happen for Canadian home owners when our market bursts. The taxpayers will be in for a Penny, in for a Pound.
I looked at your post with interest because you are an attorney Goodrich, but I get to the final statement at the bottom and what I read is that your RE "deal" is about as sucky as they come, unfair, it blows.
I was responsible. I wanted to buy a house clear back in the 90's though it was obvious to me that the median income could not support median housing prices, there was a bubble. I waited more than 10 years of renting for the collapse while others used their houses as an ATM pulling as much as 20k per MONTH out of their homes. That too sucked and was unfair.
Then it happened, 2007 came along and bang, the bottom dropped out of house prices. April 2008 I found a three story townhouse never lived in that had been completed just months earlier with a starting price of $235k but was now a distressed sale at $129.9k which is less than the $144k replacement cost for insurance purposes. Zero down at 6.5% for 30 years and $968 per month.
But, the bottom kept dropping out, and the neighborhood has turned into a slum, an out of the box brand new slum. The two most recent sales were $63 and $56k.
I walked away in March of 2010 because while I am not a lawyer I do have a degree in finance and one of the most important lessons they teach in that discipline is how to recognize a sunk cost, many high ranking bankers have not even learned how to deal with those. A bad deal is a bad deal, divorce the emotion surrounding the failure and do what is appropriate.
Every single day at ZH I read of resentments and anger about economics and the foolish handling of government and private income and debt, of manipulations and can kicking. In reality all of that comes down to TPTB refusing to recognize their failures and overcome their emotions about sunk costs. There is a whole continent refusing to deal with the biggest sunk cost in history, the euro.
But then you all get highly emotional about it all and accuse and rant and pout that it is fair for everyone but you or "the little guy." I am not saying that I do not feel it also, I am not saying you should not vent your feelings, I am saying that you should coldly evaluate YOUR situation without the false guilt of so called "morality" and fears about how you will be judged, if your situation is a bad deal then dump it. If you are going to pay for 15 years even though you deeply resent every payment all you are going to do is destroy your own happiness.
The deal so and so got or the base fundamentals of the market that are so fucking up real estate have NOTHING whatever to do with YOUR deal. That is all up to you. The day will come when you will have to decide what is more important to you, which will hurt less, your ethics surrounding payment of an obligation to a rip off bank, or the knowledge that you are throwing good money after bad. There is a balance and you will find it. It could be that you also get some great enjoyment from your home making it worth more to YOU than to others, thus for you the market value is far lower than it's value to you, in that case you can feel good about the loan and payments because you got a great deal, a house that is worth a LOT to you but was priced so cheap. The opposite is true perhaps, like in my case, I paid what seemed like half the value of a few months prior, a good deal yes? But, the house turned out not to be worth what I paid and then I could not get rid of it any other way but to simply walk, the bullshit Chase pulled just made walking that much easier.
Of course, the longer I keep my old house rented while also renting here, the longer I can tell my wife that "of COURSE we'll eventually buy another home." Even though I have no intention of signing another 'death note'.
So there's that benefit of stasis too.
This is a deliberate move to keep inventory off the market to make it appear the bottom has been reached and sucker in some more speculators/first time buyers. More foreclosures drive average prices lower and scare the sheeple....can't have that.
In most markets there is a sleazy move to tap into the Asian gambling crowd to create "buzz" with manufactured multiple offers. What a f'ing mess we have become. Also, FHA is frantically handing out basically zero down mortgages to anyone who applies - ANYONE.
How sad. Good night western civilization....
We are not going back to anything - from this point on, we are forging ahead into new territories, not by design but by consequences. This happens quite often in history........
http://www.youtube.com/watch?v=NzlG28B-R8Y
Exciting, ain't it?
Or it could be that the lenders are PRAYING that economic growth, a sustaining recovery, occurs...so that they can flog their inventory off on more consumer suckers at the old inflated prices.
Only this time it won't happen...what "recovery?"
I can tell you in my case that Chase did nothing after I strategically defaulted and handed the house back to them. They even send mail to my old address as if I still lived there. For quite a while this was supposedly to do with a court case filed in Oregon as in many other states challenging the legality of the foreclosures, they had scheduled sale on the courthouse steps April and May of 2011 but cancelled both and nothing was heard again till the settlement a couple months ago, now they have called me several times in the last couple of weeks trying to get me to file for a mortgage mod. I told them I was in no way interested in being chained to that house.
I said if they reduced the principal from 132k to 60k ( most recent sales in the neighborhood on identical units were 53k -63k ) and lowered the interest rate from 6.5% to 4% I would consider it because eventually I could rent it out for more than the payment. But, I would not do that because the first time home buyer tax credit has already been forgiven by the IRS due to foreclosure, if I were to take the house back I would have tax issues.
And speaking of tax issues, all these delays have brought us near the end of the Home Foreclosure and Debt relief Act of 2007.
Update Dec. 11, 2008 — The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief. http://www.irs.gov/newsroom/article/0,,id=174034,00.html
The banksters know if they just wait a few more months the finalization of sales of foreclosed houses will fall on the 2013 calendar thus foisting huge tax liabilities on those already damaged in this mess. Payback.
Is Cancellation of Debt income always taxable?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:
For most of us the only way around this bankruptcy and if that is the avenue you must use then you need to do it prior to the tax bill being generated.
You will note that debt cancellation is exempt in cases of foreclosure or abandonment through the end of 2012, but NOT short sales. Chase wants me to do a mod, or if not a mod a short sale. I have refused, I offered to give them a deed in lieu and waive my right to sue them for their mishandling of my mortgage and stealing money from my other accounts, misapplying funds intended for house payments, etc in return for "consideration," a sort of out of court settlement of my accusations and disposal of the property all at once. Say $2k and it is done with. Otherwise they can fuck themselves and I sue, then we can still settle but the first letter my attorney has to send the cost of settlement goes way up, to the pain level. These bastards have messed with me since the ink was wet on the mortgage papers, and they are still at it. Of course there might not be a JP Morgan Chase soon, but that is another story.
A form 982 is what's called for if you want the insolvency exception. It essentially requires that you be able to file a Chapter 7. Of course the question is "Why don't you?" and the answer could be any number of things (outside of simply not wanting to spend $3,000 and endure the stigma).
Some folks use "Informal Bankruptcy." It used to be called "being a deadbeat" before academia got involved. If you're really smart about it, the FDCPA suits you can bring while being a deadbeat can become a second income.
http://www.myhopeseries.com
I am an attorney here in Land O Lakes, FL. I have foreclosure clients. Some have seen their foreclosures more or less go along normally, if quite a bit slower than I would pursue a foreclosure if I were on the other side and handling a normal caseload.
I have also seen my clients "win" their case because the other side failed to prosecute in a timely manner. Other clients have been sued, but never served ... and that also warrants a dismissal (though in that particular case the court hasn't given it to us yet).
I also keep an eye on several homes in my neighborhood. In one case there was such a dismissal. In another (next door to me), the owner signed a deed-in-lieu two Christmases ago, and the home still sits with no attempt to market it. In still another instance, the bank began foreclosure proceedings in 2008 and only recently obtained title. Again, this one has yet to hit the market.
There have been some short sales, etc. But there is also quite a bit of that oft-mentioned "shadow inventory."
Sounds Familiar. My friend is in Seminole County. Florida is a freakin mess.
I have been saying to that stupid fuck Geithner from day one of this crisis, if you give the banks enough cash to sustain themselves, they won't be required to clear their inventory of REO. This is EXACTLY what's happening! Our tax dollars have now allowed the biggest crooks in the history of the world to become the biggest landlord in the world. As long as they have cash flow to support their operations what incentive do they have to sell their REO inventory if they lose money doing so? Seems to me their goal now is to wait out the market and use their manipulative schemes to make money selling the inventory down the road. Now wouldn't that be ironic? Instead of being held accountable for their irresponsible lending practices which in great part contruibuted to our dire economic situation and millions of people losing their homes, they now are in a position to reap unimaginable profits holding onto those homes and selling them. I think I'm going to buy a few more guns...there's some justice that needs to be doled out!
Forclosures will pick up after the Nov 4 elections...... What a coincidence!
I have been an REO listing agent for 5 years, and my current inventory is dry dry dry. I can tell you from my horrible experince that the banks are holding real property--and for what reason? Maybe they don't want to get stuck with a bunch of useless fiat crap dollars when it all falls apart. The bank now holds real assets. I am just disgusted with the whole system. The banksters get gullible homeowners down the modification rabbit hole that has no escape hatch, and then steal their houses. I have seen it-- I know what is goin on. I have gone to many a home and faced doe-eyed homeowners claiming they were in a modificaiton. A few token people get a modification, but mostly no....it's a full-fledged lie. I finally put all the pieces together. I suppose the only real estate work left after this all blows up will be to be a leasing agent for the state. I am thinking about giving up a license I have held for fifteen years. Too sick.
My guess is they're "banking" on Uncle Sugar buying them all at their previously inflated prices.
As we all know, prices cannot be allowed to come down!
I've got a cousin out in Vegas doing mostly REO sales (as it's about all that's left). A couple of years ago, Fannie tells him he has "too large of a market share," and his business has declined 40% each year since. So, obviously, somebody is collecting these houses for some reason.
Handled REO's for years, but when my best client sold out to one of the big, shitty asset management companies, I gave it up. Lots of people think they want to be REO agents, and the asset management companies know it and jerk the agents around for not a whole lot of money. Between the reduced commissions due to referral(s), the risk of fronting your own money and hoping they won't find a technicality to avoid reimbursement, the risk of getting shot, and the overall disgust with the whole process, I wouldn't touch it with a ten foot pole. I decided this several years ago, before fraudclosure really kicked in big; now I wouldn't be able to stomach being part of it.
Only fools keep paying their mortgage. DeadBeats are the smart ones. The US real estate market is a complete fraud, top to bottom. Socialism gone mad. Chase has my friend's mortgage. They have not paid in over three years. Chase does not even prosecute their own foreclosure filing. Judge is about to throw it out for non prosecution. Chase also file for a Summary judgement --and they were not the holder of the note-- at the time. Anyway, they don't want the property back. Chase could care less. Dimon is the deadbeat, and his Ponzi scheme. F$#@%K the Bankster, every way you can. We might save America and the Constitution before the police state throws you in the Prison Industrial Complex to work for .17 cents an hour building weapons systems for the military that enslaves you. Peace and Enjoy!
PS: friend was a 770Fica, 20% down, primary residence, school teacher for life, never missed a payment in their life. The System F@#$# them good. Bail yourself out folks.
Everyone stop paying your mortgage. Then the Gov CANCELS all real estate debt. Everyone owns their house free and clear. The TBTF Banksters are put out of business. Create a national bank, back the dollar with Gold, and start over. Everyone apply for your new HELOC and lets party. Sound like fun?
I hear you BUT i don't think we need a national bank. (Looks like the banksters already trying their damnest to get that) Personally, I'd prefer a little less gov't/security and a little more freedom/liberty.
That would have a hell of a lot better chance of succeeding than just plain austerity ...
Any agent worth his/her salt knows the market is changing. Chase and BofA fired all of their REO agents recently. All of them. They discovered its more profitable to do short sales and completely bypass the foreclosure process. Its not illegal if they never foreclose on the property.
Interesting. I'm guessing the profit is coming at the expense of the current MBS holders? Er... I mean "The Fed?"
edit: Oh, nevermind, they just changed the accounting rules, thus "no loss!"
http://www.housingwire.com/news/tweaks-psas-could-enable-more-short-sale...
Astartes09, I am not surprised that Chase and BofA fired their agents. I was worried it was just me that lost business--the whole industry is a total bust. The last short sale I closed took 2 years to close--that is not a business, that is an occasional side job. And yet the process is so cumbersome you can't do it part-time. You are very right--the market has changed and I am looking for work elsewhere.
That's cool, but don't they need the deed to sell the house?
Or can I sell my landlord's place somehow?
Details, please.
"Short sale" is a home owner sale.
I'm obviously missing something here. Previous poster said the short-sales are more profitable than foreclosures.
If a bank has a $400K asset (current mortgage w/24 years remaining, say) and the homeowner arranges a short-sale for $280K, where's the "profit" realized?
This is an old youtube, but tell explains the theft very well.
http://www.youtube.com/watch?v=ssl5yb7FewA
A good example is my case, I walked away and told lying cheating Chase to shove it. Years later they tell me that the notice they plastered on my door saying the place was foreclosed upon as of 07/15/2010 was just a formality, there is no foreclosure YET. If I will agree to a short sale they will pretty much rubber stamp it to clear it from the books.
The problem is that if I do a short sale it let's them off the hook for any liability for their actions leading up to the foreclosure, ditto a mod. Both essentially repudiate the original note in favor of a new deal. Agreement to the new deal assumes forgiveness of their shenanigans. It also incurres heavy tax liabilities that mods and foreclosures do not.
Under the law I am still the owner of the house, and I remain owner till the bank sells it at auction on the courthouse steps. Till then options they refused to grant pre foreclosure like modifications and short sales and principal writedowns etc. are technically still on the table. I take the position that they foreclosed as of July 15, 2010 and that their refusal to act accordingly by selling the house in a REASONABLE time frame is actually an attack upon me personally. It damages my credit while preventing me from taking appropriate remedial actions for YEARS. The law favors the rich/bankers of course, but I maintain that Chase will never see another dime from me. And I will leave the country permanantly if that is the only way to stop the victimization of the banksters and their government cronies.
If a bank has a 400k asset (your mortgage - remember the bank's asset here is not the house, it is the stream of payments expected over 360 months and with interest that is going to be about triple the original principal, so the bank has booked it as an asset worth 1.2 million when you buy a 400k house). IF you default and they foreclose that 1.2 million ASSET gets rebooked as a loss. The difference between 1.2 mil plus and 1.2 mil minus is 2.4 million. This is a MAJOR reason why they simply have not dealt with the backlog, to do so would require them to reassign assets as losses. Mark to make believe has allowed them to ignore market valuations and thus realize losses, where foreclosure forces them to book huge losses far FAR larger than the mere market value of your home. Now multiply by MILLIONS of dead mortgages, it is at least in the trillions of dollars.
If householders have lost 8 trillion in home equity you can bet the banks would lose more than treble that if forced to book all defunct mortgages as losses. In my case Chase can still legally claim my mortgage as an asset worth 360k even though I abandoned the place in early 2010. As long as I am the legal owner they do not have to book the loss, this is why they may never sell my house, just let it rot.
The accounting is more complex than that for certain, but I can't really explain it to laymen much more simply unless you have a working knowledge of banking and double entry bookkeeping. The fact that they were allowed to post the entire principal and interest as if you had paid all 360 payments up front is really where our system went wrong. It allowed them to leverage money they could not possibly have hoped to realize while it did nothing to boost reserves for doubtful loans.
Tyler,
Are you telling me I should:
Downside:
I bet your boys at JPM would love to have a 5.5:1 return on anything right now.
Too funny (and too true).
Of course we all know that NOBODY would ever take advantage of starry-eyed self-serving govt programs that offer MASSIVE incentives for cheaters. That would just be un-American!!!!!!
Mark,
If you can't beat'em.....
Now... just where do I sign?
You can really make it work especially if you and your spouse have good credit and a job. Qualify for a FHA loan with 1-income and using only you or your wife's credit. After 31 months, use the $45K profit to put 30% down on a similiar unit with the other credit and income stream or just buy $45K in physical gold. Up to you. If you're friends or family ever question you, you can say I never did anything that JPM or Goldman wouldn't do.
Sold my house in midwestern US in Fall of 2011. Now renting a farmhouse and doing major gardening/canning. We may build/buy again, but it won't be in a suburb, will be financed with very little debt, and the home/land will produce for us (wood, garden, wild game, water, etc.). Getting out and renting has been good so far, but a few words of caution, or at least drawbacks I've encountered:
Potential disadvantages
1. Cheap rent is good provided you don't pay more in extra utility bills - watch out for inefficient homes
2. Self-sufficiency may be impaired - you're at the mercy of your landlord for some things
3. Increased driving costs (try to work from home 1-2 days a week).
Rural advantages
1. We have a well and a public water supply.
2. We have space for a huge garden and even small livestock if we wanted.
3. More self-sufficient neighbors
4. No punk neighbor kids waltzing through my yard any time they like.
...you see, what a house flipper means now, oops, just a sec, let me tuck my horns back in, OK, there. As I was saying, in the New World Order O E O'bond Bomba Ebonic of Rosemary's Baby and the Suicide Vampire Squid of the Great Wal Mart of China, the inverted speech of the Beast,, means, Lloyd's god is gay and freedom means prison, thank you very much, you shall not surely die. AH haa haa haa haaaa. http://www.youtube.com/watch?v=W8Nfj8wk-0Y
The housing bubble is one place where the rubber hits the road. Can't have it upsetting the apple cart. The plan from the beginning was to pump it up big and deflate it slowly and unevenly. Shadow inventory will be released by TPTB in their own sweet time. If you own a house in the wrong place, you can expect to get bled for years.
The day for summary judgment is over! Yesterday was the deadline and now it looks like the first trial readiness hearing will be in August of 2013. I suspect that this may be cause for a sudden change of attitude.
http://img6.imageshack.us/img6/197/usavduetschebankcomplai.pdf
http://img7.imageshack.us/img7/6403/schedulingfortrials.pdf
Oh no Tyler....you've been taken out, corrupted, kidnapped....you're buying into their bullshit....and RealtyTrac is the biggest bullshit of them alll.The data lies on a spectrum to misleading to flat out wrong....foreclosures have not ground to a halt....they are marching right along...in fact new filings increased after the AG sellout was inked. And here in the wasteland of liberty where there is no more integrity of our courts.....they are churning out foreclosure auctions and sales more quickly than ever....while at the same time committing all sorts of nasty fraud and games before, duing and after the foreclosure sales.....a big issue is the fact that homes after foreclosure auctions are making their way into hands of private investors via inside deals with all sorts of shady characters working flip deals and manipulating the allegedly public auctions.....stay away from the propaganda.......