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The Second Foreclosure Tsunami Is Coming, And Is About To Kill Any Hopes Of A "Housing Bottom"
In what appears to be surprising news for some, Reuters has an article titled "Americans brace for next foreclosure wave" whose key premise is that "a painful part two of the [housing] slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures." Thank the robosettlement, where in exchange for a few wrist slaps, contract law was thoroughly trampled by America's attorneys general, but far more importantly to the country's crony capitalist system, the foreclosure pipeline was once again unclogged, and whether one does or does not have a legal title on a given house, the banks are now fully in their right to foreclose on it. What this means also is that America's record shadow housing inventory, which is far greater than any fabricated number the NAR reports on a monthly basis, is about to get unleashed on buyers, shifting the supply curve much further to the right, as up to 9 million new properties slowly but surely appear on the market. And while many will no longer be able to live mortgage free, forcing them to go out and rent (and no longer be able to afford incremental iGizmos), it also means that the prevalent price of homes is about to take another major tumble, making buffoons out of all those who, once again, called for a housing bottom in early 2012. Here's the simply math: there will be no housing bottom until the 9 million excess homes clear. Period. Until then it is a buyer's market, even if said buyer is unable to obtain bank financing, as ultimately it will be the seller who is forced to monetize (or vacate if underwater) their home in a world of ever diminishing cashflows. The fear of the supply onslaught will only make the dumpage that much faster.
As a reminder, this is what America's recover shadow inventory looked like recently (read more here):
For those curious how much more foreclosed properties are about to hit the market, we have the answer. Courtesy of RealtyTrac we know how many homes were foreclosed upon in the period until November 2010, when robosigning became a prevalent, if short-lived issue, or roughly 330,000 a month. In the aftermath, this average has dropped to 227,000 a month: a roughly 100,000 difference in less foreclosures each month! Which means that in the deferred amount of foreclosures, over and above the already endogenous deterioration in home prices and declining household income, means that there is at least 1.6 million in homes that are just waiting for a green light to be foreclosed upon, sending shadow inventory in the double digit millions, and unleashing a selling wave unlike any seen before. Behold the deffered foreclosures in all their glory:
Translation: Just like John Paulson lost billions on his massively wrong way bets that housing would soar (ironically, after getting the move lower correct), so Goldman's recent bet that properties will rebound is about to cost the firm dearly.
Because at the end of the day, it is all about supply and demand, or, said otherwise, money.
Reuters explains further:
"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.
"Last year was an anomaly, and not in a good way," he said.
In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.
Five major banks eventually struck that settlement with 49 U.S. states in February. Signs are growing the pace of foreclosures is picking up again, something housing experts predict will again weigh on home prices before any sustained recovery can occur.
Mortgage servicing provider Lender Processing Services reported in early March that U.S. foreclosure starts jumped 28 percent in January.
Well, no. LPS which is going through legal troubles of its own, unfortunately, is very much, less than credible. For the only real source on foreclosure data, we go to RealtyTrac, where we find that February foreclosures hit 206,900, the second lowest in many years, and higher only than December 2011's period low 205,000 (see chart above). But while there is no need to fabricate data, foreclosures will eventually come, as banks, first slowly, then very, very fast, start sending out foreclosure notices. What happens next will be entire neighborhoods with "Foreclosure" signs in front of the houses, doing miracles to prevailing home prices.
A January report by the Neighborhood Economic Development Advocacy Project in New York found that in the first half of 2011 the number of 90-day pre-foreclosure notices in New York City outnumbered court foreclosure actions by a ratio of 14 to one, indicating that while proceedings were initiated against many homeowners, they were left incomplete.
"Now the banks have a settlement, foreclosure numbers for 2012 are going to be high," said NEDAP co-director Josh Zinner.
A recent survey by the California Reinvestment Coalition, an umbrella group of nearly 300 non-profit groups in the state, of member agencies found 75 percent of respondents expected increased demand for their foreclosure prevention services in 2012 but more than a third had to scale back services because of funding cuts.
"Funding is a major concern given what our members expect for this year," said associate director Kevin Stein.
Needless to say, the return of reality, i.e., when one actually has to pay for living somewhere, instead of living 5 years without making a mortgage payment like the Ritters, means a return of ever louder calls for socialist debt principal reduction. What is odd is that nobody seems to care: certainly not the millions of other hard working Americans who would end up footing the bill.
All this has non-profits intensifying calls for the Federal Housing Finance Agency to drop its opposition to allowing the government-backed mortgage giants Fannie Mae and Freddie Mac it regulates to reduce principal for underwater homeowners.
Principal reduction involves reducing the amount borrowers owe in order to make a loan modification affordable for struggling homeowners. Republicans and the FHFA oppose principal reduction because of the risk of "moral hazard"- that homeowners who do not need help will seek to abuse largesse and have their mortgages reduced too.
"Until banks engage in meaningful principal reduction as a matter of course," ESOP's Seifert said after a recent protest at a Chase branch in Cleveland, "this crisis will not end."
Well then it won't. Because since every bank asset is another bank's liability, unless the government pulls a GSE, and funds the wholesale mortgage reduction (call it the "final solution" of ubiquitous and unquestioned socialism), banks will not do this. And while this next bank bailout is only years (at most) away, in the meantime we will see banks do just what they always do: foreclose once again, and release the pent up vacant homes into the market. Which for anyone who has taken Econ 101 means prices are about to take yet another dive lower, and the entire housing recovery plan can be scrapped. As to what it means for the Fed's plans for future easing, well... we believe our readers are smart enough to figure this out on their own.
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One needs only the ability to read, concentrate, and understand statutes.
Assuming said, an articulate and astute lawyer, one who can sever back to the last confirmable (legal) owner might (probably) find (and prove) that person is the "deadbeat"
please be careful with the suggestions folks. Krugman reads this blog and I am not sure he has enough education or experience to realize some of these posts (aliens, asteroids, chinamen) are sarcastic.
krugman's sporting quite the spare tire.
ooops, don't tell al-Gore
But.... but... buttt... this one is saying things are gonna be good!
http://www.businessinsider.com/michelle-meyer-bullish-signal-housing-market-economy-2012-4
Renovation spending...
How about you can't afford another house or aren't willing to trade houses so you improve your own. How about people who do their own renovations.
Ask Japan how long it takes to work out a real estate bubble when the government tries everything in its power to keep prices from falling.
Ummm the housing market will bottom when the inventory clears AND average incomes bottom. The latter will occur when all the affordable oil is gone.
About 2150 unless new technology and new oil intervene.
Where do they find these assholes in RightWingWorld who are worried about "Moral Hazard"? Since Corporations are "persons" according to the Supreme Court, and all "persons" are supposed to be equal under the law, and if corporate "persons" are not concerned about moral hazard, why should living, breathing persons worry about it? Case in point #1 - JP Morgan mailed the keys back and walked away from their mortgage on about $100 million in buildings in San Francisco. Not a word in the CCCP; this does not stand for the Union of Soviet Socialist Republics, it stands for Corporate Controlled Conservative Press! Not a word printed about this! Case in point #2 - The American Mortgage Bankers Association (I presume a lobbying outfit) mailed the keys back and walked away from their $70 million HQ building in Washington, DC ! Not a word in the CCCP! John Stewart had to put the word on this out. So, why should there be any moral hazard if Joe Sixpack walks away or lives in McMansion without paying his monthly vigorish to the banksters? Why Wingnuts? Why?
agreed
Care to provide some specific examples of moral hazard being used in connection with people walking away from homes they cant afford? Clear cut specific cases please, cant say Ive seen that. The only time I recall that term being used in connection with housing was regarding the federal government bailing out people who bought houses they couldnt afford which is an entirely different issue then what you mention. If you cant show something here, Id have to say youre a DKos/Media Matters "wingnut" lemming parroting a script
Jon Stewart is an idiot. Talk about phony controlled opposition to TPTB, his brother is a big time investment banker and one of the guys running the fricking stock exchange. If he covers something regarding finance and banks, there is a reason for it and he and his brother likely made money betting on one side or the other.
In case you havent noticed the media doesnt report on anything worthwhile, its pretty much all sensationalistic bullshit and where it isnt its a never ending parade of rose colored glasses sunshine pumping nonsense regarding the economy and finance.
I live in a rural county of 16,000; in my end of the county (6,000) I can count twenty- five or more houses that have been for sale for atleast 12mo.
In the past two weeks I have noticed 6 new entries to the market. The houses that have been on the market for atleast a year have deteriorated a lot. I don't see this ending well, if the banks keep up the chirade for several more years. Once fine abodes will rot, while people live out of cars.
The sheeple wil wake, when they find themselves homeless and starving in a car their parents bought.
Nobody wants to take a loss. Not the seller, not the bank, not the insurance company, not the county tax collectors - but it's going to happen to all of them. The only way to make it less painful is to sell it at fair market value. At least then you have an opporunity for some capital stop-loss. If the house becomes condemned, it's a certainly 50% loss for everyone, and the average will probably be somewhere in the 80-95% range.
Firefox with AdBlock Plus FTW. And if you are sick of seeing MB's face on here, all I get to hear now is that she is going to be in town for the graduating class at the college. OH JOY! "I wish I could graduate and have here speak at it!" "Oh, I'm going to go there and watch just to see her!!!" "blah blah blah" PUKE
Great article. Thanks ZH.
Possible campaign platforms (I promise to re-instate contract law) for November hopefuls. Massive civil suits may be filed by seperate individuals at $350 a pop in CA or free if you qualify for a fee waiver. Other laws may bring the banks to court. There are so many laws that although the banks have bribed their way out of some of them does not mean that they can't be brought into court on others.
The NWO goons were pepper spraying the teenagers at Santa Monica College today. Guess they can expect those 30, their friends and a lot of the ones that heard about it to join the revolution.
Not me though. I don't believe in Kennedy.
The coup de grace is that the banks will be allowed to become wholesale landlords with entire property management units under their control.
There will be no shadow market as the banks will simply rent the homes they want in perpetuity and the sell the ones they hold to any real return.
Think of how many times the banks have been made "whole" in this entire process.
They write the mortgage out of thin air, insured by fannie, get the debtor to buy mortgage insurance, self insure themselves over again, MBS, use the toxic mortgages for cash via the Fed, borrow under ZIRP, get nationwide clear title a la the robo-settlement - suffer no real loss because the $25 billion is nothing compared to POMO earnings and now they reap a rate of return on rents that vastly outstrips anything an investor can earn.
Millions of homes waiting to be leased by BAC and Wells and they will take section 8 - more tax payer supplied loot.
Genius.
Yeah and it's game fucking over when the section 8 dregs move in. You'll have a hood full of thugs hanging out on every front stoop at 12pm with a fo'tee in dey hands yelling, "aww hell naw" to each other. My hood of 96 homes is at least 50% full with renters now and more likely closer to 60-70% and most of them are section 8 if I had to gander a guess. I'm dumping it to short sell soon anyway so I don't give a shit any more.
gov has primed the pumps for this, had years to do it. the wealth effect has money everywhere, FASB rules still allowing banks to lie, many standing in the wait for the new flow. as with the shadow inventory that has existed since the meltdown, this new wave will have little effect on prices. the wealth transfer from the dumb who bought and lost their homes to rich who sit with hoards of cash will just intensify.
http://www.nytimes.com/2012/04/03/business/investors-are-looking-to-buy-homes-by-the-thousands.html?_r=1
this has all been managed, the gloom portrayed will not happen. haven't you learned the game from the last 3+ years?
no jobs that pay enough to make a house payment means no housing recovery.
Jobs must recover before housing can recover. Horse goes in front of cart. can't push a string.
housing not good investment, but better place to sleep, than under a pile of stock certificates.
Especially pets.com stock certificates - too much urine from angry investors.
Are the banks required to maintain insurance on vacant foreclosed properties?
What would happen to the bank's balance sheets if a large number of their vacant foreclosures were destroyed by tornados, wild fires, floods or squatters?
Most of the vacant foreclosures in my area are not being maintained and falling into shambles, losing more value by the day.
Was it Jefferson or Jackson that warned against Central Bankers, and that "Americans could end up tenants on their own land"?
And what about PMI. You never hear about that insurance on some "homeowners", that is fully designed to protect the mortgage companies. The whole thing is corrupt.
Most insurance policies have vacancy clauses where vandalism/malicious mischief, glass breakage, etc. are not covered after the house is vacant 60 consecutive days. Damage due to wear/tear/deterioration/neglect are generally not covered under most policies except under the fancy "all risk" policies.
I believe most insurance underwriters will only approve a basic fire and lightning + windstorm endorsement policy on a dwelling that is vacant.
All the banks have internal property claim departments or farm the work out to TPA's and file claims all the time for VMM and for covered losses they claim took place while the dwelling was occupied before eviction or abandonment but not addressed by the homeowner at the time it was occupied. Some banks are more prudent than others in this regard.
If everyone just defaulted and let these banks go under, we would have a full recovery/booming economy in 2 years.
fucking stupid mistake to sit there and bailout all the people who created the mess.
It would be if it were a "mistake," but it's been planned to work out like this, unfortunately.
The only solution for the people is a rifle at this point. Inherently everyone knows this but hasn't come to terms with it yet. It is what it is unfortunately so I try not to judge peoples' inaction because nobody wants that even though it is unfortunately inevitable - from a pure logic perspective anyway.
Wasn't Ilene just saying that housing had bottomed and pretty much, every post answering said post, detailed that in no way shape or form had housing bottomed out?
Apparently, it was obvious to everyone else that housing is a far GD cry from its lows.
Personally, Im still stockpiling Gold and Silver with my available cash and buying the dips for when it has truly bottomed.
Then I am going to cash in the bulk of my PM's, and buy a spread that would make J.R. Ewing red with envy.
all the fed knows how to do is print print print.... and sell sell SPY stock options hmmmmmmmmmmmmmm http://tinyurl.com/7cctuvh
The way it is going, houses may be selling in many places like they are, and have been, in many Michigan areas (such as Flint).
Like this Flint house for 3,150 dollars?
http://www.michiganhomes.com/genesee/flint/home/2205-Vernon-Ave,-Flint,-MI-48506/212031788?search_id=2
I wonder what property taxes are? There are tons of houses like this in Michigan; probably in other hard hit areas too. But would you want to live in Flint? Maybe if you owned your own personal arsenal and a couple pit bulls?
On the other hand what will happen to rental prices? They are going up, up, and up, but what about after this second wave hits?
If all this ain't bad enough, there is a very bizaar but very well timed (purposeful by the elites) article that is just hitting the net called "Next Great Depression? MIT researchers predict 'global economic collapse' by 2030". This is on Main Steam Media (Yahoo, news via Associated Press).
You need to read this article....They actually mention the "Club of Rome". But it is pure lies. They say the whole thing can be avoided:
"However, the study said "unlimited economic growth" is still possible if world governments enact policies and invest in green technologies that help limit the expansion of our ecological footprint."
So here we come with the Global taxing and more on "carbons". The 'Club of Rome', associated with the "illuminati", 'Committee of 300', and other secret elements (with the same suspects) is rarely, if ever mentioned in MSM.
The picture of the hands behind the curtain are allowing themselves to be seen. Either they are extremely worried they are losing control, or they are as arrogant and confident in their schemes as ever:
http://news.yahoo.com/blogs/sideshow/next-great-depression-mit-researchers-predict-global-economic-190352944.html
This is the companion video on the "economic collapse" and "precipitous collapse in human population" at website of the Club of Rome.
http://www.clubofrome.org/flash/limits_to_growth.html
And not surprising, it is narrated a British guy!
I'm ready to pay cash for a house now in the current market. No way though bitchez. If I found a few ZH'ers in my town to petition our county tax assessors to reassess the property at it's current market value then I would be all in. Other than that forget it.
We are going through the same thing where I live. My wife and I were seriously looking at purchasing a home. An upgrade for us. Because I saw what was coming we re-positioned our finances back in 2005, and now have enough liquid cash to essentially put down a 60% down payment on an upgrade house. However, our City Counsel has taken the position that the old tax assessments on the homes in our municipality must stand 'as is.' If the sale is deemed a 'distressed sale' it is not considered an 'arms length transaction,' and as such you have no standing to petition for a reassessment.
We walked away from this desired purchase because the tax assessment on this particular home is about $200,000 higher than what would be our offer price. I am not willing to sign up for the increased monthly real estate tax liability. So we are staying in our current home.
As it stands, the home we were looking at is three (3) years delinquent in its real estate tax payments.
This is happening all over our city, meaning homes are not selling because the sale price is not used to re-figure the assessed value for tax purposes.
No one, who was prudent and now has money to spend, is going to 'swoop in' and buy distressed real estate assets if the tax assessments are not going to reflect the true market value of the real estate i.e. the sale price. The value of something is what someone is willing to pay for it.
If the taxing authority can use the 'sale price' as the gauge to increase tax levies in the 'boom cycle,' how can they logically rationalize not doing the same thing during the 'bust cycle'?
This is a ticking time-bomb. Something has to give.
And then there is the whole "clouded title" issue on many distressed/foreclosed properties which makes purchasing foreclosed properties risky. If the mortgage for the property was securitized the likelihood of some bank showing up with a title years after the sale must be considered as an eventuality.
What a great comment. and thanks, because you just answered one of my questions!
Your welcome....
I've heard similar issues raised here in NJ where homeowners are protesting the assessed values of their homes. Seems the municipalities are not fighting these claims. But watch out... they have to have the revenue. They'll just up the ratres to get what they need.
This is where the investors will swoop in and buy all these foreclosed properties at pennies on the dollar prices just like happened to the farms the last time the elite crashed the economy. We lost our farms, and now we will lose our homes. That is the bankster cookie cutter. We will be a nation of renters.
suckers
World War III - The First Private War in History
Those who won all battles shall lose the war.
Bilderberg Group and the crimes against humanity.
This is how things work in all countries. Whatever used to belong to their people, today it belongs to the multinational companies of the Club. People were betrayed by their given leaderships and they lost everything. Capitals and markets were handed to the Club bosses. If you understand what is going on in Greece, you can understand what is going on in Britain, France, and Germany etc..
http://eamb-ydrohoos.blogspot.com/2012/02/world-war-iii.html
Authored by PANAGIOTIS TRAIANOU
Serfs... when a child is born, they will begin paying rent to the Banking Retal units... In the end they will be soylent green.
Does anyone have a chart or map showing where in the US this shadow inventory is?
figure FL vegas and phx and you'd be very close imo. i live in fl and more than half units in my middleclass pud that are listed are distressed, short sales. sales of foreclosed homes as they are dribbled out, are being flipped already. they go to cash investors realtors have in waiting, and simultaneously have yet another investor (maybe maybe end user) also looking at it.
they call it...get ready...flopping. http://www.news-press.com/article/20111219/BUSINESS/312200001/Southwest-...
realtors are, in general, scum
Explanation: Why Realtors Lie
Realtors lie because their income depends on the transfer of property from one party to another. Without this happening, they have no income. Thus, they will say or do anything to encourage this transfer to happen, regardless of the circumstances and conditions.
That is why they will always tell people it is great time to buy and try to instill a confidence (albeit false) in the stability of the housing market. Realtors always talk of bottoms and never discuss falling home prices. They will never look out for the people they represent because doing so could deter the transfer they need to produce income.
If anything, the bursting bubble has shown that realtors are nothing more than cheap salemen looking to make a dollar and not the experts in housing they once claimed they were.. Wearing thehat of a saleman escapes then culpability from the years of bad advice and false promises they made to buyers.
So remember, anything a realtor says or does is purely done for the intent of getting you or another party to buy real estate and has nothing to do with protecting the best interests of the party or parties they represent.
same in retail brokerage. the incentive is to transact, not to 'represent' anyone but themselves. but that is the current work culture...pure selling, just get sales/business...it'll probably all work out dont worry about the client
there is one assumption here that is incorrect: that the banks will just dump their REO holdings. they are not doing this now b/c they dont need to, they have liquid funding from uncle benny.
they ARE dribbling out the current holding very slowly to maintain the prices.
what would be truly ironic is if they foreclosed on all the multi-month non payers and that disposable income stops the ieconomy (a bit faster than it is currently slowing).
i think this chart may be misleading a bit though. i would like to know what/why there is a difference in 'foreclosed' and bank owned. once its foreclosed isnt it bank-owned? or is there that huge of a gap in formally foreclosed (get out of this house/change the locks) and units that are formally 'auctioned' and then bought by the foreclosing bank?
a step towards clearing would be to disallow the party that foreclosed to buy the unit at auction. here in FL banks foreclose and then buy it at auction. i dont think they are paying market price in the transaction.
-- Housing throughout the Anglo-American world is about to be driven to its knees, gasping for breath. Britain won't understand what hit it. And the poor Canadians... Well we'll just let them keep sleeping. We have details on the World News Desk. -- Michael C. Ruppert
http://www.collapsenet.com/154.html
Time for Osama Ben Bernanke to fire up the presses again.... Oh wait, that's too slow, they can just enter it on the keyboard, and call it money. Weimar Republic, here we come!
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