How do you think I'm going to get along Without you when you're gone You took me for everything that I had And kicked me out on my own
Are you happy are you satisfied? How long can you stand the heat?
Queen -- Another one bites the dust
How are people going to get along without their own ATM machines? Chasing free money induced many to pay peak prices, and now the lender has taken everything that they had and kicked them out to the street. I doubt they find the forbidden fruit of HELOC riches very satisfying under an ocean of debt.
by JON PRIOR -- Wednesday, March 30th, 2011, 10:02 am
Real estate data provider CoreLogic said 1.8 million properties make up the shadow inventory of foreclosures, down 11% from one year ago.
Analysts consider the shadow inventory as the major force against a recovery in the U.S. housing market. It is made up of mortgages in at least 90-days delinquency, in foreclosure or already repossessed by the lender as REO. These properties continue to drag down home prices, forcing more borrowers underwater and ultimately into default. Standard & Poor's recently put the principal balance remaining on the shadow inventory at $450 billion.
The 1.8 million homes represent a nine-month supply of inventory. Healthy real estate markets usually hold a six-month supply. Of the shadow inventory, nearly half are in some stage of serious delinquency. The rest is split almost evenly between properties in foreclosure or REO.
CoreLogic said while some portion of the shadow inventory can be carved away through modification or short sale, "only a small share can be effectively remediated from the shadow supply," leaving the rest for liquidation through REO.
For the first time, CoreLogic studied net present value, or NPV, calculations, and expected severity and redefault rates for modifications and short sales. Analysts came to the conclusion that these loss-mitigation efforts could cut the shadow inventory in half. But communication difficulties between the borrower and the servicer could make that prediction too optimistic.
CoreLogic found in addition to the shadow inventory, there are nearly 2 million mortgages that are current but underwater.
The highest levels of the shadow inventory remain in New Jersey, Illinois and Maryland. While mostly lower-population states such as North Dakota, Alaska and Wyoming hold the least amount of the inventory, Texas had a notably small portion.
And Shevy's home state of North Dakota has no shadow inventory at all.
CoreLogic Chief Economist Mark Fleming said despite the decline over the last year, the shadow inventory will linger for some time.
"While the trend of the shadow inventory is improving somewhat, the current level and distressed months’ supply remain very high," Fleming said. "The short-term weakness in prices and longer-term weakness in the drivers that affect the housing market imply that excess supply will remain high for an extended period of time."
JACKSONVILLE, Fla. - March 28, 2011 -The February Mortgage Monitor report released by Lender Processing Services, Inc. (NYSE: LPS) shows that while delinquencies continue to decline, an enormous backlog of foreclosures still exists with overhang at every level. As of the end of February, foreclosure inventory levels stand at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time. Ultimately, these foreclosures will most likely reenter the market as REO properties, putting even more downward pressure on U.S. home values.
February’s data also showed a 23 percent increase in Option ARM foreclosures over the last six months, far more than any other product type. In terms of absolute numbers, Option ARM foreclosures stand at 18.8 percent, a higher level than Subprime foreclosures ever reached. In addition, deterioration continues in the Non-Agency Prime segment. Both Jumbo and Conforming Non-Agency Prime loans showed increases in foreclosures and were the only product areas with increases in delinquencies.
The data also showed that banks’ modification efforts have begun to pay off, as 22 percent of loans that were 90+ days delinquent 12 months ago are now current. Timelines continue to extend, with the average U.S. loan in foreclosure now having been delinquent for a record 537 days, and a full 30 percent of loans in foreclosure have not made a payment in over two years.
A 22% cure rate is abysmal. Only by comparing it to the even more abysmal 2008 numbers makes 22 percent sound good. historically, cure rates are very high because borrowers used to have a rising market to sell into if they got into financial trouble. With the collapse of the Ponzi scheme, lenders were unwilling to extend credit, so borrowers couldn't Ponzi borrow to make payments. Since many borrowers were also underwater, they couldn't sell into a rising market, so they squat in comfort and wait for the bank to do something.
As reported in LPS' First Look release, other key results from LPS' latest Mortgage Monitor report include:
Total U.S. loan delinquency rate: 8.8 percent
Total U.S. foreclosure inventory rate: 4.15 percent
Total U.S. non-current inventory: 6,856,000
States with most non-current* loans: Florida, Nevada, Mississippi, New Jersey, Georgia
States with fewest non-current* loans: Montana, Wyoming, Alaska, South Dakota, North Dakota
Let's walk through a few graphs to figure out what it all means.
The number of loans 90+ days delinquent loans continues to grow. We need to stop the increase and reduce the number to near zero. Historically, the percentage more than 90 days in arrears is very low.
To look at the chart above, one could mistakenly believe we are over the worst and delinquency rates are near historic norms. The truth is delinquencies are double historic norms, and distressed inventories are nearly eight times historic norms. How are prices supposed to go up in the face of that?
Another one bites the dust Another one bites the dust And another one gone and another one gone Another one bites the dust hey Hey I'm gonna get you too Another one bites the dust
Queen -- Another one bites the dust
Further we are making very little progress on foreclosures. For every borrower entering foreclosure, three are delinquent. We are continuing to build shadow inventory.
Notice on the chart below that foreclosures kept pace with delinquencies until early 2008. The foreclosure statistics show a peak during that time when lenders realized they were crushing the housing market and embarked on amend-extend-pretend and created shadow inventory.
What are the prospects for curing these loans? Most bulls assume cure rates of 85% or better will mop up this mess. With less than a quarter of loans curing, foreclosure is the most likely outcome for shadow inventory even if cure rates continue to improve. Distressed inventory will be with us for a long time.
And, in case you needed any reminder from me, mortgage squatting is an national epidemic with nearly 30% of delinquent borrowers enjoying over two years of free living.
There are plenty of ways that you can hurt a man And bring him to the ground You can beat him You can cheat him You can treat him bad and leave him When he's down yeah But I'm ready yes I'm ready for you I'm standing on my own two feet
Queen -- Another one bites the dust
To make matters worse, the Option ARMs are beginning to reset and recast putting many borrowers into delinquency.
Foreclosures related to Option ARMs increased more than any other loan program over the last six months. We are only now entering the two-year period with the most resets. Look for the delinquency rates on these loans to continue to perform poorly.
We are going to see many more distressed sales over the next several years. I question whether lenders can maintain current pricing and liquidate inventories in a reasonable timeframe. Lenders will not want to hold this property forever, and as a society, we don't want them to. The only real question is how orderly will the liquidation be? How The Lending Cartel Disposes Their REO Will Determine the Market’s Fate.
Taking their lumps and moving on
Everyone who buy during a decline should know they may have to move and sell when the resale value is down. It is an avoidable financial loss. The owners of today's featured property paid $470,000 on 6/17/2008. They put 50% down. I have no idea why why they are selling. I do know that any losses come out of what was their down payment. Ouch.
House Purchase Price … $470,000 House Purchase Date .... 6/17/2008
Net Gain (Loss) .......... ($76,140) Percent Change .......... -16.2% Annual Appreciation … -4.0%
Cost of House Ownership ------------------------------------------------- $419,000 .......... Asking Price $14,665 .......... 3.5% Down FHA Financing 4.79% ............... Mortgage Interest Rate $404,335 .......... 30-Year Mortgage $84,696 .......... Income Requirement
$2,119 .......... Monthly Mortgage Payment
$363 .......... Property Tax (@1.04%) $0 .......... Special Taxes and Levies (Mello Roos) $87 .......... Homeowners Insurance (@ 0.25%) $140 .......... Homeowners Association Fees ============================================ $2,709 .......... Monthly Cash Outlays
-$346 .......... Tax Savings (% of Interest and Property Tax) -$505 .......... Equity Hidden in Payment (Amortization) $27 .......... Lost Income to Down Payment (net of taxes) $52 .......... Maintenance and Replacement Reserves ============================================ $1,938 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $4,190 .......... Furnishing and Move In @1% $4,190 .......... Closing Costs @1% $4,043 ............ Interest Points @1% of Loan $14,665 .......... Down Payment ============================================ $27,088 .......... Total Cash Costs $29,700 ............ Emergency Cash Reserves ============================================ $56,788 .......... Total Savings Needed
Property Details for 33 ERICSON AISLE Irvine, CA 92620 ------------------------------------------------------------------------------ Beds: 3 Baths: 2 Sq. Ft.: 1424 $294/SF Property Type: Residential, Condominium Style: One Level, Contemporary Year Built: 1989 County: Orange MLS#: S651484 Source: SoCalMLS ------------------------------------------------------------------------------ Rare single-level three-bedroom, two-bath condominium located in the wonderful Northwood Villas tract. The large master bedroom features two closets, along with built-in custom storage, and the master bathroom offers dual-sinks and an oversize tub: perfect for unwinding after a hard day! Revel in the elegant hardwood flooring, plush carpeting, newer appliances and central cooling system. Relax in the very spacious living room by the cozy fireplace - and enjoy the great SoCal weather outside on the spacious and private wrap-around enclosed patio. One will also find a indoor laundry room. Northwood Villas is located centrally to many entertainment and shopping venues and restaurants, including the Irvine Spectrum - and the Irvine school district is rated one of the best in the U. S. Plus, it's a short drive to the huge Heritage Park, which features many tennis and basketball courts, tot lots, a large pond, county library and community center. Make this a home on your short list.
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