Replies to This Discussion

Permalink Reply by Marcy Moyer on September 18, 2011 at 5:06am

This is a very good explanation of why there are almost no foreclosures out there that are not GSE

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Permalink Reply by Ray Snook on September 18, 2011 at 5:31am

Corruption is rife in this country because it is positively encouraged and engaged in by those in government. Let's shout about Venezuela and Nigeria and Colombia to distract the dumb taxpayers and keep them believing that the USA is a God fearing nation with a conscience -  when in reality it is just One Nation under the Dollar with boundless opportunity to line your pockets at the taxpayers expense.

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Permalink Reply by Jim Fleming on September 18, 2011 at 6:58am

Well written Jeff.  When you calculated total average cost of a foreclosure at $40,000, what did you include in your figure?

The reason I ask is that I am wondering if you included the deficiecy that is not recuperated when the REO property is sold.  In this area, SW Washington, homeowners who are in foreclosure are upside down by a minimum of $40,000.  Most are upside down by more than that amount.  The average selling price of a home in this area in 2007 was about $322,000; currently the average is $218,000.  All indications are that the trend is continuing downward and seems to be reflecting the jobless rate in this area. 19 out of 20 foreclosure auctions in this area result in the property reverting to the Trustee/Beneficiary - in other words, they don't sell.  The Shadow Inventory grows by hundreds of homes every month.

Adding the costs of processing, legal fees, asset management, filing fees, failed modifications, and so on, it seems to me that you can add a zero to your $10 Billion figure and still be conservative if the numbers in this area are at all indicative of the national numbers.

My business has shifted entirely to processing and negotiating short sales for listing agents in my area.  I always have at least a dozen active files and normally three dozen at any time.  Because of this, over the last 4 years I've negotiated with all of the major servicers through all of the various programs that have come along including the Treasury, Fannie Mae, and Freddie Mac versions of HAFA, the VA/FHA pre-foreclosure program, and various 'cooperative short sale' programs offered by some of the servicers. Some of the larger servicers were receiving as many as 10,000 short sale packages per day. Occasionally that number is still reached, sometimes exceeded.  What is astonishing to me is the number of short sales that are approved just to fail later because buyers walk. Sometimes it is because underwriting standards have tightened during the interim, sometimes it is because their lender's appraisal comes in lower due to declining values, sometimes it is because their own situation changes (laid off, divorce, etc).  Sometimes it is because they shot gunned short sale offers and have already chosen another.  When this happens, the property must be put back on the market in hopes of finding another buyer.  Meanwhile, the foreclosure process has continued forward.  Often these sellers, who are trying to do the right thing and work with their banks, run out of time.  The banks foreclose.  I don't get it.  The banks in essence are guaranteed a bigger loss through foreclosure than through a short sale, but they foreclose nonetheless.

It makes no sense to me.  As several of the people who replied to your post have pointed out, there must be a reason.  Somebody somewhere must have a lot to gain by moving forward with these foreclosures.  But all of the rest of us - borrowers, homeowners, those that are losing their homes, industry professionals, taxpayers - are suffering horribly.

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Permalink Reply by Jeff Payne on September 18, 2011 at 7:56am

JIm, my number is probably about 60% of the actual cost of a foreclosure. I believe the cost of a foreclosure has risen to 76K on average.  My numbers are conservative which makes it even scarier.........

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Permalink Reply by Richard on September 18, 2011 at 7:42am

I don't care if you're Tea Party, traditional Republican, Democrat, or Libetarian.........this should be the hot topic Election 2012.  As it should be!  Accountability should be first on the agenda!

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Permalink Reply by Cliff Stanwick on September 18, 2011 at 8:51am

From HUD.gov website

The FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages since 1934. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio.

I think everyone overlooks that the lender/investor gets paid on the balance of the mortgage that is defaulted. Most of these programs for short sale are HUD sponsored to do a workout not for the benefit of the "investor." That is why servicers are compensated to do a workout. Its truly easier to just foreclose and collect on the insurance on the loan by the investor/owner of the note. Since, the current HUD sponsored program does not address the issue of valuation only of the ability of the borrower to pay(hardship), I think a lot of the foreclosure numbers are  from borrowers "strategic" default or from Bankruptcy.

 

As impressive as the numbers seem are they are nothing when you look at the numbers or the size of the HUD portfolio.

So when you look at the numbers $10 billion is nothing on a $5 trillion dollar portfolio. The workout or loan modification is a joke when you realize there are almost 5 million loans.

 

HAMP/HAFA is just political spin, wait until after the next Presidential election for the real numbers.....

 

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Permalink Reply by Premier Loss Mitigation Services on September 18, 2011 at 9:51am

They are still snubbing their noses at reasonable short sales! I have one that their FMV is $10K more than their appraised value. Even so, they were offered >80% of their FMV for a house that has been empty for more than a year, and they declined it! They wanted FMV, not a percentage of it. Now the house will sit until the Sheriff Sale, sit while it is being "evaluated", sit while it is being marketed, and THEN they will accept an offer for less than we are offering now. This was the second offer I sent to them. Does not make any sense!

 

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Permalink Reply by joe beauchamp on September 19, 2011 at 7:21am

It seems to be the current theme - easiest way to get money is to get it from the taxpayer - be it politician, G.E. which pays $0 taxes or the "job creators" (not doing such a hot job of it..??).  BOA just packaged 400,000 accounts and put them up for sale - a couple of companies got to look at the portfolio before FNMA **jumped in** and snapped them up for $500MM (servicing rights).  Fortune Mag, and others ask that if the deal was decent, why did a fed agency buy them instead of a private company?  BOA suggests 10-15% bad loans, one of these companies that looked at them said maybe 25% or 35%.  Bad, as in guess what the tax payers just bought by handing 1/2 billion $$ to BOA..  Oh, FNMA? Right now has its hand out for a $5BB+ handout. From...uh....tax payers - again.

I just don't see that anything FNMA does has to make sense - the few times that I've tried to get them to look at badly (mis)handled files at BOA, I've gotten nonsense response.  I have the distinct impression that no one makes them take their jobs seriously and that they are happily entrenched fed gov't employees with super benefits, no real work and no one making them be responsible for anything.

And you are suggesting that perhaps they should actually make BOA attempt to save investor $$ by short selling?  Yeah, they should.... I've watched a house or two as it got bashed by BOA, went to BOA's REO where is slid considerably below what was offered over the months - stopped watching after that.  There is no feedback - the SS dept gets no feedback on what they have lost, so certainly the negotiator gets none.  Separate departments, no overall management.

I just had a discussion with a POA who called to tell me that he gave up with BOA.  In disgust/joke, I said he should have just put in a renter and kept the rent - then after he told me of the condition, I realized that even if this is fraud, it would be much better for the investor than what has happened - it would have saved a lot of $$.  The owner, his brother, in retirement home didn't care but he wanted to do what he could for people in the neighborhood.  Lost the buyer (BOA number was, as is very frequently way too high - being in BOA HAFA, there was no negotiation - take it or take a hike).  This then went to AMS - same number (an appraiser very familiar with the area said the very top of the market is $115K, BOA insisted on $138K for this vacant property - in case you wondered).  I learned that the power had been out for months, someone looked at it and, due to water and mold in the place, said $80K would be too much (of course, a miffed buyer isn't necessarily very accurate..).  So, what is now going to deed-in-lieu - in a couple of months will go to REO and will continue to mold away if not burn down will be worth what to the investor at this point?  Yep, BOA/FNMA should care - they should try to protect the tax payer but don't seem to have a reason to.

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Permalink Reply by Gael Adair Grove, CDPE/SFR/ePro on September 19, 2011 at 9:46am

It is surely some idiot out there are is making money on this craziness! I'd like to find this person(s) and wring their necks!!!

 

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Permalink Reply by Richard on September 19, 2011 at 8:22pm

Gael,

 

I agree.  The family structure, American people and housing industry deserves better than this. Not to mention how this will impact future business and possibly future generations.  I think most youth and familes still look forward to the American dream in a subtle way, even in this economy.  My question is, once the people in charge figure it out; if they ever do and I trully hope so, will it be same as our generation? 

 

With all the various players, factors and parameters involve, there's and outside chance that more regulation may be mandated.  I'm not saying that's such a bad thing and that could be good in some ways, however all parties should be equally accountable.  Crisis like this, usually have some type of a domino or ripple affect..........and sometimes, they can be catastrophic.

 

These are the types of situations that schools, scholars and intellectuals disect in huge lecture halls and tell the American goverment, history, business, management and accounting majors...........this is what you don't do!

 

In reality, a good long trip to the wood shed with perpetrators would do me just fine!

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