Spiking Foreclosure and the Statistics, those pesky little numbers! Can consumer emotions be tied to those same numbers?  As a Realtor®, businessman I look at the statistics and then try and apply them to my client and community needs.  For some time  strong honest market influences have been advising the public to research the market and if they are considering short selling.  They advise to select a real estate broker who is familiar with the short sale process.

To instill, in the mind of a new visitor to my blog, I have the experience necessary to be considered knowledgeable, I share the following. For three years (2010 -2013) I severed on the California  Association of Realtor® “Distressed Property Task Force” working to advise C.A.R.  Leadership and Realtor® members as to the best practices, to aid distressed clients.  During these “task force” meetings  we shared with some of the Nations largest banks, elected officials and regulators the issues Realtor® and the community faced by the meltdown in real estate values.    In 2013 I was a recipient of the C.A.R.  Champion of Home Award for the work I had done to aid save homes, never charging a penny for my help.    Also in 2013 I was awarded Realtor® of the Year honors by the Pacific Southwest Association of Realtor®.

Now let’s get to the statistics, we are going to provide some numbers to look at.   I am going to try my best not to influence your view of the market,  but as I see things there is still a need for one of my skill sets, that being helping with short sales.  First I would like to take you to some Federal Reserve Numbers. (from this point forward this symbol  (#) will be an active link, just click on it to see the reference point.)   At the following site location (#) you will see that the Federal Reserve tracks the percentage of delinquent loans.

I see great value in this chart as it covers a long time period.  We can look back into the 1990s for the numbers to compare.  First let’s look at the date that Lehman Brothers collapsed as that is  the commonly accepted date we entered this economic cycle.(#) it was September 15, 2008. So what was the default ratio on Mortgages according to the Federal Reserve then?   Looking at column 3 labeled Residential1   it reads, it was 5.22% in the Third Quarter of 2008.

Using this as a point of historical reference it would appear to be truthful to say; Today more than 5 year later, the number of defaulting loans is greater than what caused the melt down that lead to TARP and then HAMP the Treasury Loan Modification Program. Now let’s scroll up the page and compare this in historical reference.   Today’s number of defaulting mortgages is in fact higher!  Again I am trying not to make statements, rather allow you,  to see the trends and the real numbers.

Just to be fair let's view a random point in history say the first quarter of 2005.  The ratio was about 1.48  or about 7 percent lower than it is today.  Let’s look at this 2008 collapse, again with it was at 5.22 and it’s effect on Banks.  Going to the FDIC Site (#) it is not surprising to see it there is a correlation in the number of  failures by date and the Default  numbers from the federal Reserve.  In 2006 there were no Bank closures the default rate at the Fed was 1.60 (first quarter %)

Let’s  make this a little more visual and compare some numbers using the last "quarter" of the year’s Federal Reserve default number  and the FDIC number of Bank Closures.

Year      Federal Reserve Default Percentage     Number of Banks Closed By FDIC    

2006                         1.95                                                      0  (zero)

2007                         3.8                                                        3

2008                         6.66                                                     25

2009                       10.52                                                    140

2010                       10.2                                                      157

2011                       10.31                                                     92

2012                       10.04                                                     51

2013                         8.59                                                     24

At this time there has been a large number of loans transferred to NON BANK companies like Ocwen and its unclear if their inventory of loans is considered in the Federal Reserve number, thus skewing the number of actual loans in default.  (Here are two interesting reference points on Ocwen (#) and the New York State Attorney General (#) and their potential growth, as non Bank Servicers.)

In one of the zip codes which I work, 91915  the percentage of distressed properties listed in the MLS is 15.4%.  These properties fall into the category of  short sales  or foreclosures.   This number is easily seen at the (#) Market Advisory that is provided to my clients at my web site.  BuyOrSellYourEastLakeHome.com I can not say anything for certain.   But it appears by  looking at the default numbers we are still not in a truly healthy market.

The reverberations from 2007 and 2008 are still with us according to the Federal Reserve numbers.  I want to link to one site that states in July of 2013 the default number "increased".  DNS the author of this information is considered a prime source of industry information (#) but their method of data collection is different creating some sort of factored numbers.  For this reason,  I place more credibility in the Fed Reserve numbers.

Either way, the indication irrespective of source is  not positive, in my view. My heart continues to go out to my community.   Some people may argue that by looking at just these  statistic indicators and ignoring there has been  an increase in price, is unfair. Price increase that was good for some, but many people are still stuck in a situation that looks like it will take a decade or more to resolve.

With the current default number as provided by the Federal Reserve, I don’t see how anyone could argue with the idea of some continued pain. The warning of more negative is on its way before we achieve a stable market is getting louder, which seems to be in line with the still high default ratio. You may like to read these articles which come as no surprise to me.  What else can be done if the bank is not collecting the payment?

"Foreclosure starts suddenly rise by 57 percent."  January 2014  (#)

"LA Times Southern California housing market loses momentum in January" 2014 (#)

DNS News - Defaults rise in December of 2013, but better over all for 2013 (#)

I will be following the numbers, but more important  to me, I will be ready to help any person that needs to make a transition or understand the system that they are in.   The bundle of California laws known as the “Homeowners Bill of  Rights”  has brought more control over Banks, relative to the Loan Modification and Foreclosure process.   It is my belief this gave some people, as much as a year of grace, while the banks made sure they were in compliance with California law.   The period of changing the banks internal systems  seems to be over. Factoring in the  57% rise in filings as it detailed in the article above, what else could be the reason?

My next article will be on another issue, related to a growing concern.  "Short Sale Blight!"

George Kenner, Broker Associate  BRE. Lic 01229951   Tel.  619-723-5714  

This is a being copied and published here for my fellow professionals to view.  I can see where our unique "kind and caring" skill set is going to be needed in our communities again.  These numbers are not secret, they are just not in the common media.  Frankly it is beyond me why the media cooks there own numbers when the Federal Reserve has been posting this default rate for over 20 years.  It is amazing looking at the chart in total, the truth is in the numbers.