Wednesday, September 2, 2009

Watching the can..

Mortgage servicers have been clearly kicking the can down the road when it comes to delinquent borrowers. Yesterday, Diane Olick of CNBC talked with someone at BofA regarding foreclosures. They had this to say (emphasis added):

Foreclosure sales have been abnormally low since we learned of the pending implementation of the administration’s Making Home Affordable program. From that point, we delayed the initiation of foreclosure proceedings and sales for customers that may eligible for a loan modification under MHA. As a result of this policy, our foreclosure sales in recent months have been as little as half the normal pace we experienced before.

Until a foreclosure is completed, Bank of America continues to exhaust every possible option to qualify customers for modification or other solutions.

Now that Making Home Affordable programs are operational, we do project an increase in foreclosures as we exhaust every available option to qualify customers for modifications and other solutions.

While we have very strong loan modification programs now available, unfortunately, these foreclosure projections reflect the increasing number of customers who will not qualify for loan modification because they have suffered major life events servicers can’t solve...primarily unemployment and underemployment.

We do not hold foreclosed properties off the market. The vast majority of mortgages serviced by Bank of America are owned by third-party investors. We have an obligation to them to prepare foreclosed properties for market and sell them as efficiently as possible.

Also an analyst was quoted the following (for those believers of the huge shadow inventory of REOs sitting off market):

He says there is no clear evidence of purposeful accumulation by the banks of these foreclosed properties. They are, he believes, working through the huge onslaught of new defaults as fast as possible, but it takes time. He says they are selling REOs at a fast clip as well, within about three months of taking them as REO.

So here is one way you can see if BofA has stopped kicking the can as they are very clearly trying to manage expectations towards higher number of homes foreclosed on. Many ex-Countrywide (now BofA) loans use Recontrust as the Trustee. Recontrust website lists currently active NTS and the past 31 days trustee sales (both Back to Beneficiary and Third party sales). By watching and tracking these sales we can see very quickly if BofA starts taking more assets back.

Here are the charts I have of weekly totals listed for California and select counties:

While I don't think I will make a weekly posting of the data if I notice any large changes I'll post the charts again.


Picosec said...

A bit of a digression...

About 6 weeks ago I posted some statistical data on the comments related to you Ventura County Demand Vs Inventory for July. I did this by parsing the data out of your chart, and could do it for August as well, have the data already and you could probably whip these numbers out in a flash.

I think it would be useful to follow these numbers over time. Hope you do too.

Effective Demand said...


For the August data

Active Average 1066305
Active Median 650000

Contingent Average 412670
Contingent Median 339900

Pending Average 409013
Pending Median 329900

Sold Average 464033
Sold Median 376500

Picosec said...

Thanks ED, that's exactly what I hoped for. I compared your August numbers with those that I got from reading the chart in July and August is a bit lower (with one exception). It's most likely in how I read the data rather than a real difference, but if it was as easy as I hope it was, can you do it for July as well? And, of course, future months. :wink:

I'm not sure what would pop up, but this is a large enough data set that the noise should be rather low and any changes seen in or among any of these fields could prove interesting.

BTW - the big exception between July and August was the Active Average, most likely because there are some super high-end outliers that just show as >$2M on your chart.


PS: I just noticed that my July Pending numbers and your August Sold numbers are nearly equal so maybe my numbers were close after all.

Anonymous said...

I don't understand what the scale numbers reference. 5000 on one side 25000 on the other..

Effective Demand said...


The scale is absolute. It represents the number of homes foreclosed on or the number of homes with a NTS filed by recontrust.

The scale on the right hand side is for the whole state of California. On the left hand side is for each of the individual counties. I tried putting little arrows in to represent that but this was just some quick and dirty graphics.