Foreclosure "shadow inventory"
Some of you have wondered how many foreclosed homes are on the sidelines of the housing market, neither for sale nor in the process of being sold. Lender Processing Services, a mortgage-industry services provider that tracks nearly 45 million loans across the country, says the answer is nearly 30 percent ... of properties in foreclosure for 12 months.
Yikes.
That's "twice the level of the prior year," the firm noted this week in a report looking at data through the end of October.
On top of that, Lender Processing Services said, mortgage holders haven't started foreclosure proceedings on almost 30 percent of loans with at least six missed payments. Two years ago, it was 13 percent. (The Mortgage Bankers Association, seeing similar trends, said lenders are trying to work out modifications with borrowers.)
Nearly 13 percent of loans in Maryland were either delinquent or in the foreclosure inventory in October, according to Lender Processing Services. That's 14th highest in the nation.
I asked recently how rising delinquencies and foreclosures are affecting you. Here's what you said (keeping in mind that it was a "choose any that apply" poll):
My home has lost value because of short sales and foreclosures: 26 people
My tax dollars have been spent trying to stem the tide: 18 people
I have family and/or friends who are behind or in foreclosure: 14 people
It hasn't affected me at all: 11 people
I'm trying to buy a short sale or foreclosure: 9 people
I'm part of the wave -- I'm behind on my payments: 4 people
I'm part of the wave -- I lost my home: 3 people
I bought a short sale or foreclosure: 3 people
And one write-in: "I didn't get a bonus because of public perception."
Categories: Polls, The foreclosure mess
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Comments
Nice blog!
Posted by: Anonymous | December 5, 2009 7:39 PM
The shadow inventory will continue to build up as more and more trial modifications re-default. The problem here is that the banks who do modifications won't reduce principal balance. The re-default rate on modifications is about 50%. It is unfortunate and sickening for a person to have a 300k mortgage when the home is worth about half that amount. Instead of reducing the balance, they would rather choose to sell as an REO for that price. If the bank is willing to take the loss anyway, why won't they reduce the principal to make the loan truly affordable? It makes no sense to me. And until this is solved, the tide of foreclosures will continue to mount going forward.
Posted by: Frank Rizzo | December 5, 2009 9:17 PM
There is good news about the success of Short Sales.
During Q2 2009 Short Sale settlements increased to 23,102, a 34.8% jump from the previous quarter. Banks and thrifts implemented nearly 3.4 times more home retention actions-than completed foreclosures.
Posted by: Aaron Rice | December 7, 2009 7:09 AM
When I bought in June there were not any foreclosures on the market but there were a lot of short sales (I didn't want to deal with that). Now I am seeing that nearly every house on the market is a foreclosure. My guess is that lenders want to take advantage of the tax credit or the price stability the summer caused. One thing that I did notice is that the 4,000 sq ft houses are selling for the same as the 2,500-3,000 sq ft houses. It seems like the trend is that smaller homes are more in demand. I am sure matainance & utility costs are drive those prices. I for one would never want to deal with the up keep of a 4-5,000 sq ft house. In my opinion, that is why the houses are selling so so cheap!......comparitively
Posted by: JB | December 7, 2009 9:26 AM
Frank,
I think the banks would rather go the REO route rather than principle reduction route as they are now too risk averse to "bet on a known loser". Better to push the overextended induvudual back to the rental pool.
Posted by: Darwin Rules | December 7, 2009 11:53 AM