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Thursday, January 14, 2010
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27 comments:
Short sale news
As of April some banks will be required to answer short sale contracts within 10 days??!!!???
While I had heard they were putting in a new short sale plan, this is the first I've heard of a 10 day time limit, for any bank. This could be a game changer. Of course, around here, what I think it will do is raise the price of all shorts to regular market value (discounted only for any deferred maintanence issues as is only fair). If enough banks have to do 10 days, then even the banks that aren't required by law to do so, might have to to compete.
This could be big. The 15-30% of the current inventory that's not really available to owner occupants could suddenly be opened up. Okay, if you look at it that way, it doesn't sound that big. But one hopes they get this launched in time for it to have an impact on the future short sales of the failed HAMP modifications.
And, honestly, having ~30% of the market be slightly under priced could pull the whole market down with it a bit, if there's not sufficient compensating demand (of course I also think there is plenty of compensating demand especially if prices fall at all).
In any case, we'll have to reach a new quasi-equilibrium.
And WaPo's E. Razzi points out a new GAO map of troubled mortgages
Unfortunately that map is only what percentage of outstanding non-prime loans are seriously delinquent, it doesn't bake in what percentage of loans are non-prime, or what percentage of homes have loans....
Sigh.
But it looks as if most of NoVA is in the 20-24.99% bucket except for the congressional district that includes parts of Arlington? which is in the 15-20% bucket.
Hmmmm, less meaningful than I had hoped. The fact that much of near-DC Maryland is in the 25-30 or 30% or higher buckets is possibly more a reflection of their slower foreclosure process than it is of anything deeper. Or that's what I'd pin the blame on to zeroth order.
Judging from this map alone,
Poised for another leg down looks like NYC/Jersey, Boston, most of California, Florida and possibly Chicago. Whether Florida actually has any further that it can fall is another question. But NYC, Boston, and Chicago may all have enough air left in them that the 25% or higher delinquencies amongst the non-primes could be a factor (if their percentage of non-prime loans is high enough to matter).
Why oh why didn't they just make a all loans delinquency map? Hmm, I guess it depends on who requests it, eh? If you're trying to prove that more government intervention is needed, then pick the map that's going to look the most dire.
Cara-
Thanks for the articles they were really interesting particularly the short sale one. I wonder if more people will try and short sell their houses if it becomes easier. I doubt it will be significant, but it will probably add some additional supply.
housebuyer,
Yeah, I was really surprised by that 10 day deadline thing. I can't find it on the Treasury site anywhere, though, so I'm considering it to be at the level of slightly more than a rumor right now.
Even without more people doing it this would provide more readily available supply in the form of the existing shorts.
But yes, if the short-sale process became no more onerous than selling your home for a profit or breaking even, then, I think more of the deeply underwater borrowers will choose that route.
They may need even lower interest rates and higher buyer's bribes before this is all over to combat the increased supply in some areas.
what will happen is people will
engage in fraudulent short sales.
short sell to their cousins, or
worse shell corporations.
of course each short sale is a comp killer so it will drive down organic sales prices.
the 10 day thing is a requirement
to answer in 10 days if they want to
get some money from treasury to
help the adjustments.
pat,
"the 10 day thing is a requirement
to answer in 10 days if they want to
get some money from treasury to
help the adjustments. "
Really? Where do you get that impression from? Sounded to me more like every bank that still owes TARP money or is involved in HAMP must submit to this new time-line. Sure, one has to wonder "or else what?".
People are already short-selling to LLC's and real estate agents at way way under market, so it's logical that a shorter time-frame would move transactions away from the flagrantly obnoxious towards the outright fraudulent.
OTOH, if banks can require that all shorts be on the MLS for a minimum number of days to prove that the market price has been found, then other buyers will outbid the cousins and shadow corps, one would think.
Cara-
The banks always have the option of saying no in 10 days and reconsidering in the future. Obviously the 10 day limit isn't useful if banks just start saying no every time. I assume the government is just trying to convince banks to hire more people to handle these. It will be interesting if this gets passed and if so in what form.
Cara,
I agree that a short sale needs to be on the market for a minimum number of days.
This past weekend, I was on redfin, and late Friday night, a property appeared. It was a SFH in the mid 400s range. Usually short sale run in the low 400s. By the time I checked on the status the net morning, it was already under contract. Seemed fishy to me. THEN, late Saturday night, the same thing happened to another property, same neighborhood, same price range. Under contract early the next morning. I think each house was on the market for a total of oh, no more than 10 hours?
Leaves me scratching my head, wondering what is going on. There were different listing agents for each of the properties. The pricing and listing patterns closely mimicked one another, however. Perhaps what happened was merely chance, but I've been watching that neighborhood for a long, long time now.
REdealSeeker
Put in a back-up offer.
Those may or may not be fishy, so much as the paranas may be circling, waiting for shorts to flip for profit. They obviously like your neighborhoof.
Cara,
That would be interesting if the flippers have finally arrived at that neighborhood. I haven't seen any there yet. Well, maybe one. Someone who bought the house as a foreclosure in 2008, then recently listed at a WTF price of 560k. Recently, and not surprisingly, they brought down the price of that by 30/40k.
BofA starts getting serious about permanent modifications
98 last month, 3200 this month, 20,000 in the final stage of the pipeline. Do we still think the foreclosure tsunami is coming? (or the short sale tsunami?)
Cara,
While that's a definite improvement, it's still a far cry from good. Particularly when there's a lot of evidence indicating that even these permanently modified loans will go sour again. The borrower only had to make three consecutive payments to continue. The hardest part was the documentation--which is why it's only 20K.
Of those 20K, they should all be able to afford the payments now, given the government's requirements. But many will be exceptionally house poor in doing it. Most will still be underwater in some way, and may chose to default any way strategically, or ruthlessly. They may become unemployed, or their employment may move to a new location.
My estimate: 40% go bad again. Those 40% will end up back in foreclosure or short sale somewhere. Maybe not here, 'cause it IS different here. But overall.
CARA
Even Geithner admits HAMP has failed
they are spooling up a new program
HAFAP HAFAP will allow principal
writedowns without litigation,
and requires some sharing between
First and second trust with half the
shared money coming from the treasury,
but ti will require fast moving.
The problem is underwater houses, the second gets nothing, in foreclosure but that costs $50K.
but in a short the Second gets nothing but it costs almost nothing.
The Seconds are using their leverage to force the firsts to give them some money, but the firsts don't want to do this.
if they allowed bankruptcy cramdown,
you could go to court for $4K and
screw the seconds entirely.
But that would require doing something for little people not big wall street bankers, and Geithner and Paulsen and Bernanke live for these people.
Xpovos,
Agreed on all points. The only permanent solution to the housing crisis is jobs and an economic recovery. But if hardships can be delayed long enough, for the economy to kick back in....
There are those that are drowning, more or less quickly, but there are also those treading water with a snorkel. If the house is more important to them than financial solvency, who's to stop them from trying?
Even here, I expect foreclosure rates to be elevated for at least 2-3 more years.
Pat,
Why do you capitalize my whole name?
CRT
What prevents an overnight 363 process on any of the big banks?
What prevents the fed from taking these into conservatorship to preserve working credit.
and
What prevents 40 year old companies from retaining earnings and cash in their savings accts.
I run a small biz, i kept anywhere from 30-90 days cash in the bank
and BTW, i was using a 1.5 M SBA guaranteed loan, the problem we have had since the great recession began is a shortage of revenue, not
working capital.
Maybe some of these stupid POS's who listen to AM Radio and don't want to do anything involving the
GUB'Mint should bother doing their paperwork and having these lines of credit handy.
so CRT, maybe your clients aren't smart enough to have bulletproof capital lines, but i was.
the source of that line was ME, Company, our regional bank and the Fed reserve in Dallas.
pretty simple.
Pat - some had SBA loans. That made no difference whatsoever.
Bulletproof? Do you have a "material change in circumstances" as an event of default? If you do, you were just as vulnerable as anyone else was (although at 1.5MM you were probably much further down the food chain than the 10-80MM lines the banks were stalking).
Also, I can assure you no loan is bulletproof. When the choice was between FDIC control or improperly pulling some lines, most banks would simply pull the line without justification and deal with the consequences of a lawsuit later. Yes thats how serious it was for a time. Bulletproof lines were pulled with no justification whatsoever.
http://franklymls.com/FX7200586
just sold for 220, listed at 203K,
nice lot, corner place, small house.
but it was adequately priced.
HayfieldGrad said
"The most crime-ridden area in Springfield, IMO, is actually behind theSpringfield Plaza west of I-95 and near the Richard Byrd library. That's where a major cocaine bust went down last Fall."
Seriously? I hang out there all the time (and on foot too). It is one of the areas that I am seriously looking into buying. I had no idea that I was so oblivious.
CRT - I am a relative latecomer to following financial news and analysis but I find your posts really interesting for an insiders perspective. Thanks.
Bank response to short sales within 10 days. That IS a game changer. Thanks for posting Cara.
imo,
A ten day decision on shorts will only raise the prices on shorts. No more big discount for uncertainty.
Shorts will still be sold "as is" right? That's got to count for some kind of discount.
CRT the largest an SBA loan was
at that time was $2M.
now what I did see was a real increase in pickiness.
Late on submitting financials?
Suspeneded. late on annual reports.
suspneded.
the risk adusted return on SBA is far too high to walk away from.
Besides the fed could lend directly to community lenders.
The FHLB and Fed Districts can lend overnight to those guys.
What made Wall Street so special that the fed couldn't replace their overnight lines?
Also why aren't long established firms retaining some cash? I sometimes kept 2.5M cash in the savings acct because it used to piss off my banker.
If a LA is not trying to get the best possible price for the seller of a SS, they are doing a huge diservice to the seller. Many times, a SS only gets approved if the seller signs a promissory note for part of the difference between the first and 2nd trusts. Also, the lender can come after the seller for the difference, if the debt is not forgiven. There are also tax consequences on the forgiven debt. Short sales are very tricky. Use an agent that has a proven track record and markets it properly.
now this is a decent deal
http://franklymls.com/DC7232691
178K was 450, needs work but
throw some TLC into it and it's a good home.
across from Gallaudet, close to metro.
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