Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

30 responses to “Foreclosure “Freeze” Hides Actual Repossession Trend”

  1. hoary

    Tim,

    Do you use county records data for these stats? If so, do you adjust for duplicates? Just curious.

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  2. Kary L. Krismer

    Don’t forget either Fannie or Freddie is having a holiday moratorium, although I don’t remember if that would be a moratorium on sending out notices (as opposed to repossessing).

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  3. ray pepper

    They are ALL coming back! Not just in Washington………..Just a matter of time………unless…………………………u got it…………….FED…….Bank on it!

    Principle Reduction is COMING and it will be E P I C !

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  4. Scotsman

    RE: ray pepper @ 3

    Give it up. The Fed isn’t going to do anything here, and “cramdowns” are a fantasy that would only lead to riots and open rebellion.

    You really need to eat somewhere besides Claim Jumper- the food there is obviously affecting your thinking. Probably some nasty staph infection in your gut that’s sending toxins to the brain. Get help while you still can! ;-)

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  5. anonimaniac

    Scotsman: agreed. Fantasy. Not politically viable nor does the Fed do any such thing. The Fed controls money supply and has only two mandates, RE and mortgages not being either of them. I like your comments Ray but you have to deal with reality on this one. If the Fed even tried to do something like that with Ron Paul now head of the committee overseeing the Fed, there would be hell to pay. Not gonna happen. House prices must fall, pure and simple. On a nationwide basis prices are expected to take Another large tumble even though as a whole prices across the country already fell dramatically and were thought to have bottomed. Bodes ill for Seattle area as we are always behind or way ahead of the economic curve.

    And for all the comments lately about price stability in the near future here is a little common sense:
    “People who use houses to live in benefit when the price of the house goes down.
    People who want to sell houses benefit when the price goes up.
    Price stability is a stupid goal in the abstract. “

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  6. JW

    I wonder what will happen like everyone else here, but why I don’t think the government will stop prices from falling by interviening, is because they don’t do that when the stock market dips…i mean a lot of people have lost substantial amts of money this past decade in the stock market…they call these “corrections” and everyone agrees these are good (albeit your portfolio drops)…we’re simply in the midst of a real estate “correction” and I hope level heads in washington prevail and they allow this ‘correction’ to occur for the good of the order. I can’t imagine the Fed stepping in on this one. Yeah corrections hurt, but man enough kicking of the can…let prices drop.

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  7. deejayoh

    Friend of mine works for one of the TBTF banks. One that bought one of the biggest boom-era lenders. He told me last week he saw an internal presentation from their mortgage banking side in which they highlighted that they are going to have a huge wave of foreclosure activity this spring. Basically they are going to start going after all of the 90 days+ accounts. Not sure what this means, as I think that there could be two interpretations: a) they are getting pressure to remove non-performing loans, no matter what the consequences; or b) they have increasing confidence in what they will recover so they want to start moving.

    Whichever it is, he expected these numbers to start spiking in the spring. He said Pierce County is ground zero for this region.

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  8. Kary L. Krismer

    RE: deejayoh @ 7 – If I recall correctly, Pierce County had a lot more sub-prime loans–as a percentage.

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  9. dscott

    deejayoh @ 7
    Amid the speculation, real world info on that order is certainly interesting. Doubly so as we’re poised and ready to buy when it’s safe to get back in the water…

    A third scenario might be: Act on foreclosures before some manner of forced write-down. I, however, have serious doubts that this is the case.

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  10. Lurker

    RE: dscott * 9

    Maybe Ray was being a loudmouth at the BoA branch ATM near the Claim Jumper and they got wise.

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  11. Scotsman

    RE: deejayoh @ 7

    Or they think they may be ahead to sell now instead of waiting for the mystical recovery rumored to begin in 12-15 months. First ones to the exit win. ;-)

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  12. EconE

    RE: ray pepper @ 3

    I highly doubt that we’ll see any principal reductions* (see below for * explanation)

    From what I’ve read on the loan mod forums, what I gather is that it goes like this…

    1. Debtor applies to gov/bank for modification.

    2. Bank/Gooberment breaks out the financial “speculum” and gives you a more thorough inspection than a proctologist. They’ll know all your assets and if they find out later that you’ve been hiding any then you’ll really be #%$&ed.

    3. If they think you can pay, then you’re denied. If you obviously can’t pay, again, you’re denied. If you are a semi comatose turnip that they can squeeze more blood from…HOORAY! You get a loan mod.

    4. The loan mods look like this one for the most part…

    http://www.loansafe.org/forum/success-stories-homeowners-who-fought-back-won/36265-received-permenant-mod-now-how-do-i-fix-my-credit.html

    YMMV

    5. When you die, your heirs, who have probably just finished paying off their exorbitant student loans, will inherit the house and the balloon payment. The house will subsequently be firesaled for less than market value (typical of probate sales) to pay off the balloon payment or the balloon will be refinanced, with the house now owning the heirs. With the 40 year payment loan mods, I’m willing to bet that most homeowners will die before paying off their house.

    One final note: Take a look at the interest rates on these loan mods. They are EXCEPTIONALLY low. What does this mean? Inflation isn’t coming any time soon. Nope Nope Nope.

    * If you happen to live in a very UNspecial location (and probably an unspecial house too) such as Florida or Las Vegas, there is a chance that you will get a principal reduction on your 2nd, 3rd and 4th mortgages because those silly lenders know that they’ll get jack $hit if you get foreclosed on. I doubt it will happen in Seattle however because as we all know…

    Seattle is spe-shul. Tacoma…not so much. ;^)

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  13. ray pepper

    Can’t understand why so many unbelievers. Its happening all around us. Just not on an EPIC scale. I’ve had two friends get their principles crammed down in San Jose (800k to 610k) with the same 5 year term heavily analyzed in the last year.

    http://www.walletpop.com/2010/03/24/how-bank-of-americas-principal-reduction-plan-will-work/

    Watch and learn friends. Its hush hush now but in the next 6 months it will NOT be. Let the “rioting” begin.

    You should see what Wachovia (Wells) has been doing…………….

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  14. EconE

    RE: ray pepper @ 13

    Key statement from the referenced article…

    “as long as the forgiven amount does not reduce the principal below 100% of the current market value.”

    The bank always wins.

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  15. anonimaniac

    RE: ray pepper @ 13

    Please, Ray, you are undermining your own argument. You say a cramdown from 800k to 610k in San Jose. That reduction amount is nothing for the Bay Area, NY City, Seattle area. Like EconE says, “those silly lenders know that they’ll get jack $hit if you get foreclosed on.” A simple truth. Banks always win and they know that if they forgive a little now they don’t have to lose a huge amount of the loan and fix up the house and pay a realtor to sell it.

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  16. Scotsman

    Plus there’s a huge distinction between the bank voluntarily forgiving some principle to keep a buyer from just walking and having the government come in and dictate a “cram down.” Banks aren’t going to reduce loan balances below the value of the collateral, and will happily collect a generous fee for doing so. But the minute anyone suggests that those who over leveraged or over spent be given an instant equity position at the expense of public money the game is over. People are already touchy enough about the disadvantaged position of responsible savers and investors. And as a history of failed loan modifications has shown you still can’t afford. . . more than you can afford. And character requires more than a signature to be real.

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  17. David Losh

    RE: deejayoh @ 7

    You may be talking about Bank of America, but I don’t know. They can get as aggressive as they want, but bottom line is that they are screwed.

    Bank of America had the minority lending division. Do any of you remember that banks were required to make 10% of the loans to minorities? Well bank of America took that to heart and had an entire floor in down town Seattle dedicated to Minority Lending. Then they merged with Countrywide.

    Once foreclosure start into full swing new statistics will emerge showing that minorities paid more in interest payments than others.More foreclosures will bring more foreclosures and a drop in retail pricing of homes. I mention retail pricing because I can imagine, it just my imagination, that Real Estate wholesaling is already going on.

    I forget the law, but will look it up after I submit this comment.

    We are in a situation normal right now. It has never been this big, but the under belly of Real Estate is slowly turning up.

    Great wealth will be made out of these foreclosures. Yes, it’ll be in the book.

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  18. ray pepper

    RE: EconE @ 14

    Econe and everyone please note. It is well understood all these Loan Mods and current principle reductions are a sham and people redefault at over 50%. This is why THE FED will shock you in the coming 6 months. There will be no sustainable recovery without housing and with the ability to point fingers at an entity (Wallstreet) as the cause, it makes it much more satisfying to the pallate when the money starts getting chopped off principles in an effort to keep people in their homes.

    Bank on it.

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  19. ray pepper

    BTW I never did say people will be brought down to an equity position. I contend they will be brought down to fair CURRENT market value and their loan amounts will be adjusted to the new payment thereby lowering their monthly payment.

    There will be many restrictions put into place with rules on selling in the future.

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  20. Lo Ball Jones

    Seattle still very short on children

    “Recent census data indicate Seattle is continuing a decades-long trend of having the lowest concentration of children among all the major U.S. cities, except San Francisco.”

    Meaning…implosion…depopulation.

    http://seattletimes.nwsource.com/html/localnews/2013699496_census17m.html

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  21. EconE

    RE: ray pepper @ 18

    Ray…check out this thread of BOA loan mods. There are a bunch of them.

    http://www.loansafe.org/forum/success-stories-homeowners-who-fought-back-won/22047-boa-successful-permanent-mods.html

    These debtors are being played like chumps and they all think they’re getting the deal of a lifetime. You couldn’t pay me to take one of these mods. The smart ones will walk. Whatever loan mods you think may be coming will just be a different flavor of kool-aid.

    And why do they all use so many friggin exclamation points!!!!!!

    It’s like a bunch of f#cking tweens were given mortgages.

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  22. David Losh

    RE: David Losh @ 17

    How could I forget the tax reform act of 1986 particularly section 469.

    A lot has been talked about the mortgage interest deduction which was just a part of the Reform Act. Before that a lot of interest payments were tax deductible.

    Some called this the end of the Real Estate Investment Trust. What it did is change REITs into managed Real Estate portfolios.

    The problem today is that these portfolios are equity. Over Supply, over building, the ability to create more housing units quickly and cheaply will continue to strain the incomes.

    The Fed will change the tax laws within the next two years to make Real Estate portfolios more attractive by making losses tax deductible. In that way these entities can mortgage out cash to generate more cash. The interest deductions from these portfolios will off set other income.

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  23. zipzippygc

    RE: Scotsman @ 4
    My lifestyle has been suffering for years due to being on the morale side of history, saving, living under means, never reaching forward with housing as ATM — count me in as a rioter if the financial misfits get cramdown.

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  24. ChrisM

    RE: EconE @ 21 – Good find on the website. It is amazing reading the stories. I agree w/ your assessment… Here’s one example:

    http://www.loansafe.org/forum/success-stories-homeowners-who-fought-back-won/36456-85k-principal-reduction-w-full-lein-release-we-our-home.html

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  25. David Losh

    RE: EconE @ 21

    Fine whatever, how about paying off the debt? It’s only money. It makes no difference, you just make more. There is always more money.

    You should know that. It seems though you keep looking at mortgage docs like they are some how set in stone. It’s Real Estate. Everything is negotiable.

    If you are willing to walk away, banks have no recourse. I just found Jesus standing on a street corner, he told me to do it. What are they going to do?

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  26. EconE

    RE: David Losh @ 25

    I’d like to see Tim post a thread WRT what is a possible solution. Looking up mortgages gives me an idea of just how grave the situation is. It’s not like I’m waiting in the wings to buy peoples homes as an investor. But when I see people call for mortgage modifications, it frustrates me as I think that those mods are just as predatory as the original toxic mortgages.

    My personal suggestion would be as follows.

    If a homeowner is overextended (for whatever reason) and wants to stay in their home then they should have the opportunity to bid on the home at a foreclosure auction. So many homes are going for such low amounts in many markets that I can’t help but think that the homeowner, who may have already left and moved into an apartment etc, could have afforded to buy their home at the price that the investor paid at the auction. This would only be for owner occupied residences. If it’s an investor that had toxic loans, then I feel that they should lose the homes but I also am in favor of all loans that are written off being non-recourseable. I for one do not like seeing people being turned into debt-slaves. They were stupid but they weren’t neccesarily evil in most cases so losing their “investments” is punishment enough. Many banks would fail (good thing we have FDIC) and the bondholders of course would have to take a haircut. If we have the level of deflation that this would all bring on, then maybe it’s not as important that someones pension payment isn’t as large as they were anticipating.

    I just want to figure out a way to get out of this mess without a bunch of people looking for ways to profit off it.

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  27. EconE

    RE: ChrisM @ 24

    Yeah. That’s the example that made me think of Florida/Vegas etc. The second lienholders know that they’ll get nothing so getting 10c on the dollar is gravy for them.

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  28. Jonness

    By Kary L. Krismer @ 8:

    RE: deejayoh @ 7 – If I recall correctly, Pierce County had a lot more sub-prime loans–as a percentage.

    Highrate loans issued by metro area -Percentage of all mortgages (source: wsj.com)
    …………………………………………..2004…..2005……2006
    Tacoma WA …………………………16.30% 29.90% 31.00%
    Olympia WA ………………………..11.70% 22.00% 24.10%
    Seattle-Bellevue-Everett WA…..10.00% 19.90% 21.50%

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  29. David Losh

    RE: EconE @ 26

    Well there is a way. It bothers me that people don’t see that the asset, or price of the asset, is irrelevant at this point. Compound interest works out the difference between what the asset was in the past, and what it will be in the future.

    Compound interest is in a variety of forms. Consumer credit being the number one contributor. If you make the minimum $200 a month payment on a credit card that adds up quickly in a banks interest income portfolio.

    Even that is irrelevant. It’s irrelevant because we have periodic crashes of the stock market. Some people come and go, some stocks tank completely, other lose equity positions and trade lower, still irrelevant.

    Derivatives is what it is all about. In this crash the derivatives market has doubled in it’s phantom claimed value. All of these little investment instruments, debt instruments, have mingled with insurance pay outs, equity swaps, debt swaps, and grown into other financial instruments.

    You said it yourself that you don’t care about the price of property, neither do I.

    People, the public, gets ground down it what they have always done. If they work a job they try to think of something fancy to do to get rich. Most of the time all they have to do is negotiate.

    Banks aren’t getting hurt. Everything is as it should be. People need to start thinking. What can you do, and what can you negotiate? What can you pay? What makes sense to pay? If you’re thinking your credit score will be worth anything in the future, forget about it. You are who you are today. Your FICO score won’t make you into some one else.

    People, real people need to think in terms of cash. Cash is king means we are in a period where cash has a value. Your cash has a value to the bank. Offer the bank cash, negotiate your debt.

    Being debt free will make your future credit worthiness that much greater. Now would be the time to take advantage of that. You have 5 to 7 years to repair your credit.

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  30. BillE

    By zipzippygc @ 23:

    RE: Scotsman @ 4
    My lifestyle has been suffering for years due to being on the morale side of history, saving, living under means, never reaching forward with housing as ATM — count me in as a rioter if the financial misfits get cramdown.

    That about sums up my situation.

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