Posted by: Timothy Ellis (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.

26 responses to “Foreclosures: Still on the Decline from 2010”

  1. Scotsman

    “LOS ANGELES (AP) — Banks have stepped up their actions against homeowners who have fallen behind on their mortgage payments, setting the stage for a fresh wave of foreclosures.

    The number of U.S. homes that received an initial default notice — the first step in the foreclosure process — jumped 33 percent in August from July, foreclosure listing firm RealtyTrac Inc. said Thursday.

    The increase represents a nine-month high and the biggest monthly gain in four years. The spike signals banks are starting to take swifter action against homeowners, nearly a year after processing issues led to a sharp slowdown in foreclosures.”

    http://finance.yahoo.com/news/Mortgage-default-warnings-apf-157937671.html

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  2. 3rd Generation

    “The increase represents a nine-month high and the biggest monthly gain in four years.”

    Ka BOOM !

    Attention knife catchers, Chinese knockoff-made zoloft, prozac, xanax, gereric ssri meds and valium (full strength only) on blue-light special on aisle 666, certain restrictions apply. Show your Bank of America employee ID for further discounts.

    Save your spare change for a favorite charity case rattling their tin cup for donations…

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  3. deejayoh

    RE: 3rd Generation @ 2RE: Scotsman @ 1
    Wait, so M2M changes are important now?

    I notice how you both left off the next sentence in the release:

    Despite the monthly increase, default notices were still down 18 percent from August 2010 and were 44 percent below the monthly peak of 142,064 default notices in April 2009.

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  4. Lurker

    a 20% YOY decrease is good news

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  5. softwarengineer

    Washington State is Just “Kicking the Can” for a Few Extra Months on Foreclosures

    The bill took effect last July. I’m sure that’s why Tim’s charts show foreclosure improvement. Ask Kary.

    http://www.gritcitylaw.com/2011/04/new-washington-state-foreclosure-law.html

    As Scotsman would say, “it just puts off the inevitable” and then it spikes even worse when it all hits the fan, and in this case, only a few months reprieve.

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  6. softwarengineer

    RE: softwarengineer @ 5

    The Yin and the Yang of Delaying Foreclosures

    The Yin is we can kick the can and forget about the bad consequences a bit longer.

    The Yang is if we let unqualified people sit in homes too long in our neighborhoods they likely let them go to rot and there goes the neighborhood prices as the home next door gets no maintenance. This deterioration home price impact worsens with time.

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  7. Crascadia

    Go look at any of the loan mods and you will see that the banks kicked the can 2 years or so, down the road. I see mods that will fail once the interest only period expires. I see a slow drift down in house prices over the next few years with fresh foreclosures that appear out of performing loans… until they are not.

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  8. Kary L. Krismer

    By softwarengineer @ 5:

    Washington State is Just “Kicking the Can” for a Few Extra Months on Foreclosures

    The bill took effect last July. I’m sure that’s why Tim’s charts show foreclosure improvement. Ask Kary.

    http://www.gritcitylaw.com/2011/04/new-washington-state-foreclosure-law.html

    As Scotsman would say, “it just puts off the inevitable” and then it spikes even worse when it all hits the fan, and in this case, only a few months reprieve.

    The Foreclosure Fairness Act is a bit too complicated to determine its overall impact, unlike the legislation passed a year or two earlier where you knew it was going to cause a delay, and how many days that delay was going to be.

    Or maybe it isn’t that complicated, but I’m just too lazy to figure it out.

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  9. Scotsman

    RE: deejayoh @ 3

    I just thought the contrast in headlines was interesting. My actual take on this is that much like pending sales data the numbers don’t come close to telling the whole story. One has to be very careful to consistently compare oranges to oranges as they say. There are numerous steps to the foreclosure process and some are clearly more significant than others. What I’m seeing as I look around the areas we hope to buy in are numerous homes that have been forclosed and are now either empty or tied up in court, but not on the market. The larger “shadow inventory” may have already gone through the foreclosure process but hasn’t hit the market yet.

    As an aside, I think it may be harder for researchers to get an accurate measure of exactly how many homes are truly in or headed for foreclosure and where they are in the process than we assume. It has always been easier to analyze the data than it’s been to collect it. The only real measure is public foreclosure auctions/sales. How many are in line for auction and when they will hit the market at realistic prices is much more of a guessing game.

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  10. Scotsman

    Concern about shawdow inventory would be dwarfed by changes to underwriting standards:

    “Of the many financial reforms in Dodd-Frank, a requirement that lenders retain a share of the risk in mortgages they sell to investors seemed like a no-brainer. If lenders were on the hook, too, the thinking went, they would tighten standards and avoid the kind of defaults that contributed to the collapse of the housing market and the financial crisis.

    But now that a rule to implement this provision has been written, critics say the requirement will make it so hard to get a mortgage that it will further depress the housing market and undercut a struggling economy. “I’ve been in this business 32 years and I have never seen guidelines as tight as they are now,” said Scott Eggen, senior vice president for capital markets with PrimeLending, a mortgage lending subsidiary of Dallas-based Plains Capital Corp.”

    http://www.thefiscaltimes.com/Articles/2011/09/15/This-Rule-Could-Kill-the-Housing-Market.aspx#page1

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  11. 2kt

    RE: deejayoh @ 3

    We, the uber-bright Scotts, only consider that data we like.

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  12. pfft

    By deejayoh @ 3:

    RE: 3rd Generation @ 2RE: Scotsman @ 1
    Wait, so M2M changes are important now?

    I notice how you both left off the next sentence in the release:

    Despite the monthly increase, default notices were still down 18 percent from August 2010 and were 44 percent below the monthly peak of 142,064 default notices in April 2009.

    of course he did.

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  13. Scotsman

    RE: pfft @ 12RE: 2kt @ 11

    There’s only one “t” in “Scots”

    Ok, I’m wrong, always have been, always will be. I’ll just have to live with myself. Alone.

    The foreclosure mess is behind us, the stimulus is working wonders, Obama has saved the economy and housing has reached the bottom and is setting up for a record decade long run-up in prices. Follow your own advice- buy now, leverage up in fact and buy as many homes as you can. (Did I mention rents are rising?) That is, assuming y’all have jobs, ready cash, and great credit. Which I’m sure you do.

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  14. 2kt

    RE: Scotsman @ 13

    Unlike you, I don’t dispense advice.

    The mess is not over; stimulus has prevented collapse of the banking system, but caused some inflation.
    Rents are rising, indeed and that always helps real estate prices, over time, not all at once, captain.

    That said, should SoGen or BNP take water, we may have another big leg down.

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  15. softwarengineer

    RE: Scotsman @ 9

    Its Like Undocumented Immigrant Counts

    A Republican pushing for the Halt act said there were 7-20 million IAs in America…..not only is that spread a wild _ss guess (WAG), how in hades does anyone count undocumented immigrants??? With a Ouja Board???

    I think a more accurate count of foreclosed properties is drive around and find empty boarded up homes, then estimate a total. Same thing with IAs. At least this is an “educated WAG” (EWAG).

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  16. softwarengineer

    RE: Kary L. Krismer @ 8

    I Agree

    And when a bill is that convoluted, I assume the worst and hope for the best. At least I’m not hit by surprise when the foreclosure clown with the seltzer bottle jumps out and sprays me.

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  17. Real World Express

    In some sense the entire Obama Era is about forestalling the inevitable.

    Hello 21st century and SUV priced homes.

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  18. deejayoh

    RE: Scotsman @ 9 – I think much of this is due to what BofA is doing – which was being discussed in the mid-week open thread.

    From Calculated Risk:

    Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months … Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity … [BofA responded to Olick]

    A friend of mine who works at the bank told me this was coming. Their CEO apparently had said back in the spring that they’d be ramping up the rate of foreclosures on the seriously delinquent properties. I think I posted this when I heard it but searching the comments here is pretty futile so good luck to me finding it.

    My thinking on this is that you really need to watch the numbers at the front of the pipe. 90/60/30 day lates. If that goes up, then things are changing. The banks can’t really fudge that number because they don’t control it. But what I have seen is that delinquencies are generally down, and so M2M foreclosure spikes are pretty much in the category of noise.

    edit: Wait, I found the post. It was all the way back in DECEMBER!.
    http://seattlebubble.com/blog/2010/12/17/foreclosure-freeze-hides-actual-repossession-trend/comment-page-1/#comment-118497

    and yes, the unnamed bank was BofA. The timing was a little later than anticipated but the story is entirely consistent with what I had been told.

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  19. softwarengineer

    RE: deejayoh @ 18

    Delinquencies Are Currently Up According to the PI

    “…
    “While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped,” association Chief Economist Jay Brinkmann said in a statement. “Mortgage delinquencies are no longer improving and are now showing some signs of worsening.”

    http://www.seattlepi.com/realestate/article/Slow-job-market-spurs-mortgage-delinquencies-2135910.php

    Looks like most of it caused by a total job market in Washington State chronically shrinking while simultaneously insourced population growth is growing….a horrifying witches brew that nobody but us demography science guys will live up to. Where’s the old Earthday Democrats for depopulation when we need ‘em?

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  20. Scotsman

    Maybe we’ll get some form of federal intervention if the pressure on Obama, etc. keeps up:

    Obama “AWOL” on foreclosures, “irresponsible,” policies “abysmal failures,”

    http://hotair.com/archives/2011/09/16/obama-awol-on-foreclosures-irresponsible-policies-abysmal-failures-say/

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  21. Scotsman

    Today’s Seattle Times has the WA budget short $1.4B already, in addition to the cuts just made. That’s either coming out of someone’s paycheck, or their job is gone. I don’t think we’re done with foreclosures yet. . .

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  22. deejayoh

    By softwarengineer @ 19:

    RE: deejayoh @ 18

    Delinquencies Are Currently Up According to the PI

    “…
    “While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped,” association Chief Economist Jay Brinkmann said in a statement. “Mortgage delinquencies are no longer improving and are now showing some signs of worsening.”

    http://www.seattlepi.com/realestate/article/Slow-job-market-spurs-mortgage-delinquencies-2135910.php

    Looks like most of it caused by a total job market in Washington State chronically shrinking while simultaneously insourced population growth is growing….a horrifying witches brew that nobody but us demography science guys will live up to. Where’s the old Earthday Democrats for depopulation when we need ‘em?

    What that article says is that delinquencies are up Q2Q but down Y2Y. 30 day lates are up but 90 day lates are down. Your editing choice of the quote leaves off the next sentence which doesn’t support your point.

    “While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped. Mortgage delinquencies are no longer improving and are now showing some signs of worsening,” said Jay Brinkmann, MBA’s Chief Economist. “The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due.”

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  23. Macro Investor

    By deejayoh @ 22:

    By softwarengineer @ 19:
    RE: deejayoh @ 18
    “The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due.”

    Delinquencies can fall simply because foreclosure eventually works them off. It is a bad sign that early past dues are increasing. That threatens to refill the front of the pipe, as the foreclosure process works to suck them out the back end.

    Unfortunately this is old data, so we have to guess what’s happening now. The big news was the highly televised federal budget farce, the downgrade of US debt and unemployment increasing again — causing record low consumer confidence. None of this is good for housing.

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  24. Lurker

    RE: deejayoh @ 18

    I remember that post. Thanks for sharing and your perspective on watching 30/60/90 day lates. I’m curious if it is the head of another pig in the python.

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  25. Kary L. Krismer

    By Macro Investor @ 23:

    By deejayoh @ 22:
    By softwarengineer @ 19:
    RE: deejayoh @ 18
    “The good news is the continued decline in long-term delinquencies, those mortgages that are three payments or more past due. The bad news is that drop is offset by an increase in newly delinquent loans one payment past due.”

    Delinquencies can fall simply because foreclosure eventually works them off.

    That’s also true of the percentages of houses underwater, which is another reason why I didn’t recently claim that the BS DeutcheBank study from 2 years ago was off when I commented on the more recent BS study of the same topic, which indicated the percent was roughly half what DB predicted.

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  26. Suitably Skeptical

    As long as people are posting links to relevant media, here is another…which claims that caution as a result of the “documentation crisis” last year is largely responsible for the drop in foreclosures. The implication is, of course, that the housing correction is just being slowed, and thus further delayed.

    I think The Tim might have made that prediction a year ago…no?

    Sorry for some (most) that WSJ is behind a subscription wall. Hoping that by knowing about it, y’all can find it if you’re interested.

    http://online.wsj.com/article/SB10001424053111903374004576578860527754444.html?mod=WSJ_hp_LEFTWhatsNewsCollection&mg=com-wsj#

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