March 2009 Foreclosures

[jjl]

Sniglet,

All properties that which a bank wants to foreclosure on will receive the initial "notice of trustee's sale".

However, several things can take place between the time of the notice and the sale.

Deed in Lieu
Loan Modification
Sale of home/short sale
Homeowner cures default

If none of the above happen, the property is taken over by the bank (or Trustee) on the "foreclosure date", and they will try and sell it on the courthouse steps. If it is sold there, the new owner takes title under "Bargain and Sale Deed".

If the property doesn't sell there, the bank takes title under "Trustee's Deed".

With the large rise in Notices, I wonder how many are actually making it to the courthouse steps? I haven't been down there to watch what is happening of recent.

[sniglet]

[DrShort]

[jillayne]

Hi JJL,

Alan has been posting the NTS numbers like clockwork each month for the past 6 months or so. I was merely expressing my extreme gratitude for his work as this saves me the time from having to do it myself. I have three classes to prepare for this week and give Alan and SB credit for the stats. Thank you, Alan!!!

[jillayne]

Hi Sniglet,

Yes, there is one other way that a foreclosure could happen without a Notice of Trustee Sale (NTS) being recorded. Lenders have the option of turning a deed of trust into a mortgage instrument in the event the lender chooses to foreclose judicially (by going to court.) This rarely happened during the bubble run-up because lenders were lucky enough to sell the home at auction and recoup their costs. Here is an example where a lender may choose to foreclose judicially: Lender has evidence that the borrower has committed fraud or other egregious acts and the lender also has evidence that the borrower has other assets.

I would take a guess that judicial foreclosures would be so low as to not effect the statistics too much. However, we should try to find out because it would be interesting to know.

[jillayne]

I have an idea for an interesting trend to track.

Alan has given us NTS numbers, JJL has given us Trustees Deed numbers. We have those numbers for now.

What I'd like to see is a comparison to 2007. The question I'm asking the data is: What percentage of NTS ended up as Trustee Deeds in 2007 v. 2008?

My guess is that the percentage in 2008 is much higher than 2007.

We should also be tracking the number of bank-owned REO listings in each county to see if we can figure out if the banks are holding back REO inventory.

[Alan]

I wonder how many properties regularly enter and exit NTS status. Could the NTS numbers be inflated because people on the edge are being "double counted"?

It is sort of like looking at pending sales when sales keep falling through.

[jillayne]

Hi Sniglet,

For residential homes, most all foreclosed homes will first have a Notice of Trustee Sale filed, and then finally a Trustee's Deed.

The NTS just notifies the world (creditors) that the home will be sold at auction in 90 days.

The Trustee Deed transfers title from the owner back to the bank. Now the bank is holding title to the real property and can now convey title (sell!) the home.

Since most all residential mortgage loans use a Deed of Trust as their security instrument, we'll see the foreclosure process go through these motions: Notice of Trustee Sale, Trustee Deed.

I suppose it is possible for a bank to have used a mortgage instrument to encumber the property, however, that would be rare. In this case, the lender must go to court to foreclose; a much longer process. I would guess that the number of judicial foreclosures would be extremely low.

ALAN: I thought about you today. I was wondering what April NTS' look like at the 15 day mark and I thought, now who would know the answer? Of course! Alan!

[jjl]

Jillayne,

King County through 4/15:

NTS = 454
TDS = 80

Looks like foreclosure rates continue to lower.