June 2009 Foreclosures

[Alan]

This is a little early. I'll update the numbers if they change much.

King County Notice of Trustee Sales
6/2009 - 1615
6/2008 - 576
6/2007 - 304
6/2006 - 299

180% increase YOY (280% of last year)

The last few months:
5/2009 - 992
4/2009 - 938
3/2009: 1089
2/2009: 838
1/2009: 909
12/2008: 660
11/2008: 540
10/2008: 643
9/2008: 607
8/2008: 575
7/2008: 728

[jillayne]

WTHeck! Alan, no way! Are you sure? That's a big jump.

[Alan]

That is what the records say. Double check them if you want.

I agree it is a big jump. I checked it last Friday and was shocked.

Wasn't there some government regulation slowing foreclosures that expired recently?

[jillayne]

No, no moratorium expiration here in WA state. The holiday moratoriums were extended through March, I believe. I will wait patiently for your YOY comparison so we can see if we're looking at a summer bounce, even though I know we are not.

I will ask JJL to update her chart (which I believe is on her blog) showing the comparison of NTS and actual trustee deeds.

So many postponments were going on back at that auction toward the end of, when was it...May? The banks are going to drag this out for as long as they possibly can.

[marlon]

This is in line with my experience.

After losing my six figure income and successfully demonstrating I could qualify for the "House Affordability" Loan Modification plan - which is in my experience just looks good on paper - the stupidity of lenders ruled and they turned me down using the excuse that my 'debt to income ratio' is too high. Obviously if one loses a high paying job, that is expected even though my expenses are relatively moderate and I was able to sell one car.

That tells me banks are not serious about loan modifications and that is the reason we should see people more people stop making payments and foreclosuring. Stupid lenders.

[jillayne]

Hi marlon,

I'm sorry to hear of your unfortunate situation.

There was a good paper released on this very topic. The conclusion was that if banks grant loan mods to homeowners whose debt-to-income ratios were too high, the chance of re-default is extremely high. A better option is to foreclose now instead of spending X on modifying the loan, just to lose even more money with foreclosure expenses.

In order to get a loan mod, the homeowner must be able to demonstrate an ability to repay the loan. This is priority number one. Some people are better off trying to sell than modify.

[Alan]

I wonder if the bump is due to people figuring out what they had to do to qualify for the government refinance programs.

Assuming there are government refinance programs. I don't really know what is going on in that area.

[Courtney]

marlon you're already ahead of the curve by selling a car. I look at (bad) credit reports all day at work and I swear, 90% of the reports w/ mortgages in default or foreclosure also show at least one substantial, completely current vehicle payment. People's priorities are bizarre. Then again maybe they figure the car is depreciating at a slower rate than the house..

[perfectfire]

No, people are being rational. They need a car to get to work and run errands, but they can always rent a house for much less money.

[jillayne]

Hi Alan,
Any changes to the 1615 June number?
Thank you.

[davidlosh@davidlosh.com]

The loan modification and government loan programs are, in my opinion, ways of generating new mortgages.

The money is made by generating the loan, for a fee, then servicing the loan for a fee, and then selling the loan to an investor, for a fee, while continuing to service the loan for a fee.

If you hold enough loans, notes actually, in your portfolio that you service it eventually adds up to real money.

A 1% servicing fee on a million dollars is very little, but 1% of a billion can add up. At today's loan amounts a million is easy, a billion takes a few weeks.

I took issue a few weeks ago with a short sale article on another blog. It frustrates me that people in the mortgage and Real Estate business refuse to see what has happened in the credit markets.

Credit is trillions of dollars trading hands every minute of every day. People talk as if the economic stimulus package is large bundles of dollars. It's credit. Worse, it's the promise to pay with future dollars.

After that you have the discussion of inflation versus deflation. Will those future dollars be worth more or less, in the future?

Let's pretend we are at the end of the game. No one wants to call it quits, but let's pretend that today every one just hunkered down and paid off debt. When we make money we pay living expenses and pay off our debts. What happens?

What if, rather than modify your loan you concentrate on paying it off? How would that go? What if you actually got into the game and did whatever you had to do to get out of debt?

The banks would continue to make the servicing fees, investors would have more money to invest, and you would become financially solvent.

The problem is you are not generating new loans. Investors have fewer loans to buy, loan originators have fewer loan generation fees, and there are fewer future inflated dollars. You would be paying today's debt with today's dollars which circulates real dollars back into investors pockets and they have fewer investment opportunities except in commodities.

You are buying less and paying more on debt. As the commodity prices go up you pay more for living expenses. You pay higher prices for food and heating oil. That leaves you less to pay on your debt.

So coming or going you pay, we all pay. The investors get the reward of us using their dollars.

It's the investor's dollars. If you own stock, that's you.

Now wait, there's more. You own stock in a company like GE. You want them to make a profit. Buying and selling corn futures may get a profit, but financing the purchase of corn for the production of ethanol can get you real dollars.

Here's the point, your debt is generating more profit than oil, food, and durable goods orders. No one wants you out of debt. Everything in this macro economic discussion is focused on you being in debt, in default, generating fees, and paying interest.

The loan modification is a carrot. it keeps you current on other debt. It keeps you protecting your FICO score so you can get more debt in the future.

Debt, keeping you in debt, is the goal.

[Alan]

It looks like 1615 is the final number.

[BillE]

[perfectfire]

[rose-colored-coolaid]