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Are Banks Holding Back on Releasing Home Foreclosure Inventory?

Maricopa County Arizona:

We have one of highest amounts of residential home inventory in the country. We broke lots of firsts over the last couple of years. We had the fastest appreciation gains in the country and now we had the fastest depreciation values in the country. Now with prices so low and interest rates attractive, the property investors and first time home buyers are flooding the market with purchases. With that flood of home sale activity, inventory levels seem to be improving. In the last two months bank foreclosure inventory in the price range of $200,000.00 or less has dried up. I got one report put out by Fletcher Wilcox with Grand Canyon Title Agency that shows inventory levels for homes priced under $200,000.00 with about 2.5 months of inventory.

Now I am being told by many real estate sources that the banks held back on releasing more inventory until they knew for sure how the new federal home bailout programs would work. Now that the banks know there is not much incentive, we are told that a flood of more foreclosures should be hitting the market.

But are the banks really going to release all this inventory?

I am not a conspiracy believer, but I have a trustworthy source stating that banks will not be
releasing all their inventory and will take advantage of higher rates to help offset losses
over the last couple of years. They are also taking advantage of multiple offers now that "big brother" is offering so much incentive to first time home buyers.

I am not 100% buying into this one, but thought I would pose the question.

Are Banks Holding Back on Releasing Home Foreclosure Inventory and for what reasons?

Posted by Gary Miljour - Mortgage Lending for Tempe Arizona on 06/14/2009 06:48 AM

Comments (123)

maricopa county foreclosures, home inventory levels

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123 Comments on Are Banks Holding Back on Releasing Home Foreclosure Inventory?

JUN

Gary, there is a bill going through the MI Legislature now, that is going to be a moritorium on foreclosure's for 3 months to force the banks to work out loan modificaitons. Loan Mod's have not been effective in Mi. Now the bank will be forced to appear before a judge if they will not work it out. The Mi State Housing Development Authority will be the counselor to the banks if they won't modify.

So 3 months published in papers, 3 more to work it out, then in Mi we have a six month redemption period. Looks like if the banks don't work it out the homeowner will have lived there a year making no payments.

I'll post on what the final bill says but that is what passed the house.

Interesting. I believe you may be onto something here, Gary. I guess I will sit back and see how some of this shakes out. I don't know the reasons for sure, but I suppose I have a few ideas/assumptions running through my skull.

Gary - seems there's been lots of rumor (speculation) about banks holding back REO inventory. Not sure if it's true but in some hard hit markets it might make sense to avoid flooding the market. Rather than dumping dozens at once rolling them out a few at a time would also help control internal staffing levels thus reducing cost of sales.

I don't think it is a conspiracy...it's just good business on the part of the banks. Why tank the market by flooding it with reduced price inventory? That would only reduce it further. Not to mention what it will do to non-distressed inventory when the competition is bargain priced. There is no dispute that there is alot of prime (as opposed to subprime) foreclosure going on primarily as a result of job loss. Depending on the part of the country you are in and the strength of the rental market, banks may get into the rental business just to keep the flow to a constant trickle instead of a flood!

I agree with Sarah, I don't think it's a conspiracy - in our market, if the banks put all the foreclosures up for sale, prices will nosedive. It's their call. It is a fact here that the banks are not placing all their inventory up for sale. On the flip side, I didn't check these numbers before, so I don't know if this is how banks handled foreclosure properties before the meltdown. I don't know if the banks "bank" their inventory as a matter of procedure or if this is a safeguard of property values, or both.

My only question back from all the comments, is why hold back on inventory when you know the months left of those prices is so low. If the banks truly wanted to sell and unload inventory, you would think they would take advantage of the activity.

I also felt John Secor made a great point about the lenders having internal staffing issues. This makes more sense.

Readers please continue to comment, I am really trying to get the pulse of the market for my own benefit.

I am sure they are spreading their losses. With bailout money it allows this type of thing to occur much easier than in a normal free market. It may be a good thing as it spreads the damage. We will never know.......

Whether they are or not it is still a free market, if they choose to hold back some homes from the market they should be allowed too, they own them. The less government interference the better.

"They" keep saying there will be a flood of inventory from the banks, but we haven't seen it. Perhaps the banks don't want to drive the prices down by increasing the supply too much.

It will be interesting (and hopefully not depressing) to see what unfolds. I hope they aren't sitting on a lot of it, given all the bailout money many large banks have received.

Gary - I agree with many of the others. In my market here, we are finally starting to see some price increases and inventory is low. So, if the banks released all the foreclosures that they're sitting on, they would just simply glut the market and drive prices down again. They're not about to do that now that they are in control again, meaning, around here, it's no longer a buyers market but rather a sellers market.

Gary I don't think it's a conspiracy of any kind. It's business as usuall for the big dogs. And quite frankly even if they did release a bunch more homes they would be bought up fast. We can't keep anything on the market (we're in phoenix like you). Multiple bids on everything under 200K. Going in one day or less. I would like to see more released as we have such a huge back up of buyers wanting to buy.

Gary, I don't have an answer one way or the other, I actually think it could be a combination, higher interest rates, higher prices and being forced to work out modifications. Thats fine and dandy but what about the houses sitting vacant obviously needing to be sold to a new family? Foreclosures are unbelievably more complicated than they need to be, and the investors could come out better if the~sorry that would be a whole different post. Have a GREAT day!

We are having the same problem and our inventory issue is so severe here. We are BACKLOGGED with buyers and I am telling them they need to look at stuff that is 10-20% lower to bid up (provided the financed buyer has room for an appraisal.) Our price range goes up to $400k with buyers so I am unsure about the $400K + market but I can say under $400K there is not much. I think our June inventory numbers for REO will be less than one month of absorption :gulp:

Here's the reason (other than moratorium.) Freddie and Fannie have rentback programs after foreclosure in place now for tenants. One of them (think it's Freddie) has rentback for owners. I didn't believe it but check on your MLS and separate the listings by "REO" and occupancy "Tenant" if you have such capability.

Fannie and Freddie have bulk buying opportunity for REIT (both on their website.)

Homes are being bought at the Trustee's sales by cash only investors.

There is now a law in regards to kicking out renters right away post foreclosure. They have to have 90 days notice.

All those combos are making it hell for new inventory to be released. I am seeing Fannie and Freddie being trickled on the market. We could EASILY have 7-10K units dumped out there now and absorb and still be a stable market. We have less than 13K units and are pendings are in the high 12K region! Our pendings and actives are going to match each other very soon here - in the next couple of days if nothing changes!

Hi Gary, I keep hearing that the lenders have decided that flooding the market with all the distressed properties would erase any price support and collapse the system.

It would appear that the banks are simply trying to safeguard their own interests, by attempting to control the supply side of the housing market. This, however, also greatly affects demand, in that by holding on to foreclosures the banks are not allowed to lend as much money, due to reserve limits (since the money lent for the foreclosures is still out/not currently on deposit).

The banks' position strikes me as a very odd one to be in. (Wouldn't most other businesses be prosecuted for such a great deal of control in their market?) Are the banks potentially in violation of antitrust laws, exempt from antitrust laws, or simply all protecting their own interests in similar ways? Is there any collusion at all present between the banks in this situation?

We saw a moritorium in Oklahoma that lifted on June 1st. Volume has rocketed up since then.

Banks have held back inventory for years, that is nothing new and sometimes it never makes the market due to the fact that it was sold to an investor and sold to them as bulk.

I give up! I have no idea what the banks are doing and so far most everything that they have been doing makes absolutely no sense.

I can't speak about REO inventory, but I know that HUD is keeping their available properties in very tight supply. I know there is an inventory of about 2,500 in Ohio, and in the Columbus area, at any given time, only about 100 HUD properties are for sale. Why, you may ask? Well, since the inventory is so scarce, these HUD homes are selling like hot cakes, most of the time ABOVE asking price. So, it makes sense for the seller to hold back and control the inventory. More about buying HUD properties, juicy stats etc on my blog http://ColumbusOhioHUDHomes.com

The answer is YES, the government is creating an artificial real estate market by forcing REOs to be held back.

Gary: Some of these banks don't seem to have a rhyme or reason to their madness.

JUN

Hi Gary,

Like so many others correctly stated....the foreclosures and REOs are just getting started.

We have been posting articles about this very topic for months.....probably at least 20 blog

posts discussing this.

Bottom line, we are not anywhere near any sort of bottom.

Tim

Gary, the question posed has a lot of other questions built into it. When the moratoriums were lifted, NTR sale notices were filed/posted and around August 1 (for our market at least) is when the "floodgates" should technically open. However, it is unlikely if there 1000 assets to be released they will do that at one time--that would bog them down and things would get worse. While this rumor has been floating out there, I think actual County stats will show we are about to get nailed.

Many interesting posts-- Here's the points I come up with:

The banks will do what they think is in their self interest, if they can manage it.

They are so busy and often overburdened that they can't manage well.

For the most part they manage by crisis rather than objective these days.

They change their polilcies and protocols, often oversteering in the process, very frequently

It is likely that at times they have and will hold back, sell off market, sell to wholesalers

And there is big money and big control hooking up a number of the rich to get richer in this.

Some of this is good business; some is short-sighted with short term benefits and long term loss.

In general, the institutions are suffering from lack of principle and long term planning.

That's all from me.

Karen Stanley

who will rent or many other things to avoid flooding the market

It would be prudent for banks to trickle out their foreclosures or rent them because if they flood the market, the market will have another huge drop. I have seen some houses go into foreclosure and come back on the market the next month and sell. Others haven't come on the market yet.

Sharon

I can tell you this, there are two foreclosure homes I have been watching for clients. both have been scheduled for foreclosure 3 months in a row, both were just delayed another month

Gary, we have the same issues in California. Our local market is down to about 2.5 months inventory too, down from 37months. California is also starting another state mandated 90 day moratorium. So I wonder when we will see the inventory released? doesnt look like anytime soon.

It makes sense. Get the buyers at the start line waiting for the race. Us agents are waiting right along with them. They are getting everyone hungry.

Renee

I thought the rent back program was only for those that were previous tenants and not actual homeowners? Let me know if i'm wrong.

Susanne

I have noticed HUD homes reducing in the last 2 months. Over the past few weeks, in the county that I consistently search, only a handful come out a week. I knew something was wrong when it went from like 40 to like 10-15 new listings a week.

I believe that would make them smart or savvy banks. Here in AZ prices are turning around due lower inventory levels (For lower priced home under 400K). Over average, AZ MLS is listing 35% less Bank Owned homes than the previous two quarters, while buying is still on a torrid pace. All and all, it helped us, holding off inventory allowed AZ to eliminate some slack, leading to less than 3.7 months inventory; we should be applauding this if true.

Gary, I have heard since late last year that the banks would be holding back inventory to help balance the supply/demand issue and not let prices take a further nosedive. whether or not it's true I don't know. However, I have a friend who works for a large franchised real estate firm in the Valley (Phoenix) and when he joined the firm last year, he was promised one REO property a month. At the beginning of this year, he was not getting that one REO listing per month and he told me it was because the banks had a 3 month moratorium on foreclosures. Others, mortgage brokers who work on loan mods, told me that isn't so. I have been watching the ARMLS listings to see if properties that go into foreclose hit the market right away and it has been 50/50 for those that do and don't.

I also believe that investors are buying huge bulk sale inventory directly from the bank.

Gary, I couldn't agree more. I have more buyers than I have homes. When did this happen?? I don't know about AZ, but here in Vegas, we have always turned on a dime within our market (hence the boom @ the end of 03, beginning of 04. We literally went from a normal market into a sellers market in under a 4 month span, declining from 14k inventory to well under 2k). I agree with one if the previous comments that if things don't correct soon , we will have more in pending than available. I have looked at this scenerio from a hundred different angles and theories, and do believe the banks, have realized that if they do, time control release the inventory, as opposed to "dumping", that they can and will control values. Do we really believe that anything the banks have done from the time our market switched up, has made any sense? So why would we believe that now, is any different?

The short answer is yes, at least in some areas. We've just been told up here in Oregon that the Washington Mutual foreclosures haver been kept off the market because of the "buyout" (really Fed takeover) by JP Morgan. WAMU seems to have written either A paper or a lot of subprime, with no in-between, so there's a lot out there.

Gary - our current inventory in most of Sacramento is 1.5 - 3 months. The REO inventory is down to under 1 month of inventory. Yes, the banks have been holding inventory in, but it is difficult to figure out why. I think it's a combination of reasons, from staffing to trying to figure out the bailout money to banks being purchased. We keep hearing from asset managers that the flood is going to hit but no one seems to know when.

I have to agree with the statement that there is an effort to create an artificial real estate market by forcing REOs to be held back. How else to deal with the losses, then by benefiting from multiple offers on these properties. What's going to happen when the 3^rd wave of foreclosures from the prime market hits the market? Will this inventoryalso be held back?

"and will take advantage of higher rates to help offset losses"

Err. Higher rates increase losses not the other way around. Low mortgage rates increase prices. Throw in the fact that many lenders are trying to foist the loans off on Ginnie/Freddie/Fannie and you have a complete argument why people should be liquidating at low rates over higher rates.

The situation is much more simple than the mythical 'shadow inventory' argument. The political pressure against foreclosures is enormous. Foreclosure are publicly recorded, if you take the time to go look and check for shadow inventory (at least here in CA) you find isolated incidences of homes foreclosed long ago not on market. But in general when a home is foreclosed it is assigned to an asset management company who assigns it to an agent for eviction, trash out, marketing and sale. There is that inventory in the eviction / trash out stage that is off market but there isn't a huge wave of foreclosed homes sitting off market.

If you change the definition of 'shadow inventory' to homes in the foreclosure process but not foreclosed... Then the numbers become massive. But with massive political will against foreclosure I don't believe the REO listing wave until I see the trustee sale on the courthouse steps. In fact, I don't even believe it then because if you keep your ear to the ground you'll hear of rescinded trustee sales as the servicers offer the homes back to the former homeowner after foreclosure.

As long as that continues, LOW SALES VOLUMES due to restricted ivnentory will be what sales professionals will experience. If we didn't have the foreclosure moratoriums off and on since last July here in CA we'd be SO MUCH closer to a bottom because a lot of the problems would have been resolved by now. But instead we have 3-4 more years of stagnation... and even worse if rates go to 6-6.5% which is a distinct possibility.

Again, the shadow inventory listing wave is a myth. You don't have to believe me, just look at the public records for yourself.

Thank You all for the feedback and comments. It sounds like we are all confused on what the banks have behind their thinking. I think the most logical answers have to deal with staffing issue within their own banks.

All I know is I have a file drawer of pre-approved buyers that tell me they can't find a home.

I believe that the banks, the ones being helped by the Gov have instructions not to dump a "glut" of homes on the market as it will only serve to set the economy in a downward motion, negating what the Obama Admin has put in motion. I have been told by a high level VP at BoA they will be releasing on 10% a month of their over 10,000 foreclosure in Northern CA

We have seen our market turn around here as well, I now have more Buyers than inventory. My concern is whatt will happen to our Buyers if the interest rates creep up? At some point in the near future the Fed will be unable to hold the rates down, and if the economy is still weak, I think most Buyers will hope back on the fence and wait for better deals.

YES THEY ARE!!!

And guess who is ultimately paying for their holding costs while they hold out for higher prices?

Tarp.

Banks here don't have any particular inventory to hold back. Maybe 3000 or 4000 homes bank owned and not in the MLS. Down a thousand or so since January.

They may not be foreclosing as fast s they could. But that is likely a rate problem dealing with manpower and process capablity.

Don't see much of a reason to leave a vacant property alone.

We all sit here with the observation that we are running out of REOs so we postulate that the banks must be withholding them. Much simpler and rational to presume they are in fact running slower than the demand.

That would make the holding back theory pretty much hype by those selling access to REO data....

In MA we are experiencing a similar situation however it is due to the recent Massachusetts Land Court Decision that has been handed down deeming two out of three foreclosures "invalid". Now I am told by several attorneys and lenders that this is throughout the entire country. As a result of this the title companies are refusing to issue title insurance as there is not a clear and marketable title. Apparently the foreclosure process needs to be redone and this can take a minimum of three months. I had sold one foreclosed property and was notified one hour prior to closing that we would not be closing due to this land court decision. The buyer's deposit was returned and we then put an offer in on another property which was bank owned. The bank required a pre approval from them, and after running credit etc. then informed us that this property also fell into this category and the offer was rejected and the property was taken off the market. Buyers are getting frustrated and angry that their credit was pulled for no reason. This is a real mess.

It would be interesting to see a response to this question by Bank of America Home Loans and Wells Fargo Bank.

Follow me on Twitter: http://twitter.com/roykelley

Mmmm.

If it isn't a conspiracy, why are they all doing the same thing at the same time??

Great questions and wonderful dialog. I keep a good eye on bank-owned properties in the Colorado Springs area; and I've often wondered the same thing as to why it takes some bank-owned properties so long to come back on the market. I've been told by some of my banker friends that part of it has to do with clearing up of the title; as many of the foreclosed properties also have HOA liens, mechanics liens, judgements etc. attached with them. Not sure if there is any truth to this; but it's worth thinking about.

Peer consensus from friends in the banking industry say they're overwhelmed and short staffed or at minimum unprepared for the quick change in the market. Their business has dramatically changed from handing out money to now trying to get it back. This would explain 5 month escrows on short sales that still fall out, but overall seems to be getting better day-by-day. And as for inventory not hitting the market would fall along the same lines. As everyone gets up to speed on the new way of doing business that is confronting us it will take some time to get processes in place and work out the bugs to be more effecient.

Also, here in Orange County, CA, we're witnessing the demographics shifting from where foreclosures and NOD activity was deriving. Earlier in the year, lower-priced properties were abundant but that has somewhat shifted to the higher end of the spectrum. Thus drying up the lower priced inventory and sometimes creating bidding wars (did we not learn anything?!) while an abundance of inventory at the upper end of the market is appearing.

My curiosity is how long this cycle is going to run, since typically (or historically) it's been in 10-15 year spans?

Terrific reading, great topic to begin with. Supposedly we have a mortorium on foreclosures in our area of South Carolina in order to allow more owners to work out their mortgages. However, there is a tremendous increase in short sales. Having just completed the Certified Distress Property Expert class, assurance was provided that lenders are attempting to expedite the short sales process, for both the seller and the buyer. This step would be good for the seller, buyer, community, etc etc. Will be interesting to watch over the days ahead.

Courtney Peace Hagins RE/MAX Island Realty Hilton Head Island, SC

To Foreclose or not to foreclose that is the question?

The answer is not so simplebecause of what is not apparent and what is not disclosed.

If the bank has already "stressed" and has already set aside for loses it could hold off for years

and keep the loan on its balance sheet.

If the bank has TARP money , who knows how long.

If the banks, now as some have started to do,go after the "loss deficiency"

and actually get some of that money-more gain!

If the FEDS really bailout AIG maybe the banks can get some of the "insured portion of losses back?

Ther is so much UNDISCLOSED information that maybe we do not want to know what is out there.

06/14/09 Sun-Sentinel "250,000 Florida homes in some stage of foreclosure"

Over 9 milliom homeowners "underwater"

AND NOBODY CARES ABOUT THEM

As in "The Everybody Wins Plan"We simply must get off the idea that we should only help "the good" people and leave the "reckless" ones to their own ends. Whether the foreclosed house next to me was owned by a good guy or a reckless flipper doesn't matter.. my home value goes down either way due to the foreclosure.
We simply have to set aside moral judgments and fix the problem.Why not at the same time create revenue for all taxpayers.

Based on the past performance of the financial institutions I might believe anything. I'm not convinced they are intelligent enough to put this all together. I guess it is possible but they also may be so slow to react that it is just taking this long to get the paper work prepared to get them on the market.

Lots of great comments here. In Georgia, we are a non-judicial foreclosure state...."don't pay, don't stay" If you are behind just 3 months in your payments, the lender will foreclose on you and your home is sold at the courthouse steps. No dragging it out here, which is not a good thing for the homeowners in trouble. Some of our metro counties report 2000+ foreclosure filings EACH MONTH! Yeah, that keep the inventory of discount priced homes on the market for months, and months to come. I now have a hard time taking listings for people that just want to sell to move, as there is so much discounted inventory around them (condos). And then there is the appraisal...will it or won't it?

And I'm still on the bandwagon about no help being offered in the form of loan modifications to investment owned proeprty. Values have dropped, so investors should be able to work out loans as well, but nope! Who cares if they dump all their properties into the pool of homes!

When WILL this mess EVER end?

Gary, I think it is an interesting question. As I drive around my area, I see many vacant homes but not any signs for sale or any activity. Now, granted the banks may be in the process of foreclosing but I think you are absolutely correct - it appears they may be holding out maybe because they don't want to flood the marketplace again or maybe it is at the end of the foreclosure cycle (probably not) or for whatever reason - maybe we don't want to know! But I think you raise an interesting point. Let us know if you get the answer. I agree with Roy, maybe this would be a good question to ask some of the banks.

It has been interesting reading all ofthe comments. I have seen properties that have been foreclosed on take a long time to come on the market. However with the delays before getting a response to an offer on those same homes; I have assumed that it was simply another case of the asset management companies being way understaffed and unable to deal with the REOs in a timely fashion - whether it is getting them listed or responding to offers and getting the contracts to closing. No part of it proceeds quickly.

"the Everybody Wins Plan" by BASILOVECCHIO

BASILOVECCHIO wrote: Would it be irresponsible to resolve at least the portion of the financial crisis that pertains to ALL underwater mortgages
subprime and of course , now even those that were prime in such a manner AS TO BE PROFITABLE to the taxpayers????
Thank you,Paul Volcker......"An outside agency"
                     Robert Shiller...."properly funded"
                     Dr. Yunus..........." a profittable business that does
                                                      a  social  good."
The legality is already there.
Funding is already there.Actually NO NEW MONEY NEEDED,This is just a guarantee of payment.
In 90 days or less 8 to 12 million homeowners
would be paying their mortgages not only on time but one month in advance.85% want to stay and pay,the other 15% will have a waiting list of those who would wish to purchase their homes with the use of THIS FEDERAL APPROVED REGULATED PROGRAM.
I can not sleep well every night because EVERYONE knows about the $700 billion TARP program Where the feds gave away $350 billion and are looking to give away the other $350 billion.
Everyone knows about the $787 Billion Stimulus package
to create jobs etc.YEAH RIGHT....but why is it That
IT is so difficult to get the word out on TV or internet
that the feds passed the Economic Recovery Act Oct 2008
in which EFFECTIVE JAN 1,2009 THE FHA WILL GUARANTEE
TRILLIONS AND TRILLIONS OF DOLLARS IN HOME LOANS!

This program could be the basis for 100% recovery of ALL
defaulting mortgages,ALL and with no cost to taxpayers ,
BUT AT A PROFIT.

"THE EVERYBODY WINS PLAN"
TAKE ALL LOANS MARK THEM TO 100% TRUE MARKET VALUE>
YES 100% Fair Market Value"
NEW MORTGAGE (TWO PARTS)10 Yr plus 30 YEAR
with A VERY LOW PAYMENT is the solution.
Just as in the 1930's
A LOWER RATE OVER A LONGER TERM got people back to buying the ranches because they turned the 5 year loans into 25 year loan-
Did you know that?
Thank You Dreyfus School for the Arts and Wellington High School Debate teams.

Please feel free to:
print- edit- copy- trash-challenge or endorse

www
basilovecchio.
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THANK YOU
PLEASE
Change it,
Challenge It
or Endorse it.PASS IT ON
A SOLUTION TO THE HOUSING MORTGAGE CRISIS AT NO COST to the taxpayers. By using the 1930's method,i.e., lower interest rates with a longer payback period.The ranch had to be paid using a 5 year mortgage,till someone created the 25 year mortgage.
Using today's rates and knowledge,the entire inventory of troubled homes will become EXTREMELY AFFORDABLE and thereby
AAA and 100% asset based.At no cost to the taxpayer with an option for a profit to the taxpayers.

A special 10 year year mortgage with an automatic 30 year mortgage that includes
PRINCIPAL
INTEREST
TAXES and
INSURANCE.

PER $100,000 loan there would be a total fixed 10 yr. PITI payment of
.........$475........PITI followed with a 30 year fixed mortgage that will
pay the loan.
FOR HOMEOWNERS;
Let them stay in their homes,
Let them be able to afford it,
and be able to manage it.
THIS IS THE REAL AMERICAN DREAM.
Turn this challenge into a greater good for all.Re-establishing "CREDARE" .Faith in the American people and home values.
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to fix the blame and to do what is nessecary for future prevention.

We simply must get off the idea that we should only help "the good" people and leave the "reckless" ones to their own ends. Whether the foreclosed house next to me was owned by a good guy or a reckless flipper doesn't matter.. my home value goes down either way due to the foreclosure.
We simply have to set aside moral judgments and fix the problem.Why not at the same time create revenue for all taxpayers.

Problem solved: All homes become owner occupied.All housing supply will be eliminated by demand,created by those who wish to stay in their homes(85%) and by new homeowners (15% foreclosed or rented,Investor owned) because of the extremely low affordable rates.
ACTION:Solve this trillions of dollars crisis at no cost to the taxpayers,and allow for a taxpayer profit.
RESOLVED:ALL "underwater" loans and foreclosed homes to be purchased at 100% of FAIR MARKET VALUE.Loan to be marked "paid-in-full"This is a one time deal and could be done in 6 months or less.
PURCHASE to be made by any lender willing to take 10 year treasury rate on note FULLY BACKED 100% by FHA,creating a 100% backed,100% asset!

Legislation is already in place for FHA to do this and NO NEW FUNDING IS REQUIRED.
PAYMENT IS GUARANTEED.We need only to enhance the present HECM rules
to allow 100% asset without any owner age resriction.Payments to be made for the ten year portion
will be very low and for that reason perhaps 0% ,yes, 0% loss.Anyone that wishes to default will have people in line willing to pick up their payments and even give something for the right to do it.
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A 10 Year loan that has fixed payments (120)  with payment number 121 (the magic bullet) ...... paying the balance in full.Because of the low cost of the funding(12/31/08 @ 2.08%)now @ 3%with the special long term payback this will be a very affordable payback.
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.............. (A) payment of total interest;

(B)15% of principal ;

                 (C)15% for taxes and insurance.
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LOAN AMOUNT $100,000 with payments to include:
A...Total 10 years interest............... $30,000
B...15% for principle reduction........ .$15,000
C..15%..TAXES and INSURANCE.....$15,000
TOTAL.......................................................$60.000
paid by 120 fixed equal payments of $500.00 each...... (wow, how affordable is a $100,000 mortgage
at a total P.I.T.I. payment of $500.00 per month???)Then the 10 year treasury bond is paid-in-full since a new 30 year fixed mortgage is acquired for the $85,000 balance.NOTE: if taxpayer profit is desired then the new 30 year loan is for $90,000.

To calculate payment for 10 year portion use a factor of5.00 per $1,000.
Example:, if loan amount is $250,000;payments of $1250.00
($250 X 5.00 = TOTAL PITI FOR A HOME VALUE OF $250,000
at an unbelievabe low $1250.00
REPEAT: Extremely affordable.It is total payment...P.I.T.I.

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Gary, I recently posted a blog on how the banks are gaming the real estate market. One school of thought is they are "cooking" the books by keeping those properties out of sight out of mind.

Interesting question indeed as I have also heard through the grapevine that banks have a lot of inventory to unleash. Many of them also want the buyer to prequalify with them as a condition of submitting the contract. I, too, see a lot of vacant homes in some areas. I'm curious to see exactly how many foreclosures will enter the market over the next six months. I've also noticed that the foreclosure listings seem to be more spread out among listing companies and agents and don't seem to be dominated by one to three entities like a year ago.

I am in Columbus, Ohio and one other commentator noted the "obvious" withholding of foreclosed properties. I began to see that happen even last year. Then came news of the bailout and there were all of a sudden a lot more houses. But they were the trashed, vacated "angry houses" the banks released then to the taxpayer's demise! Oh, a few nice homes hit the market then too. These produced "bidding wars" literally- you ALL know the headaches those multiple offer situations cause for these "young innocent" buyers we are putting offers on the house for...

What is clearing in my perspective is that there is a Buyer's glut on nice homes that haven't been grossly abused or need to be completely demolished (even in nice neighborhoods- those are out there and while my buyers say they'll "consider" doing some repairs, I have lost severalclients taking them to houses that look like a "steal" based on a low distressed price and the stench drove us back as soon as we opened the door!

It maddening that the banks are doing what we call want to call good business. Dumping crap inventory they don't want and holding nicer fforeclosures back hoping eventually they'll get a higher value? Why not help this economy ...sell them to young people who want to buy them NOW at "affordable" rates they won't need to be foreclosed on! These would be true legitimate deals that can be made with "finance-worthy" buyers.

I see the Banksmonopolizing the real estate market folks. This is no conspiracy. It's what it is ...banks own a lot of the real estate market and guess what? They make Realtors cut commissions and they do not value our professional place in a market they have no business being in as far as i am concerned. How about the ability to snub the laws we follow regarding property disclosures? Just ask yourselves...all of you...What caused this mess are the people who left in control and they have done nothing but gone on conniving- managing government bail outs and now getting more for homes they took back from people who could not pay the first time around ...the folks still holding the purse are again finnagling their higher profits right now and everyone else stands to gain?

Is this good for our economy? What exactly are the banks doing in the real estate business anyway since their specialty is loaning money...I want them out of real estate personally.

Should HUD and Fannie and Freddie be making back door decisions about how many homes they should release at certain times? If they own tons of inventory, the answer is absolutely! This withheld inventory is neglected and getting worse by the month for the most part, causing neighborhood deterioration due to lack of any maintenance. Frozen pipes in winter; high weeds right now! Who would even think to suggest this is a good policy? Someone needs to take control over this problem. Immediate attention should be directed to shame these entities who are "banking" on getting more money and holding on to properties for over a year at a time. Go walk into one in my town that has sat empty without power and no sump pump running...

People have to wake up. If you agree to let banks tell us they have the "right" to do whatever they want to do, you have NOT opened your eyes to the reality of what I have seen with my own eyes in a two years' time.

I got into the business of selling real estate and I don't like the filth I am subjected to in these bank owned properties that none of them feel one bit of responsibility to clean up! I refuse to sell their trash, sorry.

And I am as frustrated as my poor young newlywed clients every time I make a bid and find out three other realtors offers went forward too and we all got rejected, because someone got snookered and bit on this bank bait and switch deal and had to end up paying more than the ir "supposed" legitimate, clearly the advertised price they did not accept from me!

THE MOST obvious thing about the housing market right now is that people who HAVE NO BUSINESS DEALING IN BUYING AND SELLING OF REAL ESTATE are comprehensively manipulating everything and they hold all the strings because, as I see it, we handed our industry over to them not standing up to this!

I don't think that it's a conspiracy and the fact that they're all doing it at the same time shows a sound business plan that is apparently working in our area. It's just the basic priniciple of supply and demand working AND it really depends on which side of the aisle you're working in order to either see the benefit of the drawback. To the average homeowner, this plan enables their values to start creeping upwards and helps mitigate further losses in home value. I think we're going to begin seeing more pre-approved short sales within our areas as more loan modifications are denied. This will help provide additional inventory to buyers who are looking, but not as much as the ocean of foreclosures.

I am with you in AZ Gary. I have been telling my RE friends all along that I think the awaited flood of foreclosures isn't going to happen. I believe with many others that the banks would be prudent to drip the thousands of homes we KNOW have been foreclosured on but are not on the MLS or listed with an agent. Plus, if you go in to our tax records Gary you will see the massive numbers of homes that have sold but where never with a REALTOR.. where are they getting them? Bulk sales directly from FNMA/Freddie? Are they going to the Trustee Sale with cash in hand?

To those comments regarding a "conspiracy" by the banks to withhold the properties to have better control of inventory and prices.. let us not forgot... the largest banks and FNMA and Freddie are now being ran by the government for the most part, so I don't have a hard time envisioning a meeting with all the TARP recipients telling them what they will and will not do with their inventory. The thing I do have a hard time envisioning is that it wasn't leaked somehow to the media. If the Fed's truly have a rhymn and reason to the madness you would like to think the "transparency" promised us would be published... especially since the US tax payers are now on the hook for all of this.

Allow me to add my 2 cents to this discussion.

Our real estate bubble was artificially created and is artificially being managed. The current Administration wants to foreclose less and modify more. In fact, the lenders get govt money when they modify loans. Not to mention that lender's accounting methods do not write off losses until they are sold in the REO market. Add to this that fact that flooding the market with distressed properties drives the values down. More and more legislation is being introduced locally and nationally that protects occupants rights. So it should not surprise us that REO properties are slow to be released to the market.

For REO brokers, this means restructuring how we do business (again). For others, it means more stability and greater buyer opportunuties. For the lenders, they have to try to survive and follow an ever increasing regulatory environment.

In my opinion, those of us who are left to clean up the mess will be doing so for quite some time. We need to continue to educate ourselves and stay on top as best as we can. Sharing information is key for us all. Good luck to us all.

I welcome your thoughts and comments.

Gary,

Well, in my market in PA we are also seeing some firsts. Fannie Mae foreclosures are being pulled off the market or are being allowed to expire with no price reductions..

Why? Is there a conspiracy? Sure there is: Profit Motive. There are two major occurances happening right now, that most people are not aware of. The first is the idiotic idea of giving banks additional money to buy their own defualted assets with public money, thereby getting the debt off their book, AND, at the same time, owning those assest MUCH lower enabling them to sell them at a profit even in this market. For more on that, see the reprint of a post I will put below for you. (This information was recently in the Wall Street Journal - the info, not my post). Second, there is a bill before the US Senate called H.R.1728. Boy is this one a doozy! I could espouse on this all day long, but I'd rather just put the links the the bill, and the experts who have picked this one apart. This will be a disaster for the individual American property owner, the mortgage broker, the real estate agent, and investors nationwide. So yes - YES, the banking lobby is defintely working behing the scenes lobbying congress for more public money, and then wanting to put in the "fix" for how mortgage biz will be conducted in the future. As we all know, he who writes the rules benefits most...

The Short Sale is Dead!

The short sale is Dead! ...is my prediction if the Banking lobby is allowed to use public money to short-buy their own defaulted paper and get the debt off their books, essentially becoming an investor in their own toxic assets using public money.
Not familiar with this?
Here's the headline from the story and the link to the article on the Wall Street Journal Online;

Headline:
Banks Aiming to Play Both Sides of Coin
Industry Lobbies FDIC to Let Some Buy Toxic Assets With Taxpayer Aid From Own Loan Books

Link:
http://online.wsj.com/article/SB124338836675757049.html

I would contact your reps in congress, and make it clear that this is a mistake. If banks are allowed to do this, they will behave badly, as they always do, when given a huge gift: They'll be able to sell the properties at fire sale prices -AT A "PROFIT"- (for them),(of course, you, me, our childern, and future generations are still out the money)making their balance sheets look great and boosting EPS and stock prices. Of course, this robs the real estate agents and everyone else connected with a short sale from making a living, and then of course will make our lives "much better" when fire-sale comps flood the market at a time just after the new appraisal rules have taken effect.

There has been enough 'funny' accounting and creative risk strategies. Banks should feel the pain from their mistakes, and the gov't should not give a massive profit incentive to banks to subvert the rights of homeowners and livelihoods of Real Estate Professionals.

This is the info for H.R. 1728:

There is a bill in congress called HR1728. It was passed by the House, and awaits a vote in the Senate.This could end RE investing in the capacity in which we are presently familiar. It also trounces an individual's property rights... Make sure you go through all of the information below.

You're all educated folks, so I'm just going to provide you with the links, and ask that you first take action with your Senators, then pass this along:

http://www.govtrack.us/congress/bill.xpd?bill=h111-1728

http://www.hr1728.org/

http://www.taxloopholes.com/connect/node/2069

http://mandelman.ml-implode.com/2009/06/now-the-banks-want-to-stop-you-from-selling-your-own-home-without-them/

http://www.realtor.org/fedistrk.nsf/files/testim_hr1728_042309.pdf/$FILE/testim_hr1728_042309.pdf

http://www.washingtonwatch.com/bills/show/111_HR_1728.html

http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1728ih.txt.pdf

- The text of the bill. This may or may not include the last minute addition of the section regarding revocation of rental property rights..See the link below for the NY representative who proposed this insane idea, and had it added to the Bill.

http://www.mynewplace.com/blog/2009/05/20/hr-1728-mortgage-reform-and-anti-predatory-lending-act/ -

Bottom line:

This Bill NEGATIVELY affects Consumers, Investors, RE Agents, Appraisers, and anyone who has an interest in RE, or a future interest in RE, WHICH MEANS EVERYONE. However, this is a HUGE gift to the Bank Lobby who is cramming this through. I could go on for pages, but I trust that you will browse the sites above.

As usual, when the Country is about to be royally screwed, the MEDIA IS SILENT.

Call, write, and email your US senators NOW !!!!!!!!!!!!!!!!!!!!!!!

Stay Well,

Mike

There is no drive in my area by lenders to unload inventory that has been on the market for over a year. They turn down offers and sit- hoping for more or collecting money by not selling? More REOs continuously come on the market along with short sales and compete with private home sellers bringing their sales prices down. We are not nearly seen the bottom yet here and fully expect a fall release of homes.

Every area is different. Here in southern NJ we still have a 20 month supply of homes in some towns. I do know of several homeowners who have not paid their mortgage in over 1 year...and still no forclosure or "loan modification" . Short sales need to happen quicker so that forclosures can be prevented. I think the banks are going to do what ever is good for the banks, and that keeps changing.

I don't think they are holding back on inventory, but I do believe some foreclosure companies or banks are collecting offers on properties until they have enough offers to start a bidding war. This doesn't happen all the time, but it does happen. Quite often recently I've submitted offers on foreclosure homes only to be told they have 3 or 4 offers on the home already and are expecting 2 or 3 more. I submitted an offer on a foreclosure 2 days ago only to be told by the listing agent to tell the buyer that it might be a couple weeks before the seller responds to our offer. The listing agent went on to tell me that someone else had submitted an offer 2 weeks ago and she had yet to hear back from the seller. Somebody was collecting offers on this foreclosure home and sitting on them, that much was for sure.

Maybe I'm being naive here, but if inventory is being held back, wouldn't it make sense to evaluate any moratorium by locality? A steady release of REO's would help in markets where supply is limited and multiple offers are a regular occurance. Considering the banks are in control of those properties, and they now have to shuffle ever-mounting paperwork from multiple offers, problems are compounding. Yes, in other areas an influx of foreclosures could put downward pressure on prices. When we hear about this huge backlog of distressed properties that could potentially hit the market, I have to wonder..... Those numbers, spread over an entire state - are they large enough to create chaos? It's too bad this can't be addressed from a more localized point of view - the way real estate is supposed to be!

I also agree with Terry Westbrooks comments

I'm not sure they are holding them back in my market. However, it is taking longer than usual on others that I have my eye on. Makes you wonder.

What is with people hijacking this blog post???? If you have enough to say that it would constitute a blog post on its own, the post it in your own blog!

That being said, I would love to see how this develops.

This will be interesting to follow. I'd like to know more about how banks manage their foreclosure portfolios.

Excellent Post....Politicians and the media are controlling the real estate market in CA. Our newest political REO moratorium went into effect just last Friday with a new 90 day "work out" freeze. Followed by a 90 day tenant occupied freeze. Here is an interesting statistic over 70% of loan mods are already back on the default list. What will happen when these are added to the first 90, second 90, and now third 90 day moratorium's? While they may be holding back inventory now it can not last.

Regarding the above comment about loan mods already back on the default list...... Could it be because they won't do the mods unless people are already in arrrears? I've been hearing that if you try to negotiate a loan mod and currently aren't behind on payments, they won't approve the modification. That just doesn't make sense. Perhaps if they worked with folks who are taking a proactive approach, as some of my clients are trying to do, they'd have a better success rate. Sheesh!

Absolutely the banks are hold back on inventory. Some of the reasons are good but once again the consumer is paying via their taxes to support the banks.

I'm also unsure about banks holding inventory. I have sources here telling me that there are an additional 1600 homes going to our market in the Charlotte area. That's a scary thought. Our inventory is high enough without foreclosures flooding the market.

I am in Palm Springs California. I have seen the Banks and The Asset Managers do some really dumb things. I don't think they are smart enough to hold back lstings and control inventory! I also don't think that the several Banks will work together to do this.

Thank You again for all your comments. As I read through all the comments, it seems like we touched a nerve with us all on the issues we face in our markets with banks and their inventory. I know for instance in my market we are not getting multiple bids on everything under $200,000.00 and some clients are even over bidding the list price again for a chance to get a home. Between the low interest rates, the $8,000.00 first time home buyer funds and low prices, people are out there buying.

If the banks are holding back on property releases for sale on purpose, they might be in for a rough road ahead. If rates continue to go up and market prices go up due to supply/demand ratios, we will see more expensive purchases. This will start to scare off at least the first-time home buyer.

Most buyers I have been dealing with over the last 6 months have made it clear that they were buying because homes were affordable again. Once that affordibility is thrown out the window, we could see a drop in buyer activity.

I think the banks are entering the rental market. I recently showed a REO home for rent in the Tampa Bay area. Certainly could be a smart move for the banks as the numbers work out.

After seeing some of the longer comments on this post, I am beginning to think it may be necessary for Active Rain to set a limit on how long a comment can be. Keep them to a couple of hundred characters, perhaps.

Regarding the topic: Either the banks are holding back on releasing inventory, or there is no foreclosure problem. Apparently, all the problems are getting worked out :). Seriously, though, every agent in my area has at least a half dozen buyers ready to go, and no homes to buy. We could very easily absorb a flood of inventory for first time buyers. It is not uncommon for there to be 20 offers on a property. I heard of one last week that got 60 offers.

Gary, I interviewed with Bank Of America/Countrywide last week to be added to their REO list and they told me they were holding just over 70,000 homes in our area until the end of June. When I asked why, they stated they get more of the bailout money and a better tax write off. So perhaps the bailout money is issued in quarters? Or perhaps with the influx of the old bailout money and some banks physical year ends at the end of June that they want this inventory on next years books so they look just as bad, thus more bailout money and better tax write offs for next years books? Or maybe the Feds are making them hold the inventory thru the summer so they can brag about foreclosure rates being lower and building the hype that the market is turning around to get buyers off the fence.

Prior to the bailout they were making effort to get rid of these houses. I don't think it's a matter of what's good for the market or the economy the banks will always do what's best for them. Why sell the foreclosure properties now, we gave them the money to be able to sit on them. i gurantee you if they didn't have our tax money they would be selling. Now They have the money and the homes.

We are down to a less than 1 month inventory of homes in the area where I work. I would welcome a bunch of REO's so there would be some homes to show my buyers. I think my market could easily absorb a managed realese of the "held back" REO's

One thing I do know is that a past due loan doesn't affect a banks numbers as bad as a loss. With the Gov. watching so close they will hold them as long as they can and try to time the release of foreclosures so as not to decrease stock prices.

I may have become a conspiracy nut.

Well, I can tell you that the foreclosure problem is getting worse. The moritorium is over I believe unless they are trying to implement another one. And it had little to no effect. Over 80% of home owners in trouble wouldn't even respond to the banks.

Are the banks holding foreclosed inventory? You bet.

Why? I haven't a clue. Although I don know of a bank that pulled all it's current inventory from the real estate agents and appear to have set up there own real estate company that isn't directly associated with the bank.

Our overall housing supply is down to two months in east Contra Costa County. I heard there is another foreclose moratorium. I think it is just putting off the pain.

Tish, yes I have read articles about Freddie Mac renting back to owners AND reinstating mortgages on a modified basis for thsoe who qualify. There are bits and pieces but nothing ever confirmed. I do see evidence of all I have written above and REITs are now flipping their treasures of bulk purchases.

It amuses me that we are surprised when the number of foreclosures jump when these foreclosure moritoriums expire. What doesn't amuse me is that we hear about the jump in numbers but not the reason.

It amuses me that we don't think that those not paying their mortgage will continue to do so under the moritorium. It doesn't amuse me that we get angry when banks look for ways to actually make money.

If banks are holding on to some inventory it might actually be a good thing. If they flooded the markets with everything they had, driving prices lower, inducing more uninformed people to walk away from their homes we'll never resolve the problems in the housing market. If they are waiting for ever increasing new legislation. It's their business decision to make. if they don't like the new legislation all they have to do is wait 2 months for new legislation. Maybe if the government took their fingers out of the pot, this whole mess would sort itself out. Selling in bulk to investors is a business decision as well.

I don't buy the fact that they are holding on to inventory because they see mortgage rates coming up and want to be able make some money back. Higher rates mean lower prices, meaning a larger write down on any house sold. Selling a house is not a guaranty for the bank to get the mortgage. Rates go up because banks have to buy money at a higher rate. They make basis points on that money and it is a fairly inelastic spread. Higher rates don't mean the banks are making more money.

A recent blog post from the Massachusetts Home Buyer Network sites a Christian Science Monitor article that reports that only 30 percent of foreclosed homes have actually been listed, leaving around 500,000 properties around the U.S. sitting empty.

The article suggest that this is happening because many banks are holding the properties in their inventories, waiting for the market to rebound before they list the rest of their properties.

Whatever the reason, this is not good news for some markets.

Gary,

However you look at it, it is still a business. The main goal of the lenders is to maximize profit, or lessen the losses. Since the moratorium passed last month, we have seen a lot more homes hit the market, but they are still going quickly. If, indeed, they are holding back, that is a good thing for the market. The laws of supply and demand come into play and too much inventory will put us back into the awful conditions we were seeing a few short months ago and even worse. The amount that the public psyche effects the market is tremendous. We need good news, and we have had it for the last few months.

Wow, great comments from everyone. My hope is that they're holding back on releasing this inventory so they can work through all these upside down homeowners. If you could just write an offer on a short sale and get it closed in 30 days, how this might help fix the situation (obviously the seller would need to qualify with a hardship, not just because the market went down). Move all the asset mgrs to the short sale department, get agents used to working the online portal and move offers through just like REOs. It used to be that banks had a deep desire to get rid of their non-performing assets because it limited the amount that they could lend out. Something must have changed or they don't care about lending, not sure. I'm starting to see a trickle of inventory here in Las Vegas. I'm also predicting the old days of flipping homes will be here again. Let's see if the appraisers catch up with this market (they're still calling it a declining market). All we can do is adjust with the market, see around corners, and work hard to stay in business. Good luck out there.

I have been hearing this for months now from different sources. The California legislature just passed a 90 day moratorium on all forclosures. Holding back on large amounts of inventory (distressed inventory, at that), is not going to do any good. They should at least start releasing these in some kind of orderly way and get these properties pushed through the market. This is a part of the real estate recovery that we have to deal with!

There is much much more pain to come, but that is another topic.

Is the lending community holding back inventory ? ABSOLUTELY !

Is it in their best interest to do so ? Yes - for the time being and for a myriad of reasons. Are they being influenced to do so by the Fed Gov. ? Again, yes absolutely. The govt is buying control of the entire banking system with the primary consideration being the false supporting prices of all equities and the value of the dollar.

Is it in the interest of the brokerage community for them to do so ? In the short term, yes, but believe me, supporting Realtors like GM is hardly in the thinking. Regardless an individual's desire to work REO's or simply to get some listing action going, the last thing most of the brokerage community needs is higher inventories at this time.

Most of the big originator/lenders that I have dealt with do not have people who even grasp the concept of loss mitigation. They are either grossly inexperienced or do not possess the education - or both. Believe me, if they survive in their jobs over the next wave, they will have both. None of these people have ever seen the likes of this market situation and most are not educated economists.

Also - most all the responsibility for remediation falls back to the originators rather than on the actual paper holders by virtue of the original contracts between originators and big lenders. ( Say a Countrywide creating paper for 5 or more global lenders ) Therefore, there is little chain of command capable of making real loss mitigation decisions. These big lenders often by contract can't order the sale of their own asset due to the terms of the contract with originators.

( as an aside, I spoke to the individual responsible for $400 million in bad paper at a major EU bank's office in Manhattan and to quote " I don't know anything about loss mitigation - I didn't even take the class. " And believe me, school for this individual wasn't all that long ago. )

Combine this with a mentality by these originators that they really only want to replace the cash flow from the paper ( put another borrower in the house ) rather than get it off their books at a true current market value. As one poster said - going into the retail business. There is no motivation to mitigate their own losses when the Govt keeps handing them money ?

The govt program a of trying to falsely supporting price by attempting to control supply is in overdrive.

This will fail.

So Many great Comments.

Sorry for not commenting back to each one of you indivindually. My Mondays are very hectic.

Great post! Wonderful food for thought.

Lenn has a point there, all the banks are doing it so how can it not be a conspiracy? You gotta just love the stupidity of the banks. They want to protect their investment in a foreclosure!

Lyn,

They absolutely want to protect their investment, even if it is a foreclosure. Who doesn't want to protect their investments, even ones you're losing a bit of money on. Remember, its a foreclosure to you but an asset to them. Maximizing the amount that they can get for their asset is a priority. Dumping them on the market only deflates the value even more and is counter productive.

This is nothing new. There was a time where farmers would rather burn their crops in the field than to bring them to market and lose money on them. As mentioned before... Supply and demand is still an underlying market rule that still exists.

Gary,

You HIT a big nerve. It is all such a question what banks will do. I hear from so many of the REO agents in my office that July is the time. They have been holding on to so many for so long that it is going to burst. So like many have said we are going to be flooded. The inventory in my immediate area is low and many many buyers. Inventory in out laying areas have so many REO's and prices are ridiculous. They all go out higher and what erkes me is that along with so many offers comes "the bank wants your best and highest by Friday". What that does is it scares people they are going to lose and they run scared wanting to bid much higher and like someone commented the appraisal is the issue. SORRY I got off on a tangent from your immediate question. I feel it is sooner than later.

Mike's comments were excellent & on target. Our government's supposedly fixing, but it shows this is only making the messy web harder to untangle.

Banks are so far not helping responsible citizens who have "real" real estate hardships - people who need to sell but can't because of all the distressed properties that have been accused of dragging values down. So some assume banks are being responsible by not flooding the market with more of the same, since it would presumably continue to cause further price decline and more hardship on all sellers.

I lack any proof of a responsible thought behind the banks current activities, however.

Despite legislation attempting to streamline short sales, I have experienced no improvements. The one I am working on right now is a case that makes my point!

The principal mortgage holder never flinched turning down the two "current market value" offers I presented them. WHY? BECAUSE MY SELLER WHO NEVER MISSED A SINGLE PAYMENT WAS TOLD NO URGENCY EXISTED. THE BANK CURRENTLY IS PROCESSING HUNDREDS OF SHORT SALES. ALL OF THESE INVOLVE HOMES ALREADY SCHEDULED FOR A SHERIFF AUCTION!

My client is a young couple. Their home has been for sale for two years; they're willing to take a big financial hit to cover their second mortgage - the equity loan balance is about $7K but this means that the primary lender can have all of the proceeds from an immediate sale, if they allow the house to be sold.

This property will net a little more than half of what's owed. Yeh, it's a poster child case of a subdivision damaged by the subprime loan crises. The steep decline in the market value of their home is due to the present condition of nearby abandoned properties. It's devastating what happened in this neighborhood, where more than half of the properties went into foreclosure and many are currently in various stages of complete deterioration.

This couple has depleted every last penny of their savings and can't procure an offer on their home without causing a huge payoff shortage, which they can't make up. They have a balloon on the remaining amount they still owe and that is coming up soon. But the loss mit process spat them out for now. Because this bank was fixing the serious indebtedness of other people- people who are qualified to make huge credit card purchases and walk away from that debt while they shamelessly were also skipping out on making their mortgage payments for months on end!

My client's wife just had a baby is not working so now he is their sole income provider. He just got notice of a salary reduction last month, due to his company experiencing a slowdown in their business. These are the dominos that are still falling. The bank said he needed a copy of his reduced paycheck, knowing it would be another couple weeks to get that receipt. That was where the bank left his file after three months of documenting this genuine hardship.

The potential Buyers I lined up to buy this house as a short sale will be long gone if I ever get this bank to help out and stop moving toward forcing the foreclosure of my client's property.

What more needs to be figured out? Many innocent people are out there just like this who can't sell their homes. There are many victims who are still in this same predicament.

It's not right for the bank to force these people into foreclosure. On that we all agree. But why is it some people do not see this harm is still being done currently right before our noses? Yes, the banks ARE still taking homes back in record numbers. And this is the reason they have so many houses and their inventories are swelling at the present time!

What Banks are not still "taking" properties? Are moratoriums really effectively helping people like my client? NO!

Banks have NEVER shown any interest in helping and only reluctantly take a share of the loss. Despite having had much to do with the real people of America experiencing this loss! How can anyone side with an industry that turns their back on someone who is honestly still paying their mortgage but can't sell their home without there being a huge loss. People believe the media hype? Let me show you someone who needs relief through a short sale but this bank says its not considering that an option irregardless of the loss in any appreciable value of the merchandise being no fault of this individual!

It looks like banks are holding on to their inventory? Look again...It might actually just be that banks are still actively "taking" more and more homes all the time. The administration of such a large amount of inventory is cumbersome, especially for an industry that isn't supposed to be in the property resale business. I am sure it will take them a long time to ponder off that many homes, that the legitimate owners could not themselves sell for a profit. I don't think the banks will be able to force those prices back up right now either. So some of them are no doubt going to sit and wait?

At a recent RE seminar we discussed this very issue. We were informed the banks are aiting until the market stablizes a bit. But the problem is, when the do release them, the market will go nuts!

Gary,

We're watching the same as you. And we've asked ourselves that same question, too. My wife and I conduct BPO's for lender's also and we've seen an increase in that actviity, but the listings have not followed. There may be other reasons, other then foreclosure, that lenders request BPO's but that activity is still high.

Up until about 3 months ago from Longboat Key to Punta Gorda FL there were 600 plus foreclosures priced above $70k at any given time. The number of current available foreclosures has been reduced to under 200 in the past 2 months the number has not gone above 200. Now that the foreclosure inventory has been drastically reduced, they seem to be just trickling out. There are more buyers in this market than there are good deals on foreclosures. Immediately when a decent foreclosure hits the market it is in a multiple offer situation with 5-25 offers on the home and in many cases sells for at or above listing price.

I have myself set up on instant foreclosure updates that hit the market. Up until about 2 months ago I would get between 15-25 new foreclosure listings a day, since then it ranges from 1-5 and the bulk of those updates are not new foreclosures but price reductions on the less desirable homes that no one seems to want.

I cant say that the banks are coordinating controlling the trickle of inventory as that would be pretty hard to prove but it would be in their best interest now that they have the supply down to release them in a more controlled manner. Prices have definitely stabilized and most well priced foreclosures are sold within 10 days.

We all know that there are many homes being foreclosed on & many more to come but it has not increased the number of foreclosed homes available for sale in this area. There seems to be an equal number of foreclosure homes sold to the number of new foreclosure listings. This has been the case for the past 2-3 months.

Gary,

Illinois is one of the States in a Moratorium with IL Senate Bill 2513 requires banks to notify homeowners 30 days past due on their mortgage to go seek assistance at a HUD approved office. A counselor at these offices will help owners get in contact with their lender and modify their loans. The Moratorium could prevent a foreclosure for 90 days with this homeowner.

The verdict is out whether the counselors are going to be successful helping homeowners. An article in the Tribune recently said Homeowners are getting frustrated because banks are denying loan modification process.

As a result more people will be faced with foreclosure. As far as holding off putting homes on the market. I do not see this working to the banks advantage. Time Value of Money tells you that you get more today than in the future in a down market.. and in my market prices are going down not up any time soon.

Flooding the economy with trillions of newly printed dollars must inevitably cause inflation. What happens when inflation strikes? Hard assets can be exchanged for more money. If a bank holds inventory (which isn't counted as a loss until it sells) until prices go up, it will be able to make up its loss on paper.

The only problem with bailing out the banks this way is that the dollar will buy far less than it did before and those on fixed incomes will suffer tremendously. Today's dollar buys only a fraction of what it did in 1960. What will tomorrow's be worth? The largest printed currency denomination in Zimbabwe is $100 trillion. You might be able to buy a loaf of bread with it.

BTW, don't blame banks for trying to make a profit. That's what they're intended to do and there's nothing wrong with that; we do the same. For the most part, they're just as unprepared and confused by this mess as are the rest of us. The real problem is caused by too much government and the law of unintended consequences.

In Response to Sarah's earlier comment about the banks getting into the rental business, I'll buy you a dozen doughnuts if you ever find a bank that will put a renter into one of its properties. The liability alone would make it so unattractive that they would run from any situation that could possibly cost them more money than they are already losing. And how exactly would a property management division of a bank work? They barely know what they are doing now; just imagine having to collect rental receipts for the properties they can't sell. They should at least explore lease/purchase for the tenants, through no fault of their own, who are being forced to vacate due to their unscrupolous landlords.

I wrote about this new law a few days ago. This will add to less bank owned being available...New Law to Protect Rental Tenants When Home is in Foreclosure Las Vegas Real Estate Update

This is directly from the NATIONAL ASSOCIATION OF REALTORS® Washington Report..

New Law to Protect Rental Tenants When Home is in Foreclosure

Some banks here are trying to work with the homeowners on loan modifications, even those that are not behind on their payments, so I think they are even delaying NOD and sale dates because of this.

I know I have several homes that we are watching for buyers that had NOD issued w/sale dates back in Nov/Dec and the sale dates keep getting post poned....hmnnnn.

I am a member of a few different groups..and I have been hearing of more foreclosures, but have not seen much going on in my area.. we are in fact low on inventory

Wow, This has been enlightening. I never realized when I got in to real estate that I was going to following politics and banking policies so closely.

All I can say is that is a sad that we all have to be spending so much time commenting on foreclosures. Just think of how many people in distress are represented by those empty homes.

Beware ye all of those who deceive...for they are not all that you may believe...

They'll steal your home and then relieve themselves to allow you time to grieve. Mike McCann

......................................................................................

The banks know exactly what they are doing and they are stealing any equity left in the properties and playing the markets.

They are doing the same in the commercial market. and the credit card market.

Mike McCann Broker 308-627-3700

JUN

My business partner and I are of the group who firmly believe that there is another wave of foreclosures coming that will rival and perhaps eclipse the NOD's, NTS's and eventual foreclosures of '08. I believe there are several reasons that the inventory is currently low and many have mentioned them here. Imagine a combination of an government mandated REO moratorium (2X), rapidly changing lending guidelines, increasingly nervous stockholders making demands, and a lack of experienced manpower to handle the huge task of processing all of the NOD's, NTS's, and requests for loan mods. Oh wait, you don't have to imagine any of this.....it is happening right now. These issues will take time for the banks/lenders to work through and the moratoriums cannot go on forever. When the next wave hits (Dec '09-Feb '10) there will be plenty of inventory for all of your clients, at least those who still have incomes and can qualify to buy a home.

--Andrew

Gary,

In my opinion, the banks aren't paying any attention to what's going on internally! Is the staff knowledgeable on how to get the home foreclosed on? Are there piles of pre-foreclosure forms laying in some empty office of a fired employee? Are the HOA/Condo fees, electric bills, grass cuttings being paid? Who's watching the money? I don't think the banks are holding back the inventory.... I don't think they even know how much of it exists!

Kathy Opatka

The foreclosures are already out there, ready to be picked up. We have access to 780 million dollars of foreclosures right now just in FL. Another case, 190 foreclosures in Ohio were sold for about $5000 apiece, and again 130 properties in IN for about the same price...

The banks are letting the properties go, you just have to know or have access to the lists. One of the operations of our business is finding investors/buyers for these kind of properties, both residential and commercial. If you need more info, contact us.

Kenneth Young,

I have no idea if you even read what I had to say. Most of the commenters and myself all agree that the banks are not releasing inventory. Please tell me the so called Lists that you have available beyound MLS.

AHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Gary, sending you an email... will follow up with a phone call.

Yes, I read what you had to say, you just don't have access... we deal with the banks and asset managers, these relationships have been developed over the years, we have first access to what is going to be released and what is being sold outside of MLS....

Definitely think the banks have been holding back inventory so as not to flood the market and deflate their own assets. However, the bigger factor was the moratorium that was lifted in March. Look at the March/April/May numbers with NODs and add about 6 months for those properties to turn into REOs, and that's most likely when we'll start to see another big spike.

The scary thought is that we are now seeing prime borrowers defaulting in the greatest numbers, and we still have yet to hit all the option arms and alt-a loans, which are supposed to hit in 2010-11...We still have a ways to go...

JUN

Great points Michael!

We have been discussing the upcoming resets with our clients and their reactions are very mixed. Investors are expecting a flood of inventory over the next year and possibly 2 years. But lenders and realtors seem to be content to ignore the evidence and are adamant that we have turned the corner and are heading onwards and upwards.

Currently, there are about $1B (yes with a B) worth of ARMs resetting each month. The fact is that from April '11 to April '12 there will be an average of $10B worth of resets each month with a high of $18B due to reset around Sept '12. Many of these will default sooner due to negative values and the inability to sell or refi, and still many others will not default at all due to able borrowers and/or successful modifications. But even if an huge % such as 75% do not default, the banks will still be dealing with 2-3 times the amount of defaults they are dealing with now.

This is why Obama is pushing so hard for loan mods. Not to help current homeowners as much as try to get ahead of the problem and stop 2010, 2011, and 2012 resets from defaulting.

--Andrew

I juts read an Inman News Article this morning. It makes me wonder?

The headline reads: "Broker snubs limited-service listings." The article relayed information about blocking exclusive-agency listings and those under contract with limited-service brokers from appearing on some 'Cheesy' company's public-facing Web site (Sorry for that poke; this is actually about some questionable blackballing by one of Wisconsin's largest real estate brokerages receiving the backing of its multiple listing service).

I suggest people who are following this this blog go check this morning's Inman informational story. Perhaps this accounts for the seemingly "missing" foreclosure listings in some of our other states? I was provided new insight ... I think this might actually have hit on another answer that part explains the truth of where all the listings are right now ...?

The simple answer is YES. The banks are holding back inventory. And it's only getting worse.

In my very mature neighborhood in Las Vegas (built some 10 years ago - yes 10 years ago is a mature neighborhood in Las Vegas) there are five homes owned by the banks that are not even listed for sale or on the auction block according to Realty Trac. This is out of 292 homes.

It is much, much worse in neighborhoods that are newer built in 2004-2007. The banks are holding back massive inventory there.

Just pull up the listings in a neighborhood. Then go to RealtyTrac.com and turn the map feature on. Count the number of bank - owned homes that aren't also listed. Then you will get a handle on the severity of this situation.

The folks who are looking strictly at MLS data make the faulty assumption that every sale and transaction is always reflected in the MLS. That is a wrong assumption.

JUN

Well it has been a long and interesting read. I thought I had something to add but it was all said before. Good question.

I was watching Cramer on CNBC Tuesday night for comic value. He was talking about the increase in homestarts in May, I think the number was up 17%.

Cramer was jumping for joy singing that the housing market had bottomed out. I was chuckling and thinking that he was wrong again. Maybe we should send him a copy of this thread.

JUL

I give up! I've stopped TRYING to understand the banks....

JUL

Just my two cents here. I know this is a national audience, so what applies in one market doesn't apply to all markets. We (my wife and I) sold our house in Oct '08. We have since been renting and are starting to look again. I personally don't feel like we need to rush, but my wife feels otherwise. The market is still going to come down. Unemployment is high, and confidence is low. All the govt comments and the media is about trying to have the Joe Public believe things are better. They are not. Ask anyone that owns a business how things are. I bet 8 out of 10 will tell you it is horrible. Walk around malls or "downtowns" of smaller communities and notice all the emtpy store fronts.

The govt/banks are playing games. They need to just let the market forces take over and get the bottoming overwith. We are just dying a slow painful death vs. a quick one.

Another thing is this. Banks have tightened lending requirements. There is an influx of inventory, but your pool of qualified buyers have shrunk considerably. Who's going to absorb the inventory? You have investors (large cash purchasers) and you have buyers (well qualified who are smart and don't want to get above their heads -- which is part of this initial problem). No one else qualifies. Good luck to the banks.

As a middle class taxpayer, we are getting screwed by the govt's handouts to these "too big to fail" businesses.

We have made bids on 3 different houses in the past 2-3 months. We have been shafted twice by the selling brokers (no proof but easy to read between the lines). I'm not in rush. If we find something we both reallly like, and I perceive "value," then we will make an offer. (value to me = priced well enough that should the market retract another 20%, we hopefully we only be down 10% on paper. No plans to sell after we buy, plan is to live there for 10+ years)

As reference, we reside in the San Francisco Bay Area. We are looking at homes on the peninsula. (ie, there has not been a 40% correction, probably 10-15%)

I just want to give most of you agents on this blog some props. You have restored my faith in your profession. You all must cringe everytime one of your national "talking heads" appear on TV/media and say "starts are increasing and pending sales are up! buy buy buy!" Of all the agents we run into via openhouses, only ONE has been honest enough with me to say that he doesn't believe we're at a bottom. All the other ones are "oh things are picking up, you should buy now!" Please treat me like I have a brain. I'm not in this financial position to purchase a home in this crappy economy because I'm stupid.

JUL

Where I live (Miami), the rate of foreclosure (based on our county public records) is from 2000 to 2500 properties per month. I don't see any point for banks holding real state assets. What are they thinking? That such prices will go ridiculously up again (as previous years ago)? Who will be buying? The formula is pretty easy: no real jobs (like factories, industries, engineering, etc.) = no money circulation. Banks should get rid as soon as possible of their repossessed properties, with prices according with our declining economy nowadays and to favor those buyers who were smart enough and did not decide to pay inflated prices like previous years ago (as previously stated).

Thanks.

RC.

SEP

Here in Flagstaff, we have very few bank-owned properties and most scheduled trustee sales are cancelled. Now, some of those may be going as deeds-in-lieu, or payments being caught up (probably very few of those!) but many are postponed because the banks are negotiating short sales. Meanwhile, the inventory of short-sale pendings keeps rising and rising because the banks are short-staffed.

SEP

The banks can hold on to homes if they like. But I smell collusion... and that isn't legal. Only a whistle blower can prove this.

SEP

If the banks resold all their foreclosures....their net worth would plummet. This would have a devasting effect on their ability to make new loans. Pretty scary picture.

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