2009 was an erratic year in the REO business. Brokers that were used to large inventories were suddenly picking up their signs and not moving them to new listings. Most of them were geared up for a regular flow of new assignments and found themselves unable to load their pipeline. Most watched their active listings shrink and had to respond with lay offs and overhauls of their expenses and all were faced with not being able to get their arms around their quarterly projections. We were in what appears to be the Golden Age of REO and, yet, their inventories were shrinking and they simply were not feeding well-established appetites.
The reasons were innumerable – the moratoriums that lasted through April, bulk sales and auctions were no longer reserved for aged or tough to sell inventory, new agents into REO because it was the only real hold out in a crating market and major changes in how and who had the assets. The old guard were saying that the relationships they had with major customers didn’t really mean a whole lot anymore – asset managers were no more in control than their bosses. This was a new age of REO: the old ebb and flow was no longer predictable and what they got last year this time was a false indicator for where they were going.
One factor that didn’t really hit the radar at the time even though we all knew about it was the influence of Loss Mit on what actually made it to the courthouse steps. Turns out it was considerable – in fact, the number of duplicate postings for the year was probably close to the 30% mark for the year. That’s huge. It means that somewhere close to 1/3 of the monthly foreclosure postings had been there more than once – and, as it turns out, probably multiple times.
In a recent conversation with a friend of mine – someone close to the legal process- one thing he said hammered this point home. This friend has little or no influence on the process but has an unobstructed view of the legal playing field. He said that he would get calls from the law firms going into any given month with reports of record postings and follow up calls after the foreclosure date with reports that less than 25% actually got done. Once the smoke cleared it turned out time after time that “ loss mit pulled the bulk of the postings.” This happened month after month and even though hardly represented the whole market but as the saying goes ‘keep this up and we might have a real trend going.’ We are in the age of the Short Sale.
It is the elephant in the living room, it is where the action is and as big a pain in the ass as they are lenders in general are geared up to sell short and some reports are they would prefer it to foreclosure. The theory goes that if they are going to take the loss anyway they might as well get it out of the way with the least amount of baggage as possible. Even if this is not true, the fact is the venues for negotiating short sales has been ramped up to respond to the demand. No longer are the lenders force feeding a collector-loss-mitagator with more than they bargained for and have developed whole new call centers with underwriters on hand to assess the content of short sale candidates.
The Short Sale/Loss Mit platform is here and starting to process in a tangible, measurable way.
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