Monday, November 03, 2008

Sacramento Regional Real Estate Trends for November 1, 2008

**Apologies for the "Yes on 8" ads. Google is a little slow taking them down.**
**OK, it looks like they're gone. If you see them again, please let me know. **












18 comments :

Anonymous said...

On the front lines I've heard that REO agents have been scavenging for work as their inventory is not being replenished over the past 60 days.

Need some of that shadow inventory to show up.

Short sales are a large % of the inventory, but very little of it ever closes IF your agent can actually find a decision maker.

What will be the impact of Chase/WAMU renegotiating their loans with consumers? Their 90 day hold on foreclosure actions puts them into end of January 2009 before putting REOs back on the market.

A guy I know got a redo from Countrywide that took him from default to $600 lower payments (fixed) overnight.

Sippn

patient renter said...

A guy I know got a redo from Countrywide that took him from default to $600 lower payments (fixed) overnight.

There may have been a catch though. Is the loan fixed forever? Is the lost interest being tacked onto the principal?

Max said...

Need some of that shadow inventory to show up.

There was a decline in REO in California due to changes in the foreclosure law:

Preforeclosure volumes to drop in CA due to SB1137

Also, I believe (but can't prove) that banks are now holding back in anticipation of a massive mortgage bailout package. The plans are already being "leaked" by FDIC and Treasury, but I doubt any big new initiative will be announced until the new administration takes over.

Politics is trumping market activity for the moment.

Max said...

I'll be donating all my ad revenue today to GLAD.

Darth Toll said...

"A guy I know got a redo from Countrywide that took him from default to $600 lower payments (fixed) overnight."

Let me get this straight. This guy got converted to a recourse loan and is basically on the hook for the full debt amount indefinitely and can be sued and wage garnished if he doesn't cough it up. Foreclosure and/or bankruptcy will never be a viable alternative again.

I don't know this guy's situation in terms of the original house price paid or if he was making payments on a bubble mortgage, but oftentimes it's better to just walk away without getting a redo. So the lender gets the house back (and that's all they get in California) - there are plenty of things in life worse than that. Then in a few years, he could have started again and got a much better deal on a place that he could realistically pay off in 15 or 30 years without breaking the 3X yearly income budget. Instead, he will be a debt slave forever on an overpriced depreciating asset. Nice move...for the lender. Not so much for the guy you know.

Max said...

Nice move...for the lender. Not so much for the guy you know.

I've been wondering how much "help" these guys really need. At today's 30 year fixed rate, you can finance $100K for about $600/month. So all things being equal, CFC just took a $100K writedown on his mortgage.

The only way that works for CFC is if the LTV was greater than $100K, and the guy keeps making his payments on his still underwater house.

Anonymous said...

They purchased an REO for close to 100% LTV, lost job within 45 days of closing. New job paid about 1/2. Her job pays well. The area has no new home inventory, price mid $200K, likely still worth that as area had already done most of its blood letting. No money down, but they had filled some new credit cards with improvements into the home.

I believe CW wrote down some principle, lowered the interest rate and fixed it, extended the loan to 40 years. The payment was set at about 1/3 income.

Max, most of these people couldn't get that nice fixed rate you talk about.

Darth - funny, don't you think he should just do what's right and pay for the house? just asking, I don't disagree with you on that, but I do believe the 10-15 year horizon in his home is 2-3x purchase price.

BTW, a credit union (Golden One?) is already advertising a "post foreclosure/shortsale" loan

Also, saw Lander cited an Inman report that used a good source stating CA still has a lot of price risk...... problem is the report was dated May meaning the data was even older, but it was right. Heck, I usually trust Inman.

Back to my friend, we (the big regulatory we) need to take some teeth from the credit card companies and keep them from sending out the free money everywhere. Thinking that showing the kids some tough love in that dept will pay dividends.

Sippn

patient renter said...

I'll be donating all my ad revenue today to GLAD.

Awesome :) I noticed HBB is also being inundated by the ads, not to mention just about every part of Folsom. I'd like to think they'll be gone immediately following the election. We'll see.

Darth Toll said...

Sippn, the situation you described is totally different than what I imagined. I assumed this was a bubble house and bubble loan and it isn't at all. This is a recent purchase. See, this is what I get for assuming!

So in this context, a workout/redo seems the most logical thing and CW is probably not trying to willfully screw him over. Having said that, he MUST pay on the loan this time or he could potentially be in big trouble, especially if we start seeing a lot of workouts that go bad.

Hopefully we won't be going into the Greater Depression, but it sure looks like we are. If so, we're going to see a lot of this type of thing, where folks make a recent purchase and it's a sound deal and the numbers make sense, but things STILL go sideways due to the bad economy.

patient renter said...

Darth - I still haven't seen any other (mainstream) info on non-resourse loans being converted to recourse. Is there any?

Anonymous said...

Thanks for dropping the prop 8 ads. It's appreciated and will be rewarded with Karma.

Darth Toll said...

pr, it's my understanding this is basically par for the course. In other words, all refinances are by definition conversion to recourse. Max or Deflationary Jane can correct me if I'm wrong on this as they work more in that industry or have more direct knowledge of this and DJ seemed to concur with my earlier statements.

This doesn't mean that all redo's or workouts are necessarily nefarious though, just that the POTENTIAL for mischief exists. So in the past, most lenders wouldn't sue even if a redo wound up in foreclosure, they would still just take the house, even though they COULD have sued had they wanted to. It just wasn't practical (blood out of a turnip).

Now if the collapse continues/worsens and the government meddling doesn't help, there exists the potential that one or more of these banks will turn into law firms where they start going after folks more aggressively to seek damages.

Max said...

Here's an article from the OC Register from 2006:

Refi loans could prove costly in foreclosure

Homeowners behind in their mortgage payments after hocking the house to pay for a major remodel or a new boat or car may be in for a rude awakening.

If they previously refinanced and their lender decides to foreclose, they may not only lose their house, but the bank also may be able to go after their other financial assets including stocks, savings and their paycheck.

Max said...

I personally don't think this will become an issue. One change coming next year will be a gutting of the 2005 bankruptcy law. If banks get too aggressive on this front, they'll change the recourse law too.

Anonymous said...

"So in the past, most lenders wouldn't sue even if a redo wound up in foreclosure, they would still just take the house, even though they COULD have sued had they wanted to."

What is there to sue for anyways? By the time foreclosure happens, there is nothing left. The borrower has already filed for bankruptcy. It's kind of a moot point.

Darth Toll said...

anon 8:33 thus the "blood from a turnip" comment. I realize there's not much left after the foreclosure. Unless there is job loss, there is still the income stream and a lot of the recent walkaways don't involve job loss, just loss of equity and paying too much on a loan for an overpriced depreciating asset - so it's fourth down and 44 to go and they just punt.

It is in this spirit that the potential exists in a redo for wage garnishment and awarded damages if the bank feels there is breach of contract and the foreclosure "victim" still has earnings power.

Not saying it will happen - I'm on the fence here. The political landscape is changing quite rapidly to the point where banks will face an uphill battle conducting waves of lawsuits against hapless folks that have gone through foreclosure. OTOH, the banks are out of capital and if folks still have earnings the banks will be tempted to go after them. We'll have to keep an eye out on this one. A worst-case scenario that could develop is akin to the "company store" approach, as in owe your soul to it forever:

http://www.oftwominds.com/blogoct08/serfdom10-08.html

Anonymous said...

DT - I used to agree with the hard line, as conservative as I am/was, but I see all these homes purchases with liar loans from people and institutions with supposedly a lot more institutional knowledge than an individual consumer.

The consumer relied on the credit industry to:

1. properly value the asset.
2. properly qualify the buyer.

The industry failed to do both on an individual as well as massive basis, creating the problem that is flowing through almost all industries and markets.

Sippn

Anonymous said...

"It is in this spirit that the potential exists in a redo for wage garnishment and awarded damages if the bank feels there is breach of contract and the foreclosure "victim" still has earnings power."

Darth, a bankruptcy petition puts an automatic stay on any such proceedings by the bank. You file for Ch 7, walk from the house, and mostly start clean. If you happen to fall above the threshold limit for filing Ch 7 and are forced into 13, then there is an outside chance of being forced to pay SOME of the debt back in a structured repayment plan. This is VERY unlikely though. Most BK judges are so, so liberal and side with the debtor.