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Foreclosure Listings Underestimated for Q2-3

April 30, 2009

Analysis of:US Foreclosure Filings Jump as Moratoriums End | www.cnbc.com

The lifting of the Moratorium (October 31-March 31) has released a sizeable number of foreclosures into the mortgage modification process, largely a prefunctory step before the assignments are made to REO Brokers to list the assets. The current supply of foreclosureslistings  has dwindled during the Moratorium but now will increase by 500% or more given the release of the pipeline of assets no longer under the Moratorium.  The change to the mortgage modification program now provides that mortgage servicing companies must automatically modify the second mortgage  when the first mortgage is reworked. About half of the assets have both first and second mortgages so the failure to provide for second morgage modifications was a major issue. (WSJ 4/27, A4) The implications are underestimated, specifically: (1) foreclosure supply will spike (2) home values will drop further (3) foreclosures as competition to new construction will reduce demand for Builders.  

Post-moratorium Spike Expected

March 17, 2009

Analysis of:Rise in foreclosures 'a shock' | money.cnn.com

The extension of the current moratorium to March 31 on new assignments to Realtors for pre-listing activities on Bank-owned assets delays but does not mitigate the spike in foreclosures. Except for a week in February, the moratorium has been in effect since December in order to allow Federal and State changes to procedures for mortgage modifications to take effect. However, the forecast 2009 decline in home values nationally by an additional 10% undercuts modification efforts disincentivizing homeowners to pay even a reduced mortgage payment on a house worth less than the principal balance.  The RealtyTrac results for April through June will be materially distorted to the high side until the volume can normalize with the moratorium lift. Some Asset Managers report their current backlog of foreclsoures awaiting assignment to Realtors exceeds their total volume for 2008. Even if fully implemented, the Obama administration plan targets relief to only one in nine households. 

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