For anyone who thought housing might have been stabilizing, here is a cold dose of reality. The bottom line? If you bought a house in California after 2005 and want to sell it for what you paid, you’ve got a decade to get it ready.
From the WSJ:
Some of the nation’s largest mortgage companies are stepping up foreclosures on delinquent homeowners. That will likely lead to more Americans losing their homes just as the Obama administration’s housing-rescue plan gets into gear.
J.P. Morgan Chase & Co. (JPM), Wells Fargo & Co. (WFC), Fannie Mae (FNM) and Freddie Mac (FRE) all say they have increased foreclosure activity in recent weeks. Those companies say they have lifted internal moratoriums which temporarily halted foreclosures.
It continues:
Foreclosure sales had dropped in the second half of 2008 as mortgage companies delayed taking action against delinquent borrowers. But sales have been edging up this year, according to LPS Applied Analytics, which tracks loan performance. Foreclosure-related filings increased by nearly 6% in February from the month earlier, and were up almost 30% from February 2008, according to RealtyTrac. The backlog of seriously delinquent loans has been growing.
Completed Foreclosures Jumped 44% in March
In California, notices of trustee sales, which are preludes to foreclosure sales, climbed by more than 80% to 33,178 in March, from February, according to data from ForeclosureRadar.com and the Field Check Group. The increase reflects both the expiration of foreclosure moratoriums and a California law enacted late last year that temporarily delayed default and foreclosure notices, says Mark Hanson, president of the Field Check Group, a research firm.
Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008, according to Moody’s Economy.com.
Mortgage-servicing companies, such as J.P. Morgan Chase and Wells Fargo, collect mortgage payments and work with troubled borrowers, both for loans they own and those held by investors.
J.P. Morgan Chase has increased foreclosure actions since the expiration of a moratorium on new foreclosures that began on Oct. 31, and a later moratorium put in place at President Obama’s request. The Oct. 31 moratorium delayed foreclosures on more than $22 billion of Chase-owned mortgages involving more than 80,000 homeowners.
Remember this chart from last October?
It hasn’t significantly changed people. These loans, when they reset will mean payments double or triple their current level for homes not worth near the amount of the loan. Result? People will continue to walk away from homes.
Let the markets work. It will not be pretty or easy but interfearing in them inevitably makes things far worse than they would have been otherwise.
Full article
Disclosure (“none” means no position):Long WFC, none
7 replies on “Here Comes Housing’s Next Leg Down”
Do we know for sure that these ARM’s are going to re-adjust to higher rates? Is it possible they re-adjust to lower rates? Or is everyone currently paying teaser rates?
the option arms almost all reset higher as they negative amortize
couldn’t you say that a certain % of these mortgages were refied? what i still can’t comprehend is what sense does it make for any bank to foreclose on anyone in a market where prices are dropping? i could understand if we def hit a bottom but does not seem like it, anyways, i was thinking about the tilson presentation on the whole sub-prime mess and then the prime ball that will drop around 2010-2011, do you have that? can’t remember if i saw it in the VIC presentations that were released
enrico,
the chart in the post is from T2 and VIC.
the option arms would be hard to imagine refinancing. they would have been bought at the peak and the loans underwater now.
if the banks foreclose and sell for 30%-50% of the value, it is better than the nothing they are getting from the current non paying homeowner.
yeah, i agree there but instead of selling for 30-50% of the value, why wouldn’t they mark em down that much so the home owners could afford the payments and over a 30 yr stretch they would recoup some of those losses in the interest and capture any upside if the property is sold, i guess too many details and i have read/heard that even after mortgages get refied the default rates begin to creep back up but who knows, ends up being a vicious downward spiral, thanks
who would give them another loan to even pay the reduced rate?
don’t forget the role unemployment is playing in all this
Why wouldn’t they mark the principal down? Because the servicer is overwhelmed and the mortgage is sliced into a dozen tranches, is why.