Bay Area Notices of Default (NODs) in the fourth quarter of 2009 rose 21.8% on a year-over-year basis, up 54% in San Francisco proper (from 302 to 465). NOD activity in San Francisco fell 23.4% from the third to fourth quarter (versus a 14.4% decline in 2008).
Actual Bay Area foreclosures in the fourth quarter fell 2.8% on a year-over-year basis (from 7,677 to 7,464) with Contra Costa (down 6.9% to 2,151), Alameda (down 6.2% to 1,576) and Santa Clara (down 7.6% to 1,244) leading the way with respect to volume.
Fourth quarter recorded foreclosures in San Francisco totaled 174, up 55.4% on a year-over-year basis but down 2.8% (5 homes) from the third quarter 2009 and versus a 42% drop from the third to fourth quarter in 2008 (think moratoriums).
∙ Another Drop in California Mortgage Defaults [DQNews]
∙ Actual San Francisco Foreclosures Up 31.6% QOQ (Down 6.8% YOY) [SocketSite]
A nice addition to these charts would be to superimpose the moratorium dates.
regardless of moratorium dates, this is what was hoped for by those hoping to keep housing valuations high.
regardless of cause, lower numbers of foreclosures helps reduce housing supply.
it would be interesting to also show completed short sales as well, which is another form of distressed transaction.
Was there a moratorium on NOD’s as well, that might partially explain the steep, unpredicted decline in that number?
It looks like there is a 6Q lag in NOD and foreclosure. The current Foreclosure of 174, corresponds to the 418 NOD. If we keep the same ratio, then in Q4 2010 or Q1 in 2011, we should have a peak of around 225 foreclosures.
Not that many to speak of really.
607 to 465 is a 23% drop.
Not that many to speak of really.
Certainly hasn’t hurt condo prices…
I was just thinking about how the freeway speed limit is 65, but nearly everyone drives like 75-80. The police obviously can’t ticket everyone on the road, so they basically let it slide and only go after the people who are going 90+. In that context, we could interpret a drop in speeding tickets as news that nobody speeds anymore. Yet the freeway is full of people going 80 when the sign clearly states 65. Just a random musing which is likely TOTALLY unrelated to why foreclosures are abating…
Soooo…how come no talk about the shadow inventory of bank owned units waiting in the wings?
We know that they are there…we just don’t know when the other shoe is going to drop.
I don’t get it. It’s here. Just because it isn’t happening like you were told it would by a group of bears, mostly now long gone, on Socketsite doesn’t mean it isn’t happening. Pinnning hopes on a vast warehouse of “shadow inventory” now? You “know” that they are there? How do you know this?
“If we keep the same ratio, then in Q4 2010 or Q1 in 2011, we should have a peak of around 225 foreclosures.
Not that many to speak of really.”
Unclear if you were joking around, but 225 quarterly foreclosures out of approx 1500-1800 sales in SF County per quarter would be significant.
“You “know” that they are there? How do you know this?”
What do you think happens after an NOD goes out? Most loan mods fail after only a few months, if the trial is even allowed in the first place. http://graphics8.nytimes.com/images/2010/01/02/business/02modifyGrfx/popup.jpg
The shadow inventory is represented by the area between the purple and blue lines on the above graph.
In addition to that, you have many people that are just hoping to sell when the market improves.
I agree that there are lots of people waiting until the market improves. They don’t need to sell, tho, obviously. What’s so shadowy about their inventory?
The problem with shadow inventory based upon NOD is that it’s discounting the human element. For every NOD there’s a human being scrambling to get out of difficulty. Why assume that NOD necessitates loan mod, one. It might just mean “I’ve held out long enough. I guess I need to take a worse paying job for a while.” But I understand the CW on here about loan mods, and I’ve seen that story and it’s a joke. I don’t want to get into that can of worms again but these programs have been getting tinkered with for over a year now. I have personally vetted three loan mod companies for a client and I know of dozens of success stories personally. That Bank of America stat is laughable. Bank of America now owns Countrywide, OK? Think about that. There are probably 98 successful mods in the city in the last two months.
as an aside anonn:
the linked-to graph is only showing the number of mods made through the HAMP program.
all of the various lenders have the ability to make mods outside of that program as well.
Thus, SF could have 98 successful mods in the last 2 months, and BofA could still have only 98 permanent mods through the HAMP program in the entire country.
regardless: HAMP is clearly not very effective for a multitude of reasons.
I know that the graph is only showing HAMP. In fact it’s probably only showing the first iteration of HAMP, begun last spring. Take into context what I was responding to: Shadow inventory –> NOD —> Loan Mods — > that graph as somehow some sort of proof. I meant to say there are probably 98 Countrywide mods in the city alone in the past two months anyway.
So anonn argues there is no definitive proof that successful loan mods aren’t occurring en masse in SF because the data only concern HAMP. And his proof that successful loan mods ARE occurring en masse in SF is . . . because he says so.
Don’t trip over yourself not making sense while putting words in my mouth. Or anything of the sort.
Pal. Seriously. Is this your hobby? Talking to me derisively on the internet?
Say something of value. Once a week. That’s all I’m asking. Go ahead and hate on me. Just say something intelligent for a change.
Yeah, just clinging to the unquantifiable…
The important thing to understand is that the stats don’t say BofA only did 98 loan mods. They did 156,864 mods, and only 98 of them made it out of the trial period.
Unless they cut principle, loan mods will continue to fail.
Loan mods are most likely to fail in the must bubbly areas, since the houses will be the most underwater, and cutting the rate still doesn’t justify throwing good money after bad every month.
Any of you can Google “Countrywide + Loan mod” on your own time. What’s transpiring is not a secret. There are numerous BBS’s from various regions full of stories and people offering advice to one another. But save the name calling and dismisiveness for when you know something someone else doesn’t. Not the opposite.
The chart shows 98 permanent BofA HAMP loan mods. It doesn’t show how many didn’t become permanent because the new terms from the first wave of HAMP weren’t attractive to the borrower. It also shows 1M+ eligible. It doesn’t show how many of those eligible loans actually applied. It doesn’t show how far along any of the current ~157K are, or what their loan mods look like versus the group of 98 who got theirs back six months prior. It seems to show that there is another 15% being sorted currently. That would indicate a backlog, and no dearth of applications. Again, if you doubt what I’m saying about first wave HAMP loan mods being unattractive, it’s not a secret.
The chart shows 98 permanent BofA HAMP loan mods. It doesn’t show how many didn’t become permanent because the new terms from the first wave of HAMP weren’t attractive to the borrower. It also shows 1M+ eligible. It doesn’t show how many of those eligible loans actually applied. It doesn’t show how far along any of the current ~157K are, or what their loan mods look like versus the group of 98 who got theirs back six months prior. It seems to show that there is another 15% being sorted currently. That would indicate a backlog, and no dearth of applications. Again, if you doubt what I’m saying about first wave HAMP loan mods being unattractive, it’s not a secret.
http://www.defendyourdollars.org/2009/11/lifting_the_veil_on_loan_modif.html
The amount of mods is slowly improving. Not at the rate Gov wants. But it is improving. This website is a consumer’s union nonprofit website.
Man. This website is screwed up. Later.
ex SF-er – HAMP would be wildly successful if implemented in good faith by lender-servicers. Check out the OCC’s Mortgage Metrics Report (its somewhere online). The report indicates that the redefault rate is 26.2% at nine months for borrowers who have their month payment reduced by 10% or more. That is, almost 75% percent of borrower can makes payments if a modification results in at least a 10% reduction in monthly payment. I think that by any measure that is successful. The problem is that many lender-servicers will “modify” borrowers into higher monthly payments.
This is the reason that Sheila Bair and co. advocated the HAMP program (which evolved from the FDIC program, which in turn evolved from the American Securitization Forum’s suggestions). The lender-servicer are obligated to implement the program if they have contracts through the TARP program. The problem is that the process can take many months and many borrowers give up (the process has been taking on average 8-10 months even after approved for a trial period). Many borrowers also get misinformation from “home retention specialists” (read: collection agents).
The problems may be related to understaffing, etc. But I’m not so sure that this isn’t intentional. In the words of a senior executive for a large lender-servicer, they face a moral dilemma. He explained, “We don’t want a whole generation of Americans thinking they can just modify their home loans when the going gets a little tough.”
sanfrantim – There were a number of things that occurred in late 2008 to lower the number of foreclosures. New law SB1137 went into effect placing notice requirements on lender-servicers. There was a 60-days moratorium. And Countrywide was made to modify loan in a HAMP-like manner starting in early October in accordance with their settlement with the Attorney General’s office.
The arguments on modification v. foreclosure go both ways. Both are bad. You are choosing between the lesser evil. Even with individuals the choice can be difficult. As a society the costs are high either way.
At any rate, modification is a short-term fix. Foreclosures will come en masse probably starting at the end of this year.
(sorry, my post wasn’t allowed the first time for whatever reason)
anonn:
cumulative permanent modifications have been dismal out of the HAMP program, no matter what iteration you use.
that said, my point above actually bolsters YOUR argument.
There are non-HAMP modifications happening.
unfortunately, the data on those isn’t as easy to get, although much of it is out there.
I actually don’t know the answers because I haven’t looked into this in the last 1-2 months, but the critical question is this:
what is happening/has happened to all the NOD’s out there
-have they been “permanently” modified
-are they somewhere in the mod pipeline
-have they been foreclosed upon
-are they in limbo (not in mod but no movement towards foreclosure)
-have they been short sold
etc
mods have increased over the last 6-12 months, but I don’t know if it is enough to compensate for the increase in NODs over the last 12 months.
also: as we all know a substantial percentage of modified loans are re-defaulting, so that needs to be put in the equation too…
regardless:
elevated housing valuations will alleviate the pain somewhat on over-indebted homeowners. (they are more likely able to refinance, sell for less of a loss, short sale, or get a mod).
=======
Publius:
I don’t disagree with you.
Satchel used to often say this as well: the goal is to drag this out and get mortgage-holders to pay as much as possible over time.
it is ironic that the banks are all concerned about moral hazard when talking about mortgage holders, but they have no problem with moral hazard when it comes to bailouts for themselves.
anonn:
cumulative permanent modifications have been dismal out of the HAMP program, no matter what iteration you use
Yes and no. You can track the changes from the treasury reports linked to here:
http://www.defendyourdollars.org/2009/11/lifting_the_veil_on_loan_modif.html
The numbers were dismal to start. The actual modifications were also lousy. They are slowly improving. It’s probably down to Gov taking BofA aside for a talking point or three. Remember that this is a public-private program launched in March that takes as much as six months to even kick in.
also: as we all know a substantial percentage of modified loans are re-defaulting, so that needs to be put in the equation too
Do we? We know that 26 % of the first wave re-defaulted. Do we know why? Do we know if their loan mod was any good?
We know that a lot more are in the pipeline. Let’s wait and see what the people actually getting principal reductions and/or low interest rate reductions do.
ex SF-er and anonn
I very much doubt that there are any substantial non-HAMP programs at this point. Many lender-servicers have done away with other programs. In fact, this was one of the goals of the HAMP program. They continue to exist in some cases but are employed extremely infrequently.
ex SF-er – your point regarding NOD is well-taken. The fact of the matter is that many are in delay. Modifications make up a small percent of those that are “in process.” Ultimately many borrowers will fall out of the process just because it is too difficult to navigate.
The bigger problem is all of the defaults compared to NOD’s. Lender-servicers are not issuing NOD’s as normal because there is cost involved and they are under pressure to attempt to modify borrowers (or at least appear to make an attempt). The true size of problem is more accurately reflected in the number of 90+ defaults.
Lender-servicers are in a current period of self-imposed moratorium. By the end of the year this will be likely over and foreclosures will begin in earnest.
You yourself referred to one of them, at Countrywide Publius. I was informed that the non HAMP bank loan mods are nothing new under the sun. People have been approaching banks with varying degrees of “Please oh please help us keep the family farm” since banks started lending on land. What’s new is the prospect of the banks being faced with numerous simultaneous foreclosures if they are not more proactive.
Actually, the BAC (formerly Countrywide) is using the HAMP program exclusively now. HAMP fits within the parameters of their settlement with the AG’s office (the settlement was copied from the FDIC program).
I don’t disagree, however, that there are other programs. Clearly there are other programs. But the other programs are now infrequently used as there is pressure to standardize to the HAMP guidelines.
And you’re right modification programs are as old as loans. The push now is to have appropriate modification guidelines for securitized mortgages (only about 12 years old). The American Securitization Forum proposed guidelines, the FDIC implemented those guidelines at Indymac, and now, the HAMP program is using those guidelines.
Non-securitized mortgages are still modified with the individual lender’s in-house guidelines. But as you know this is now a very small percentage of the market.
You’re right about BAC now using HAMP. I just found that out. Would you happen to know or be able to confirm whether banks using HAMP-TARP are now getting up to 150K from the government per modification? This is something I learned today. Apparently it is putting the onus squarely on the banks to actually get something done for people.
anonn:
18.7% of loans modified in 2Q2009 were 60+ days late 3 months after the loan mod.
That was improved from a peak of 32% in 3Q2008, but still pretty abysmal.
I don’t believe we’ll get 3Q2009 data until March 2010.
http://online.wsj.com/article/SB126144913572001111.html
as you and I both said this is an evolving process. as I said above, some of this may look better in 3Q2009 and 4Q2009 due to the mild improvement in housing that we saw in 4Q2009. it may improve again if we see continued housing strength, but it is at risk if we see another downturn in 1H2010.
Not sure about that number. That is a big step up from the $1,000 per year for five years per modification.
New guidelines were issued today making it easier to modify. Basically, the guidelines allow for incomplete documentation. Not sure if we really want that. Isn’t part of the reason for unprecedented increase in home values due to “liar loans.”
ex SF-er – 2Q2009 was down because the servicers were waiting to see what was going to happen with HAMP. The earliest servicer didn’t sign up until mid-April and most didn’t have programs in place until late summer.
3Q and 4Q will also be poor as very few employees understood the program’s requirements and gave false rejections (but no foreclosures).
We won’t know how successful this program really is until we see data from 1Q2010 and with new guidelines issued today perhaps not until 2Q210.
That said, I’m not a big fan of the program anyway. I think you and fluj would both agree that this just prolongs the problem. But the administration needs some goodwill with the proletariat in light of the dismal unemployment figures.
Ex SFer,
HAMP began in March-April 2009. I’m not sure what your Q308 numbers are, but they must come from different programs. Obama didn’t even take office until January 2009.
The Q209 numbers are necessarily therefore the first iteration. So your WSJ link goes along with what I’ve been saying. Publius actually stood the default rate on its head. From a bank’s perspective 18 percent re-default is much better than 100 percent foreclosure on underwater properties.
Sorry ex SF-er. I misread your post. I thought you were referring to modification rates not redefault rates.
The article you link is extremely misleading, however. Repayment plans are included in that statistic. Repayment plans increase your monthly payment. The only statistic that should be referred to is the redefault rate on modifications that result in a 10% or more reduction in payment.
“From a bank’s perspective 18 percent re-default is much better than 100 percent foreclosure on underwater properties.”
From a traditional lender’s perspective maybe. Motivations of servicers in the securitization age are much different. This is a good primer for anyone interested…
http://www.federalreserve.gov/PUBS/FEDS/2008/200846/200846pap.pdf