CFAH

Balance of Delinquent Loans (Image Source: Standard & Poor's)
“In summer 2009, the seasonally adjusted S&P/Case-Shiller Home Price Index rose for the first time in virtually two years. Since May 2009, the index has risen by over 3%, suggesting that the necessary correction to U.S. residential home prices is nearing an end.
However, in Standard & Poor’s Ratings Services’ view, the mortgage crisis may be far from over. The overhang of homes heading toward liquidation suggests more delinquencies and lower home prices are to come.”
The Shadow Inventory Of Troubled Mortgages Could Undo U.S. Housing Price Gains [S&P]
November Case-Shiller Index: Up For Bottom Tiers But Flat At The Top [SocketSite]

Comments from Plugged-In Readers

  1. Posted by rr

    I am neither as data-enriched as S&P nor bold enough to make broad data-less projections as some here do, but the data raise some interesting questions:
    -What percentage of these loans are strategic defaults, and is that percentage increasing or decreasing in the near-term past/future?
    -In past economic recessions, what did the goldish line look like? What did it look like as lagging indicators in a nascent expansion picked up?
    -Are loans the lender has just abandoned indicated on this graph? Will they even show up? (commenting on the anecdotal reports of people stopping payment and never hearing anything from anyone)
    -What percentage of the market are we looking at? S&P gives methodology and indicates they are looking at securitized loans only.
    -If one overlays job losses MTM over the bars on the chart above, what does the overall picture look like (on the hypothesis that some, perhaps most, of these delinquencies are job-loss induced, and that a job/unemployment recovery may reverse the trend)

  2. Posted by insidesfre

    I think we are definitely in for a rise in the number of homeowners under water. However, one positive piece of news is that large lenders like BofA and Wells are warming up to approving short sales, according to the Financial Times:
    http://insidesfre.com/2010/02/18/2010-year-of-the-short-sale/
    If more banks get on board to do loan workouts, we may not have as big a problem on our hands as you’d think. It won’t be great, but it could be better.

  3. Posted by Rillion

    Chart 1 is pretty interesting. It appears that in ~August 2007 there was ~2.2 trillion in outstanding 1st mortgage balances but that by November 2009 the total 1st mortgage loan balances were down to ~1.6 trillion. That is a 27% percent drop.
    Looking at the methodology I suspect that this missing $600 billion in mortgage debt went several places, some paid off, some was transferred to ‘agency’ mortgages (which are not included in this chart) and some was written off by the banks due to defaults.
    But at this rate if you extropolate the trends in Chart 1, it won’t belong before the only outstanding non-agency mortgage debt is seriously deliquent debt.

  4. Posted by anonn

    rr,
    I think I can sort of answer part of the first question, “What percentage of these loans are strategic defaults, and is that percentage increasing or decreasing in the near-term past/future” ?
    I’m told that starting late last fall, falling behind by two months or so was no longer necessary in order to get the bank’s attention. However, it apparently does get their attention faster still, yet all risks to that game remain attached. So I think it probably stands to reason that a lesser percentage of very recent defaults are “strategic.”

  5. Posted by sfrenegade

    As usual, redefault rates are still high and very few delinquent loans get cured. What a shocker! The report says that loan modifications are making the cure rate better, but redefaults are still at 70%.
    And as mentioned, fewer loan modifications in the 2nd half of 2009:
    “In summer 2009, it seems servicers nearly exhausted the supply of plausible candidates for loan modifications and switched their emphasis back to liquidation. The balance of loans that became recently cured fell to just more than 35% by October 2009 from about 56% in April 2009. During this period, the balance of loans that directly closed or entered REO rose to 64% from about 44%. Servicers are requesting, and borrowers are accepting, short sales in increasing numbers. Many of these are strategic defaults, meaning borrowers have significant negative equity and determine that they can enhance their standard of living by foregoing ownership to rent at a lower monthly cost.”
    I’m sure some people here will try to tell you differently though and try to confuse you with talk about HAMP.

  6. Posted by anonn

    As usual, redefault rates are still high and very few delinquent loans get cured. What a shocker! The report says that loan modifications are making the cure rate better, but redefaults are still at 70%
    Which report are you referring to, and what quarter do your percentages correspond to?
    “Fewer loan mods in the 2nd half of 2009?”
    There’s no chance of that being true. None.

  7. Posted by anonn

    Oh, I see. This S & P Report.
    Man, are you ever wrong about this stuff. Stop talking about it. Please? You skim the material and you misrepresent it too.
    Its footnote reads:
    “1. Loan modifications occur when servicers determine some concessions in payment terms are the best options to maximize investor returns. Reporting of loan modifications has only recently become common practice by trustees. Standard & Poor’s developed an algorithm that identifies loan modifications based on numerous changes to loan characteristics. Our loan modification methodology is completely independent of the federal government’s Home Affordable Modification Program (HAMP), and the majority of loan modifications according to our methodology occurred prior to the announcement of HAMP in March 2009”
    Really now. This report is ancient history at this point. HAMP is THE GAME in town. And you’re talking about fewer loan mods in the 2nd half of 2009?
    Did you not read the treasury reports?
    You act like you care about this stuff.
    YOu don’t. You’re just like Tipster. Go away.

  8. Posted by sfrenegade

    Nice try — you’ve previously said that loan mods were happening outside of HAMP in larger and larger numbers. Now you’re saying HAMP is THE GAME in town. Make up your mind. Why don’t you go away?

  9. Posted by sfrenegade

    Once again, I encourage people to read the reports for themselves rather than taking my take on them and certainly rather than taking anonn’s take on them.

  10. Posted by anonn

    Yeah, I said that previously. It was what I had read and believed to be true at the time. But since then, and on this site no less, I was corrected in another thread by someone with more knowledge on the subject than I. He provided numerous links and offered insight into the process from a lender’s perspecive. Since then I in fact looked into a forensic auditor for a client as well, who echoed what the poster (Darn it, I forget the guy’s name) said. This process is mutable and evolving. I’m not like some of the people on here with blinders on. Are you?
    And “nice try” ? Pal, you’re talking about late 2009 and the source you cite is talking about mods started before March 2009. Please.

  11. Posted by tipster

    “This process is mutable and evolving. I’m not like some of the people on here with blinders on. Are you?”
    Then stop telling people to go away. We all learn from each other and we all identify ourselves so that people can learn our biases. If someone says something wrong, people have the opportunity to prove them wrong. No harm in people posting “the facts are X” when they identify their sources and people can either refute them or discredit the source.
    Insulting the posters who have different viewpoints from yours just makes you look dumb, and you’re a lot of things, but you aren’t dumb.

  12. Posted by anonn

    No. You have it precisely backwards and you do indeed have blinders on. Everything is tailored to match your viewpoint, not vice versa. Like what Renegade did in this thread, talking about this 70% figure as if it was current and not from last June. Telling others to “read the reports” and casting doubt on others, when he didn’t even do that. This is what you do daily.

  13. Posted by Kevin

    “However, in Standard & Poor’s Ratings Services’ view, the mortgage crisis may be far from over.”
    Isn’t Standard & Poor’s one of the credit rating agencies giving AAA ratings to all those toxic securities??? How can we be sure this “data” is accurate? Maybe the big banks want to try and get another round of cash because ‘the mortgage crisis may be far from over’….

  14. Posted by sfrenegade

    “talking about this 70% figure as if it was current and not from last June”
    Ummm, how do you know if people are re-defaulting if you don’t give them sufficient time to re-default?
    I’ve mentioned on previous threads (see the link) that re-default rates usually end up pretty high 9-12 months out from a loan mod (up to 70%). This report is only 6 months out from June 2009, and it already reports 70% redefaults for loans of that vintage. That’s not good.
    anonn’s the one casting doubt without anything real to say. You can’t use redefault numbers from modifications in November 2009 in a report dated January 2010 to say that no one redefaulted after a modification. This is pretty simple.

  15. Posted by anonn

    Huh? You called data about redefaults previously adjusted PRIOR to last June the trend. Clearly. I have provided the quotes. How many times are you not going to read the material you yourself provided?
    You are welcome to speak to lenders, forensic auditing companies, or read the Treasury reports before you talk about this subject the next time.
    Now I have “nothing real to say.” After you just threw up some links to a report you skimmed, and summarized it incorrectly. That’s a laugh. Go away and study up bud.

  16. Posted by sfrenegade

    Your quotes are meaningless as they were last time. Once again, nice try. But the data are clear both here and in the prior link I sent. Maybe you should read the reports.

  17. Posted by anonn

    Those quotes are from the very S&P report you are talking about and incorrectly summarized. I agree. They render your conclusion meaningless.
    http://www.financialstability.gov/latest/pr_02172010.html
    And for your edification, you’re welcom to read what Publius says, and view how it’s backed up by links to Treasury reports, here.
    https://socketsite.com/archives/2010/01/actual_san_francisco_foreclosures_down_28_qoq_up_554_yo.html
    You are talking about old news. Not even old news. But an old version of old news. Clearly. Step it up. Or find me ignoring you on this subject.

  18. Posted by anonn

    Here’s the actual report, released yesterday:
    http://www.financialstability.gov/docs/press/January%20Report%20FINAL%2002%2016%2010.pdf
    And you’re welcome to Google “Hamp versus private loan mods.” You’ll encounter any number of viewpoints in the know. They all concede that a shift has occurred, last fall. Private loan Mods gave way to HAMP.
    Or, don’t bother and keep on cherrypicking tidbits from things that you think you understand and then propping them up as if they support the viewpoint you’ve already embraced. Lots of people on here do it. Why shouldn’t you, right?

  19. Posted by sfrenegade

    “Or find me ignoring you on this subject.”
    Feel free to ignore the truth.
    Or alternatively, go into the future with a DeLorean and get me redefault rates from Nov 2009 modifications from the Nov 2010 data whenever it ends up being published. Otherwise, you’re just throwing up noise.

  20. Posted by anonn

    You throw up an outdated report and talk about trending. I proved it. And you still have the nerve to call what I say — with evidence from a government report, yesterday — “noise.”
    I get it, man. You are anti loan mods. You think they stink. OK. But that’s all you’re saying.

  21. Posted by Embarcadero

    Loan modifications are futile. They only delay the inevitable. Arguing about which version of futile loan modifications is the one to talk about is a fool’s errand.
    Foreclosures will help reset prices and bring stability to the market.
    Here’s a reprint of an analytical report that draws from a RE consulting firm and from S&P’s report. The authors suggest flat-lining prices, unless we see a rise in interest rates. IMHO, there’s still a significant down-side risk:
    http://www.roubini.com/us-monitor/258411/coming_soon__5_million_more_foreclosures

  22. Posted by anonn

    Nobody can posit that loan modifications from neg-am ARMs that are set to recast within the next year, to very low locked low rates for 5 to 7 years or more, are “futile.”

  23. Posted by J

    “very low locked low rates for 5 to 7 years or more”…
    And still for a larger amount than the house is worth in many cases, the payment is also still larger than the rental value, and you have diminished capacity to profit from the upside…

  24. Posted by sfrenegade

    Come on, anonn — in the previous thread I linked above, you told me a few things:
    1) the previous reports I described were talking about HAMP (even though they weren’t);
    2) HAMP was irrelevant (even though now you’re saying it’s not); and
    3) that bank modifications not under HAMP would happen in larger numbers in the second half of 2009 and that you were anecdotally seeing some of this (even though you retracted this above, and I pointed out was wrong above at 10:29 yesterday).
    Now you’re saying:
    1) that redefaults have dropped under HAMP (even though you have no data and it would take a flux capacitor to get accurate data today, since you can’t know about redefaults accurately until 9-12 months after modification); and
    2) that the report on HAMP that you linked above somehow contradicts my statement on redefaults (even though, again, we don’t have data from 9-12 months after modification, and already 60K people fell out of trial modifications vs. 116K getting permanent modifications, which suggests the redefault rate right off the bat under HAMP is 34%).
    Given your evolving narrative here, your anecdotal evidence being contradicted by facts, and the fact that data contradicts what you say, you have no credibility here on the mortgage market. Why don’t you just stick to telling us which crapshack will fly into escrow next?

  25. Posted by anonn

    Is it my duty to seek you out when new information arrives? You come on. Sorry that you missed the thread that occurred between the one you linked to and this one. But I linked to it. I also explained who and what I’ve spoken to that changed my mind. I showed exactly how HAMP has increased with Treasury links, numerous times.
    You are completely in the wrong with your very dated non-HAMP 70% default, rated last June, shpiel. This process had been dynamic to say the least, and you are on about old, old news. You’re saying stuff like “the quotes you threw up don’t matter” — even though they’re from the very same S&P report you’re pimping. You’re not trying very hard, guy. You’re just another net blowhard who has a rigid opinion. So I cannot help you out, there. Look into what you’re blogging about already.

  26. Posted by anonn

    And still for a larger amount than the house is worth in many cases, the payment is also still larger than the rental value, and you have diminished capacity to profit from the upside…
    Lot of if’s there. First, if it’s too far underwater they probably won’t work with you. Secondly, the payment was larger than the rental value in the first place, so that was a given, but some of these loan mod rates are REALLY low. So that’s not even a given. SFRs in Portola are going for 2K, so do the math. Third, not necessarily. Who is to say what 5 to 7 years brings?

  27. Posted by sfrenegade

    “You’re just another net blowhard who has a rigid opinion.”
    As a friend of mine says all the time, most hate is self-hate. I’m done with you until you have something substantive to say.

  28. Posted by anonn

    Treasury links are not substantive? Links to a thread on this site where someone in the industry breaks it down, and I admittedly change my mind on the subject, is not substantive?
    What is substantive to you?
    It’d be apt if somebody created a posting bot for you that said “I didn’t read any of this stuff but I like to talk.”
    Do your homework.

  29. Posted by anonn

    “flux capacitator” to try to reduce my argument to comic, “I know you are but what am I” (pot:kettle black internetspeak instead of communication) blah blah blah. What, no “straw man” ?
    Don’t think that anybody with decent intelligence can’t see through little nettyboy defense mechanisms. Piss off. You’re just playing to a crowd now.

  30. Posted by Rillion Bitter that he does not qualify for HAMP

    For the record HAMP sucks.

  31. Posted by embarcadero

    Loan modifications – of any flavor – are utterly futile. Their record in “correcting” the problem supports this. The same people who get into negative amortisation 5 year ARMs are the same people who are in credit card debt, who are flipping houses, who are… not good custodians of money, their own or anyone else’s. That’s why these modified loans have such a high failure rate. The people making the payments are often as insolvent as the loans were wacky.
    I can’t see why it’s not in everyone’s interest to get the foreclosures over with and move on. Modifying loans that never made sense is a fantastic way to waste time and money. Or maybe it’s the banks’ new strategy of “strategic non-foreclosure”?

  32. Posted by anonn

    Loan modifications – of any flavor – are utterly futile. Their record in “correcting” the problem supports this. The same people who get into negative amortisation 5 year ARMs are the same people who are in credit card debt, who are flipping houses, who are… not good custodians of money, their own or anyone else’s. That’s why these modified loans have such a high failure rate. The people making the payments are often as insolvent as the loans were wacky
    Utterly futile and a reduction in failure rates aren’t synonymous. I understand that you do not favor loan modifications. But your same people this same people that thing is only opinion.

  33. Posted by embarcadero

    Data are the glue that link opinions to reality. My opinions about modified loans are backed up by the astounding failure rate of those loans. Maybe you have some data to back your opinion about loan modifications? .
    Unless you have some data that shows something very different from what we’ve seen thus far, yours are just opinions unglued from reality.

  34. Posted by anonn

    There’s plenty of data that shows the modifications that were defaulted on from last spring totally sucked. Who wouldn’t default on a higher rate than what they had in the first place?
    And I mean, Renegade is up there talking about fewer loan mods were even being offered in the second half of 2009. Nonsense.

  35. Posted by sfrenegade

    For the record, I was specifically talking about non-HAMP modifications because the report specifically says it doesn’t take into account HAMP (duh?). As anonn mentioned, the HAMP modifications are detailed in a separate report. As I mentioned on a prior thread, there weren’t very many non-HAMP modifications happening in the second half of 2009, and this report confirms that.
    The non-HAMP modifications are the ones that anonn previously claimed would overwhelm the number of HAMP modifications — a statement he later retracted because it was not based in fact, but rather his ideology — nonsense indeed:
    “Choose to believe that banks aren’t doing non HAMP write downs, loan mods, and interest rate changes. It matters little that you don’t care to understand that reality.
    ‘Show us’ ? Huh? You’re pretty much by your lonesome here.
    What’s your deal? Seriously? Pretty much everybody knows that this is going on. Every homeowner who has an ARM is getting phone calls right now! Do you listen to AM radio ever? Wow.”
    “Honestly, what I’m hearing is that it’s no longer necessary to intentionally miss a few months of mortgage payments in order to get on their radar. The banks are much more receptive now. Here’s an example. It’s readily searchable. You can Google “Countrywide underwriting errors” + “Bank of America” + ARM + “mortgage modification” (or some permutation along those lines) and get an idea of one very big California story that’s taking place right now. One that has nothing to do with HAMP.”
    https://socketsite.com/archives/2009/12/rewarding_their_riskiest_borrowers.html

  36. Posted by anonn

    For the record your S&P data was from last spring. For the record you were using it to talk about last fall. For the record, no kidding it was down, they all began shifting toward HAMP late last fall. Duh is right.
    Again with that old link to a discussion about something that has changed since then. So what? It’s evolving. You can stay talking about the past if you like but I’m not sure why.
    Seriously man. If you actually care about this stuff, read up. Call someone. Ask a lender.

Comments are closed.

Recent Articles