The Collected Works of Author and Blogger Larry Roberts

Archive for April, 2012

Last fall B of A and other major banks increased their filings of Notices of Default. Since then I have been predicting a spring surge of REO that would snuff out the spring rally. Right on schedule in January, Notices of Trustee Sale and the number of REO acquired increased, and it looked like the REO would hit the market in time for the spring selling season. Then lenders changed their collective minds. In February, lenders abruptly curtailed their acquisition of REOs at the auctions, and in March they took back fewer than in February. CA - Foreclosure Outcomes This has left many, me included, groping for an answer. Why Are We Seeing Fewer Foreclosures? Rick Sharga APR 16, 2012…[READ MORE]

As the crash in house prices continues the number of families displaced from their homes increases due to foreclosure, short sales, and strategic default. Since the foreclosures generally lead to an involuntary property eviction, many former loan owners are upset by the consequences for defaulting on their mortgage. Rather than accept the consequences for their mistakes, many who involuntarily vacated their houses portray themselves as victims deserving of special dispensation. Pandering politicians, mostly from the political left, have lobbied for increased loan modifications, foreclosure remediation, principal reduction, and other misguided policies to prevent those who defaulted on their mortgages from enduring the consequences for their actions. The latest attempt to generate sympathy for loan owners comes from the Brookings Institute.…[READ MORE]

Modern American culture can trace its roots on the North American continent to pioneering English settlers. Life on the frontier is harsh, and each family unit is self-reliant. In a frontier society, if people didn't work, and if they didn't produce their own food and shelter, then they died. Fear of death from starvation or exposure was very real, and anyone who wasn't motivated to produce something of value to themselves or others faced the near certainty of painful death. In a frontier society, there are no bailouts. We have made much progress over the last four centuries, and the fear of death from lack of food has been largely eliminated. Private and public shelters have lessened the fear of…[READ MORE]

Lenders have been slowing their acquisition of new REO since February. In fact, the decline in REO going back to the bank has been rather dramatic. CA - Foreclosure Outcomes Banks are also dramatically slowing the rate at which they put REO on the MLS. As a result inventories all over California have been declining. Banks are obviously planning to withhold inventory until the market bottoms. Expect to see a low-volume rally as the few qualified buyers are forced to pay higher prices. As a result, the kool aid is flowing again.... One thing notably absent from the few foreclosures that are occurring is anything over the conforming limit. Of the 196 REOs listed on the Orange County MLS over…[READ MORE]

A couple days ago, I postulated that lenders would utilize REO to rental programs to the extent feasible: ... First, it gives them immediate capital. They don’t have to wait as they slowly liquidate on the MLS. Opponents of these programs — mostly realtors who fear loss of commissions — postulate lenders will recover less when selling in bulk. Lenders will have to discount the properties more to liquidate in bulk, but they also eliminate a 6% commission to listing agents, so the net may be the same. And since lenders are recovering their capital more quickly, the benefits outweigh the discounts required. Another advantage of the REO to rental program is that lenders don’t have to dispose of those…[READ MORE]

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