Fannie Mae and Freddie Mac are good barometers for national foreclosure trends. Fannie Mae, page 82 of their latest 10-Q says "...foreclosure levels were lower than what they otherwise would have been during the first nine months of 2011 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers, changes in state foreclosure laws, and new court rules and proceedings. Additionally, foreclosure levels were affected by our directive to servicers to delay foreclosure sales until the loan servicer verifies that the borrower is ineligible for a HAMP modification and that all other home retention and foreclosure prevention alternatives have been exhausted. The delay in potential foreclosures, as well as an increase in the number of dispositions of REO properties, has resulted in a decrease in the ending inventory of foreclosed properties since December 31, 2010."
Freddie Mac, page 79 of their latest 10-Q says "Our REO property inventory declined 17% from December 31, 2010 to September 30, 2011, primarily due to a decline in the volume of single-family foreclosures caused by delays in the foreclosure process, including delays related to concerns about the foreclosure process, combined with continued strong levels of REO disposition activity during the period."
Be patient though, since more distress is on the way. Freddie: "...we expect the volume of our REO acquisitions will likely remain elevated, in part due to the resumption earlier in the year of foreclosure activity by servicers following the suspensions over concerns about documentation practices. We have a large inventory of seriously delinquent loans in our single-family credit guarantee portfolio, many of which will likely complete the foreclosure process and transition to REO during the next few quarters as our servicers work through their foreclosure-related issues."
It's definitely down here in Orlando. A lot more short sales than REOs now.
However I know that a huge amount of homeowners are still underwater here, so I think there will be another wave. Unless the new refi plan the Obama admin is implementing stops the foreclosures.
I've been hearing that a "wave" is coming for about 3 yrs. now. It seems to fizzle everytime. Inventory is very low - getting close to 2005. We are a non-judicial state, so I can't see a huge delay. If there is a flood, I'll be allover it - it just seems more of the same-old. I'll believe it when I see it. The "shawdow inventory" appears very illusive and now the gov't is talking bulk sales to capitalized investors. My take is that it probably won't happen. Banks are being very aggressive in their pricing as far as I can tell.
The thing you should be paying attention to is the "pipeline" that supplies the REO properties. I am in a judicial state, so that would be the sheriff sales here. The number of houses scheduled for any given month's sheriff sale has been declining for a number of months now - ever since the "robo-signing" fiasco broke. If that continues, then the REO inventory will also begin to decline as well.
The sources seem to be very fuzzy about this. I hear massive dumps will be ocurring, then nothing. This has been going on for years. There comes a point when you have to decide if this is going to happen or not. I say not.
The thing you should be paying attention to is the "pipeline" that supplies the REO properties. I am in a judicial state, so that would be the sheriff sales here. The number of houses scheduled for any given month's sheriff sale has been declining for a number of months now - ever since the "robo-signing" fiasco broke. If that continues, then the REO inventory will also begin to decline as well.
I believe it will be the flip side of this. The robo signing fiasco is just about over and banks are now moving on to business as usual, so I expect to see more at the trustee sales, REO's and short sales.
While I agree that you need to watch the "pipeline", I would aalso recommend that investors track current and past inventory levels. This is key to assessing where your market is heading.
I agree with you on the robo-signing being settled, and expectation that REO levels could increase again. If REO inventories are to rise, then the number of properties listed for sheriff sale should increase first; that is the supply pipeline for the REO inventory after all. Should that not happen, then the trend that people have noticed - a decline in REO inventory - will likely continue.
One other thing that could affect REO inventory that hasn't been mentioned much is the willingness of the lender to discount the amount being asked at the foreclosure auction (sheriff or trustee sale) below the debt owed. The more willing the lenders are to do that, and the bigger the discount, the more likely for that property to never make it to REO status, as the auction buyers will pounce on those.
Can someone link to soemthing showing mthly/qtrly trends (by market) in the subcomponents of the "overhang" (loans 90 days past due, NOD/pre-foreclosure stage, REO, maybe even loan mods/workouts if that's available).
Of course, Fannie/Freddie/HUD are all just govt entities with no profit motive these days, so they're subject to political currents. Also, with short term rates and their borrowing costs near zero, these entities seem to face minimal financial consequences from slowing the process to ease the absorption of the overhang (good for incumbents, I'd think).
I know the cheap funding cost is encouraging local banks to hold out more aggressively when selling their REOs. If rates were higher, the banks would feel real pain from holding these non-earning assets.
Steve, are you seeing underbids on any significant level? I've heard a few instances of it happening, but I also hear that the bank needs to bid-in at the amount owed in order to collect PMI or turn it over to freddie/fannie/HUD.
Steve, are you seeing underbids on any significant level? I've heard a few instances of it happening, but I also hear that the bank needs to bid-in at the amount owed in order to collect PMI or turn it over to freddie/fannie/HUD.
It varies by lender, and I guess by type of loan. But I'm seeing this mostly in areas of the county where property is less desirable. Nobody wants those properties ...
As to the bank bidding a specific amount to collect from a loan guarantee / insurance, yes I have also seen that. In my county, they have an accepted practice of the attorney stating the "upset bid" as being the amount the lender expects to see in order to let somebody else get the property; and the attorney's actual bid will be given as "costs", an amount far below the "upset bid" (this practice is used so that the lender does not have to pay additional amounts sort of like commission to the sheriff based on highest bid received). Every now and then an attorney will bid the full "upset bid" rather than just bidding "costs", and those are due to insurance reasons - I actually one day asked an attorney point blank on this, and that was his explanation.
Can someone link to soemthing showing mthly/qtrly trends (by market) in the subcomponents of the "overhang" (loans 90 days past due, NOD/pre-foreclosure stage, REO, maybe even loan mods/workouts if that's available).
Didn't get the memo? Fannie & Freddie are selling $1Billion in REO to Capstone. Capstone will be setting up Residential Rental REIT's.
Bulk Sales is where REO Sales are headed. Look for the major Private Equity/REIT players to announce BIG Residential REO take downs over the next few months.
My county went from having separate listings for SFH, TH, and condos to combining all three 6 months ago. Last week there were about 45 listings....today about 30. Seeing what appears to be buyers with primary residence intent. Plus BPO are getting higher. Sucks.
Only a 1, that's right, ONE month supply of REO's here in Phoenix and it has been that way for two quarters now. We are a non-judicial state and have been unaffected by the robo-signing controversy.
As far as the so called "shadow inventory" and coming "wave of foreclosures" I have been hearing that for years and it has not happened and I doubt it will happen. Our level of homes 90 days delinquent has been falling for at least a year now.
We're at the courthouse steps every week trying to buy. I've seen a dramatic drop in foreclosures over the past year. Michigan has a 6 month redemption period so typically what we see today at sheriff sale hits the MLS in 9 months.
This time last year we had 300 properties read off every week. We hit the robo-signing drought in the fall then expected a dramatic increase in January. Instead I've only seen about 100 foreclosures each week for the past 6 weeks.
The amount of discounted bids has remained about the same which I would say is 10% on any given week. But the value of the discount has gone up from the lows we saw last year of 10% of the note value, to now 20-30% of the note value.
The volume of houses currently on market in southeast Michigan has dropped 25% since December. And from what I can see the pricing of the new product coming online is roughly 10-20% higher than what we saw even two months ago.
Didn't get the memo? Fannie & Freddie are selling $1Billion in REO to Capstone. Capstone will be setting up Residential Rental REIT's.
Bulk Sales is where REO Sales are headed. Look for the major Private Equity/REIT players to announce BIG Residential REO take downs over the next few months.
Can you point to this "memo"? I don't see any filings or press. But then again, Fannie dispositions in 2010 were $40B, and $36B through 9 months of 2011. And Capstone... what? Capstone Capital Corp? Capstone Partners?
FHFA is pre-qualifying investors for bulk reo purchases. I read this a week ago (?). The vulture funds are lining up. I don't have a cite but a simple search pulls up several articles about it.
Can you point to this "memo"? I don't see any filings or press. But then again, Fannie dispositions in 2010 were $40B, and $36B through 9 months of 2011. And Capstone..
Don't know about Capstone, but these discuss large investments in REO-to-Rent programs by OakTree and GI Partners, large pvt equity funds. This bulk REO-to-Rent buying started with large banks, and is now being extended to the GSE's (Fan/Fred/HUD)
David Beard I'm invested with a company the buys FDIC pools and I'm looking closely at the tense. Your posts are regarding future buys whereas Mike implies current.
Cheryl C. my point was that Mike appears to be in possession of material non-public information regarding Capstone and FNMA/FHLM ($1B transaction) and their alleged plans to setting up Residential Rental REIT's. The HomePath structured sales agreement(s), like FDIC pool sales, don't allow these disclosures unless the information is 'generally available to the public...' and we've seen no offering presented yet from GSEs/FHFA.
I was thinking the same thing here in Illinois.
I've been doing mostly HUD deals and, in the past year,
the number of homes has dropped from 1,000 in the system
to now just under 300.
This is normally the time of the year that some really good deals
could be had since Owner Occupants aren't that interested in looking. But the listings are just way down.
I was hoping to add 3 or 4 a year for the next 2 years.
But now I'm ratcheting down to about 2 a year for the next 2 years. That will get me to 18 houses.
My hope is that, as the prices start to go up and sales start coming back, I'll be able to continue buying 2 a year by doing a flip and making 15 to 20k and then using that to pay down a buy/hold deal where the cash flow is still at that $300 a month or more.
Not as concerned with cash on cash return as much as I am with chunking in the net cash flow and continuing to grow.
25 houses by age 45 is my goal. Not sure its doable but we're going to give it a shot.
My hope is that, as the prices start to go up and sales start coming back, I'll be able to continue buying 2 a year by doing a flip and making 15 to 20k and then using that to pay down a buy/hold deal where the cash flow is still at that $300 a month or more.
Not as concerned with cash on cash return as much as I am with chunking in the net cash flow and continuing to grow.
25 houses by age 45 is my goal. Not sure its doable but we're going to give it a shot.
That is what I'm thinking too. I would like to learn to learn how to do flips so that I can move to that when the market finally turns.
Fannie Mae and Freddie Mac are good barometers for national foreclosure trends. Fannie Mae, page 82 of their latest 10-Q says "...foreclosure levels were lower than what they otherwise would have been during the first nine months of 2011 due to delays in the processing of foreclosures caused by continuing foreclosure process issues encountered by our servicers, changes in state foreclosure laws, and new court rules and proceedings. Additionally, foreclosure levels were affected by our directive to servicers to delay foreclosure sales until the loan servicer verifies that the borrower is ineligible for a HAMP modification and that all other home retention and foreclosure prevention alternatives have been exhausted. The delay in potential foreclosures, as well as an increase in the number of dispositions of REO properties, has resulted in a decrease in the ending inventory of foreclosed properties since December 31, 2010."
Freddie Mac, page 79 of their latest 10-Q says "Our REO property inventory declined 17% from December 31, 2010 to September 30, 2011, primarily due to a decline in the volume of single-family foreclosures caused by delays in the foreclosure process, including delays related to concerns about the foreclosure process, combined with continued strong levels of REO disposition activity during the period."
Be patient though, since more distress is on the way. Freddie: "...we expect the volume of our REO acquisitions will likely remain elevated, in part due to the resumption earlier in the year of foreclosure activity by servicers following the suspensions over concerns about documentation practices. We have a large inventory of seriously delinquent loans in our single-family credit guarantee portfolio, many of which will likely complete the foreclosure process and transition to REO during the next few quarters as our servicers work through their foreclosure-related issues."
Thanks for the link Steve. I get regular reports from Corelogic and one of their guys called me today to see if they could provide any additional info. I thought "Whaaa? I'm small time". I do try to read as much as possible and thank you for adding the other data. There is alot of debate about "shadow inventory" and non-judicial vs judicial States. I'm seeing alot of demand chasing few properties.