This came up for me in another thread. I'd heard about it but knew few facts, so I found this and thought maybe it was something someone here could educ..."/>

REAL WORLD EVENT DISCUSSIONS

Banks aren't reselling many foreclosed homes

POSTED BY: NIKI2
UPDATED: Wednesday, December 1, 2010 04:04
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Tuesday, November 30, 2010 10:01 AM

NIKI2

Gettin' old, but still a hippie at heart...


This came up for me in another thread. I'd heard about it but knew few facts, so I found this and thought maybe it was something someone here could educate me about. This is a local story in the Bay Area, but I've been hearint it's going on nationwide:
Quote:

A vast "shadow inventory" of foreclosed homes that banks are holding off the market could wreak havoc with the already battered real estate sector, industry observers say.

Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory."

"There is a real danger that there is much more (foreclosure) inventory than we are measuring," said Celia Chen, director of housing economics at Moody's Economy.com in Pennsylvania. "Eventually those homes will have to be dealt with. If they're all put on the market, that will add more inventory to an already bloated market and drive down home prices even more."

More than one-third locally

In the Bay Area, a Chronicle analysis of data from San Diego's MDA DataQuick shows that more than one-third of foreclosures are in shadow territory - that is, they are not registering in county records as having been resold.

For the 26 months from January 2007 through February 2009, banks repossessed 51,602 homes and condos in the nine-county Bay Area, according to DataQuick. Yet in the same period, only 30,823 foreclosures were resold, leaving about 20,000 bank repos unaccounted for.

Turnaround usually quick

Realtors say foreclosures generally go on the market a month or two after the bank takes title and then sell fairly quickly, often getting an accepted offer within a week or two of being listed and then closing escrow within 30 days.

Lots more at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/04/07/MNL516UG90
.DTL#ixzz16nVNXLLh


Can anyone help me understand (in language I can understand ) why this would be more profitable for them than keeping those people in their homes, renegotiating so the banks couldn't keep making profits? Or putting them on the market, since turnaround appears to be so quick. Seems to me they'd lose more in holding onto those houses until the market "opens up", which doesn't look to happen any time soon...


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off





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Tuesday, November 30, 2010 10:16 AM

BLUEHANDEDMENACE


see my post in the bailout thread in response to your question.

Basically, the bank tends to look at what it lent originally, which tends to be FAR above the current value, similarly to how a person would look at the purchase price of their home. i.e. "I cant sell for less than that I would lose money"

Meanwhile, a rational economic approach would be a take what I can get and move on plan. But they dont see it this way...the bank doesnt really care ultimately how long they hold the properties, its more important to them to be able to say something like "we liquidated our REO intentory at 85% of loan value" rather than "we got the properties out of our hands in 3 months at 60% of loan value"

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Tuesday, November 30, 2010 10:19 AM

NIKI2

Gettin' old, but still a hippie at heart...


Ahhh, I see. It's more about how they present their profits? ...I take it they're doing so well these days (thanx to being bailed out!) that they don't care about the money they're losing...?

Because surely, the longer they hang onto those homes--and it looks to be quite a while, from what I see of the market--the more money they lose, even if they eventually sell them at a better percentage than they can now...

Is perception really THAT important to them? Wow.

Why in HELL did we bail them out, given the profits they're now making and what they did to us? (Yes, I already know the answer, consider my question more of a than anything else.)


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off




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Tuesday, November 30, 2010 10:22 AM

BLUEHANDEDMENACE


Thats Wall Street for you...how u did isnt as important as how u did measures up against what analysts thought u were going to do.

Its really a giant clusterfuck

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Tuesday, November 30, 2010 10:24 AM

BLUEHANDEDMENACE


Also, the way foreclosure and REO files are handled, they dont get "closed out" until the property sells...so by using accounting magic, they dont lose any money at all UNTIL they sell the property, so where is the incentive to hurry?

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Tuesday, November 30, 2010 10:26 AM

CANTTAKESKY


Quote:

Originally posted by Niki2:
It's more about how they present their profits? ...I take it they're doing so well these days (thanx to being bailed out!) that they don't care about the money they're losing...?

Disclaimer: I'm not an expert on anything economic or financial, so I'm pulling this out of my ass.

In my view, they're not losing anything. They work for a "corporation" that is losing money. Their promotions and bonuses are contingent on appearances in quarterly reports rather than facts. If they can make it look good, if they can spin it somehow, their jobs are safe.

The shareholders are losing money, but most of them can afford to ride it out.

I'm sure someone will correct me where I'm wrong.

--Can't Take (my gorram) Sky

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Tuesday, November 30, 2010 10:29 AM

BLUEHANDEDMENACE


You're pretty much right on the money.

The shmuck in the loss mitigation department (yes that is actually what the forelosure/modification arm of the bank is called) is just some hourly suit in a call center somewhere (im over dramatizing this part a bit) whose life isnt going to be affected much by the outcome of these homes.

Their metrics for success are based primarily on how little the bank "loses" in actual sale price as compared to the original loan balance

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Tuesday, November 30, 2010 11:06 AM

JONGSSTRAW


It's actually looking worse for the future. There simply aren't enough well-qualified buyers out there to move the real estate market in any significant way. The days of deadbeats getting home mortgages are over. And having real un-employment close to 20% means 1 in 5 cannot even list a job on their mortgage application.





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Tuesday, November 30, 2010 2:34 PM

NIKI2

Gettin' old, but still a hippie at heart...


Ahhh...CTTS, now THAT fills in the missing piece, suddenly it all falls into place. Gotcha: between you and Blue, question answered.

And thanx for talking "real" terms, JS; all the bullshit about "9.6% unemployment" I understand, but I never forget that even 1% unemployment isn't 1% unemployment!


Hippie Operative Nikovich Nikita Nicovna Talibani,
Contracted Agent of Veritas Oilspillus, code name “Nike”,
signing off




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Tuesday, November 30, 2010 4:03 PM

DREAMTROVE


It's a very weird market. This is about manipulating derivatives which now make up 85% of the world's economy.

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Tuesday, November 30, 2010 4:40 PM

ANTHONYT

Freedom is Important because People are Important


Hello,

Speaking of derivatives...

I've wondered if these reclaimed, unsold properties are being bundled into a new real estate investment package and being traded around.

I've felt like such a thing is almost inevitable, and wondered what impact it might have.

Mind you, I have very little financial saavy despite my job, and have no idea how derivatives and other weird investments work.

--Anthony



Assured by friends that the signal-to-noise ratio has improved on this forum, I have disabled web filtering.

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Wednesday, December 1, 2010 4:04 AM

BLUEHANDEDMENACE


As far as I am aware, there isn't anything like that currently going on Anthony, but it almost sounds like a good idea

maybe I should start up a Real Estate Investment Trust and start making the rounds to the bankers I know....hmmm....that actually sounds viable.

Like we been saying, a LOT of these props are sitting neglected...

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