Posted on June 11th, 2008 in Mr Mortgage's Personal Opinions/Research

It is that time of the month again folks! The May monthly CA foreclosure report is ready, data courtesy of Foreclosure RadarIt was a ‘record-breaking’ month, which when speaking of foreclosures, is not a good thing.

This report confirms what I have said for months, that the REO market is now ‘the real estate market’ and the banks are the ‘market makers’. For the first time in history, the seller controls the price and not the buyer, which is responsible for pile-driving prices throughout the state and nation.

California broke a major foreclosure record in May with $10.4 BILLION in loans going back to lender’s balance sheets.  This was a near 9% increase month-over-month. Last month $9.237 Billion went back to the bank. See my April CA Foreclosure Report.  It is obvious that the foreclosure crisis is continuing to worsen. If the banks are lucky and sell the homes for 60% of the new appraised value or BPO, this represents another $6 Billion+ in losses for the nations largest banks in one state for one month!

Just think how many second mortgages were completely wiped out.  It’s no wonder why mortgage bonds have began tanking again. They never should have rallied off of the lows in March in the first place. 

Please see the YouTube version here. Please note, this is the MAY report, not the June report, as I stated in the video…DOH!

Let’s break it down.

1. Notices of Default (NOD), the first step in the CA foreclosure process when borrowers go down 90-days in payments, were down 2.5% to 43,011 new filings. However, the average daily filings were actually up 2.4% to 2,009 per day.  Last month the total was 44,100 or 1961 per day.  These are from people who began missing payments in Jan and Feb. If you remember, in Jan and Feb, there was a mini refi-boom, as rates fell sharply. If not for that, the NOD count could have been much worse. Since then, rates are up sharply and mortgage application volume has been consistently falling. This means more people maybe missing payments due to the lack of financing options, which will lead to an increase in NOD’s over the next few months from these already historic levels.

The vast majority of NOD’s are first mortgages because second mortgage holders quit filing NOD’s months ago, due to values falling to levels that make it futile. If you are a second mortage holder and there is no value in the property, there is no reason to foreclose because the first mortgage holder gets it all. For this reason, second mortgage loan defaults are soaring and the loans are essentially worthless. People know that lenders have to use more tradional means of collection and are not paying their second mortgage payment. A second mortgage lender is usually completely wiped out when a home goes into foreclosure. This problem will not go away.

Roughly 75% of NOD’s make it all the way through the foreclosure auction stage and end up on banks balance sheets. About 25% of NOD’s are cured by various means by the time auction hits. If you combine last months NOD’s of 44,100 and this month’s you get a total of 87,111 meaning banks will take back 65k homes 4-5 monnth out, because that’s how long it takes to get through the auction phase. This means October and November will have record REO coming back to the banks. 65k homes going back to banks is more than the total homes sold in CA in the past two months and will likely be much more than sold in Oct and Nov, which are historically poor sales months.

2. Notice of Trustee Sale (NTS ) were at a record 34, 564 new filings. This is a 15.6% increase over last month’s 28,992. This is huge. This means much fewer people are curing their NOD’s than in the past.  These are from Notice of Default’s 3-4 months prior, as by law the NTS can be filed 90-days after the NOD. However, the average time it took a lender last month to file the NTS was 105-days due to the volume. Lenders can take a home to auction 21-days following the NTS. Jan NOD’s were 38,500 so the percentage that made it from NOD to NTS was 89.77%. This is a new record.

3. Total homes that went to auction increased 11.8% to a total of 25,523 properties. This was also a record. Of those, 24,831 or 97% received no bid higher than the lenders opening bid and became lender REO. This is where the $10.4 BILLION figure going back to banks comes from.

One thing to note, 3% of the 25,523 properties were bought by 3rd parties vs. 2.3% last month. Hey, I had to give Bubblevision something to be bullish about.

4. Discounts at auction were at a record.86% of all homes were discounted at an average of 28%. The largest subprime areas such as Sacramento, San Joaquin, Stanislaus and Merced saw larger discounts from 31-37%.

Important Notes…

For those of you who live and die by the monthly existing and new home sales report, remember that in most cases, bank REO sales are counted in the existing sales number. As a matter of fact, Data Quick reported that 38% of last month’s total CA Existing Home Sales had foreclosure action within the past 12 months, meaning much was bank REO shadow inventory. The foreclosure market has very quickly become ‘the real estate market’.

With so much new foreclosure inventory entering the system and discounts getting deeper each month, there should continue to be more bank REO sales of existing homes in the future, making it seem as the housing crisis is ending. This is the primary problem with so many ‘analysts’ positive housing predictions.

But, how can you truly judge sales and inventory numbers when the banks are taking back as many homes at auction as sell each month? Remember, the ‘months supply’ number is calculated using ‘listed’ inventory and a very small percentage of bank REO inventory is listed. The amount of ‘non-listed’ bank REO, shadow inventory, is staggering. I recently did a research report on this that showed over 4.25-years supply in CA.

What is most frightening is how quickly values are dropping as a result of this. With as much bank REO inventory selling for as deep of discounts as we are seeing, it is forcing an immediate and swift mark-to-market change in values of entire neighborhoods all over the state. We have never seen a real estate market in which one seller (banks) controlled so much inventory and has the ability to sell it for whatever it takes to move it quickly.

If a few of these REO homes sell at 20%-30% below the most recent comparable sales within a mile radius of your home, your value will be negatively impacted. Very quickly, America’s real estate is being marked-to-market by the bank’s shadow inventory, accelerating a natural process that should take years. This causes even greater numbers of home owners to go into a negative equity position, causing even more loan defaults. It is a vicious cycle that has never been seen before.  -Best, Mr Mortgage

Before you go, please be sure to subscribe my blog email or RSS feed on the home page. Then, you will be updated quickly and I promise you that I will continue to have data nobody else does. Make sure you go to Foreclosure Radar for your FREE CA monthly foreclosure report.

Financial Institions – for those looking for more detailed foreclosure, REO and loss estimate information by bank, please email me at

Home owners/buyers and Realtors stay tuned!In the next month a new service will be launched called It will enable you to see the real foreclosure risks surrounding a particular subject property, perhaps your home. It is now apparent that the foreclosure market is quickly becoming ‘the real estate market’. With foreclosure inventory carrying such deep discounts, heavy foreclosure or bank REO inventory in your neighborhood presents the biggest threat to your home’s value. Finally, you will be able to easily identify those threats and act according.


CA Housing Stats, The Real Story…4.25-years Supply?!?

Breaking CA April Foreclosure Stats – Very revealing

April CA Home Sales Rise, But Not As Fast As Inventories

ALT-A Disaster Looming – Know the Facts!

About Foreclosure Radar is the only place where you’ll find complete up-to-date information on every foreclosure opportunity available in California, including exclusive daily updates on every auction. And we’re the only foreclosure service that provides a comprehensive set of professional tools for Realtors® and Investors to find, evaluate, and track the best foreclosure opportunities.


  1. […] Read More… Posted in |June 11th, 2008 by News| Leave a Comment […]

  2. […] drhousingbubble wrote an interesting post today onHere’s a quick excerptCalifornia broke a major foreclosure record in May with $10.4 BILLION in loans going back to lender’s balance sheets. This was a near 9% increase month-over-month. Last month $9.237 Billion went back to the bank. … […]

  3. […] Read the rest of this great post here […]

  4. Mr. Mortgage…you’re a genius!!

    I have been on your game plan since 2004. You can ask anyone from my x-mortgage and real estate company if I was preaching similar views to yours, and unfortunately it is because of bad times, but it feels good to be right.

    Today my x-companies do not exist because they did not believe that this market was going to be an 100% “REO market”.

    They wanted to build a company that made sense in a good market. I wanted go after the banks (in 2004!!) to help them prepare for today’s market and that would’ve given our company tons of REO listings, which in return brings in tons of buyers. the vote was 3 against 1. my partners made comments like “what is a short sale? i dont see the market going down.” DUH!!

    You, Mr. Mortgage, are correct on your outlook. Numbers never lie. Keep up the awesome work. If you are ever looking for someone to join your team…I’m a great candidate.


  5. Add these problems to the buy and bails, which I guarantee are going to become an enormous problem here in southern California. I have already gotten two calls this week from client contacts asking about how to go about it. They see the foreclosure in their nieghborhood, it is a like property that is on the REO market $200k or 300k less, either the husband or the wife qualifies for the new property…move the fam down the street…voila. The spouse getting the new house quals for a new 30 fix mortgage, at a payment at or below the IO they had down the street, because the loan principle is $200k (in many cases more, much more) less than before. And if they file for a phony divorce or separation, one spouse can keep good credit, while the other takes the hit for the mortgage lates and foreclosure. The old house goes into foreclosure and the banks, or in many cases Fannie and Freddie will lose huge money. The banks are oblivious to this. It is REALTORS who seem to be coaching homeowners about this scam, as a means to generate REO sales. I just tell these people they have called the wrong guy, but how long before EVERY mortgage professional in California jumps in on this phenomenon as a means to make the living to which they’ve become accustomed? The whole system seems to be moving toward a situation whereby banks and homeowners lose their collective asses, while the scumbags and fraudsters continue to get richer. Is your worthless Congressperson paying attention to this, or worried about getting re-elected?

  6. Thank you both “Mr. Mortgage” and Dave for your insights ! Dave, you’ve reminded me that just when I think people can’t think of a way to scam the system any more, they find a new way to scam the system.

  7. When does this vicious cycle end? At normal rent/own or price/income ratios?

  8. wow dave, great work if you can get it – LOL, seriously the levels of greed and fraud are palpable.

  9. Dave – maybe I’m a bit jaded, but I see nothing immoral or unethical about that. Considering that the banks were the ones who inflated the whole bubble I say let them reap what they have sown.

    I should note that I personally ate a 25% loss on my house I sold earlier this year and I paid my bank off in full. Considering that my loan came from a relationship with a local bank and they kept it on their books I felt responsible for it. I would not have felt the same if the loan was from a mortgage broker or an irresponsible lender that encouraged me to use an exploding ARM or similarly bad product.

  10. What happens when the new REO mortgages (sales) at 20-30% below 2007/2008 inflated MV go ‘upside down’? Many (most?) of those current REO ‘bargains’ will become just another set of capital (death) traps for all those delusional ‘bargain’ hunters who daydreamed that their 20%-30% discounted purchase price was a ‘bargain’. Unemployment will continue to increase and foreclosures will continue to do the same. And the impact of rising gas prices on suburban house prices is just starting to be felt. The ‘game’ will not be over until 2012.

  11. Great article.

    Dumb question — I’ve been looking at the REO’s available from the various major banks. Here’s what I’m seeing (as of today) in California (from the respective institution’s REO website):

    BofA — 255
    Downey — 469
    Chase — 0
    Wells — 3,943
    HSBC — 7
    Countrywide — 3,200 (about)

    Also identified

    Coldwell Banker — 3502

    Now I don’t know what overlap there might be between CB and Wells, for example. But, c’mon BofA — 255? HSBC — 7? Chase — 0??!!

    Can anyone help me understand what I’m missing? Or where I should be looking?

  12. Very well done. As always. Meanwhile, the price of energy is taking a very bad situation, stomping on it, kicking it, and then running it through a shredder.

    Man oh man.

  13. Ed – they either dont want to show you all of them due to headline risk, only show the ones that can be resold and not the ones with cement flushed down the toilets or dead animals sheetrocked behind the walls or only shows ones that are in stronger markets. Much of what they really own they bulk out. The numbers you have, even for CFC, are much lower than reality. Through 4/15/08, CFC has taken back 7191 units in 2008 alone.

  14. Admin,

    Thanks for the reply. I’ve watched this train wreck since 2004 and I read and hear constantly about FC, particularly in CA. Yet when I’ve looked at the web sites — there’s nothing there. I guess that many of the banks are using agents and the agents are trying for top dollar (or are instructed to try for top dollar) — so properties are just sitting.

  15. It certainly is bad. I can’t fathom why anyone would want to buy or lend on residential re right now. What I do know is that there are those that can’t/don’t know how to do anything else and they will continue to do business as best they can b/c they have no other choice in their own mind.

    Certain people state we are doing business. Those people are not holding the paper. They’re selling it to our gov’t.

  16. […] Mr Mortgage June CA Foreclosure Report –        youtube video         Blog Details […]

  17. […] Mr Mortgage June CA Foreclosure Report –        youtube video         Blog Details […]

  18. Thanks for all the updates. It has helped me in making trades on many stocks in the financials. Please include me in your email list.

    Thank You,

    Chris Nicholas

  19. You said that most of the REO’s are being bulked out. To whom? I have seen the auction sites and they have pitiful amounts. Where are they all going?

  20. Finally, global recession is on the corner.

    Yes, US is in the recession, no matter what Mr. B says, anyway, this time, US also drags the whole world into recession with she.

    Because of the reckless expansion and overstretch in consuming, a lot of Asian countries’ 10years hard working is for free – exchange products with useless paper…

    Good Lord.

  21. BIS warns of another Depression. That’s easy for them to predict – when we’re right in the middle of it! 😉

  22. Here’s the link:

  23. What’s the “common factor of highly accommodating financial conditions.”? It’s the ‘Death by 1000 cuts’, administered by our Zionist Fed Chairmen Sir Alan and Whirly Ben. And who do they work for? NO, it’s not Dubya. It’s the same alien creatures Dubya works for! As A. Sharon said to S. Peres, before Ariel became comatose: “We, the Jewish people, control America and the Americans know it.” When he said “Jewish people”, he meant Zionists. Ordinary Jews will suffer from the Grand Depression – just like the goyim.

  24. adding to dave’s comment: “either the husband or the wife qualifies for the new property…move the fam down the street…voila.”

    and to michael goode’s comment: “I see nothing immoral or unethical about that.”

    do two wrongs make a right?? we like to think not.

    there is a way to make these transactions work very legal.

    i’ll start off with the end of the story and work my way back.

    husband or wife to purchase their next home on a Lease Option to Buy Contract. AND try not to let the current property go to foreclosure, make all the efforts to short sale the home to save the credit.

    AHH…but short sales aren’t successful rick!

    i beg to differ.

    to make short sales successful depends on WHO is negotiating and WHAT tools they are using to negotiate AND WHO is backing them up.

    i have an investor. he buys short sales. he purchase them with 3 conditions:

    1. property to be vacant 30 days or sooner after the offer is made.
    2. investor needs authorization to communicate with the lender to negotiate for the deepest discount on the price of the home.
    3. investors offer is a lease option to buy contract subject to the bank’s short sale approval.

    AHH…but i’ve heard of this scam rick….the investor will be renting the house out while he is in negotiation…isnt that illegal??

    not according to my research. please take the time to read CA Civil Code 890 — Rent Skimming. it specifically states that a homeowner in default cannot collect rents fromt the subject property. however this does not apply to lessees, tenants, and assignees.

    so what the investor is doing is requesting the control and rights over the property before he technically buys the property from the bank; with a lease option contract, and in that contract it specifically states that the buyer/lessee will be paying the seller/lessor $1/month for the rights & control of the property. the $1/month agreement is to show a legal exchange and keep the seller out of trouble with the lender. the seller decided to give up the property since he missed his first payment. this strategy not only secures the investment, but gives the investor an exit strategy…which is always needed in the RE investment world.

    after the investor has the agreement from the seller, the short sale package begins to be put together. the investor, along with the short sale package, will then attempt to purchase the property from the bank at .50 to .80 cents on the dollar.

    AHH…but rick…you know that nobody is having success in purchasing properties with such discount.

    yes they are.

    again…it depends who is negotiating your file. is it a real estate agent who’s been in the business 9 years along with a transaction coordinator who’s been in the business 5 years? OR an x-loan underwriter who’s been in the business 20 years and has many relationships with individuals in the banks along with a real estate attorney backing her up?

    if you show the bank they SHOULD sell to you because of errors the bank made in approving the loan in the first place, you should have successful short sales.

    now…back to your original couple who was contemplating whether or not to purchase the home down the street under one of the spouse’s name.

    guess who the investor rents these houses to? people who have no chance in getting a home loan today. people who have no problem paying a lower monthly rent, but have unfortunately gotten stuck in this whole mortgage implode mess.

    the investor gives these people an opportunity to become homeowners again…legally. by renting to them while in neogtiations, then, once investor purchases the property from the bank, gives the tenant first dibs on buying the house from him on a lease option for 12 months. during the 12 months the buyer/lessee has time to repair credit and completing the option to buy at or before the 12 months.

    guess who is buying the couple’s old home in short sale to try to avoid a foreclosure on the credit report?…yup….the investor. AND repeating the same steps with other homeowners.

    there is much, much more involved in this process and there are pros and cons.


    – helping create homeownership at a time where it almost seems impossible for people with bad credit and no down payment
    – creates a 100% positive cashflow for the investor during negotiations
    – no abandon houses
    – give hope to people in foreclosure
    – if everyone in the business were to use this system, the industry will not take the dive it’s about to take, the banks will liquidate sooner (they’re already losing a lot of money), and real estate agents will not work hard on short sales just so the bank can foreclose and assign the property to an REO agent


    – people fear the unknown
    – people dont understand and turn away
    – everyone calls it a scam before doing research
    – REO agents will not be as successful as they are going to be (that’s not a con for me because i am not an REO agent)
    – it’s not a guarantee (every short sale is not a guarantee to begin with). it’s 50/50 chance.

    i believe in this system, but people begin to hate the investor for making money during other people’s misfortunes. truth is we need systems like this and the investors should make the money for coming up with the system and providing the funds to help the industry recover.

    short sale agents, homeowners in distress, and investors need to team up against the banks. that’s the only way to do it.

    but the banks have always been on the greedy side and will continue to be on the greedy side. live by the sword, die by the sword.


  25. IF, after the auction process has failed to find a 3rd party buyer and the bank must take the property onto its books as REO then at what value does the bank BOOK this asset on its balance sheet? Is it the value of the banks bid in the auction (which would imply an immediate charge against earnings) or is it held at some derived higher level (implying a potential loss/gain to be declared at some later date)?

  26. Meanwhile, the slimeballs who intentionally created this mess (Greenspan & Bernanke) are watching the agony and the fall-out from a safe distance. Undoubtedly, some of their Zionist Billionaire buddies are looking to make a ‘killing’ by preying on the distraught victims.

    Americans will eventually ‘catch on’ to what has been (and is being) done to them and their families – and they will take matters (and a piece of rope) into their own hands. Tall trees will be put to good use. Halliburton-built gulags will be full of ‘unintended occupants’. Americans will borrow an appropriate slogan from their tormentors: “NEVER AGAIN”!

  27. One more important point to remember, especially for Christians: America’s tormentors are NOT real Jews! America’s tormentors (as well as humanity’s tormentors) are descendants of Khazars (Ashkenazis) and they are NOT descendants of the 12 tribes of Israel. Read Arthur Koestler’s “The Thirteenth Tribe” or get an overview here:

    Is this ‘off-topic’? Only slightly, if at all. The mortgage mess and coming Depression are only some of their murderous creations. When you discover who they really are, it all makes sense.

  28. Your site is like getting the news before it becomes news!

    “Get the news before it become news !”

    Would make a great slogan for your site.

    US foreclosure filings surge 48 percent in May
    Friday June 13, 7:29 am ET
    By Alan Zibel, AP Business Writer
    Housing crisis worsens as number of US homes facing foreclosure in May up 48 percent

    WASHINGTON (AP) — The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50 percent compared with a year earlier, a foreclosure listing company said Friday.

    Nationwide, 261,255 homes received at least one foreclosure-related filing in May, up 48 percent from 176,137 in the same month last year and up 7 percent from April, RealtyTrac Inc. said.

    One in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record.

  29. […] Breaking CA May Foreclosure Stats – The Real Story […]

  30. […] RELATED MR MORTGAGE STORIESRecord-Breaking CA May Foreclosure Report  […]

  31. […] Mr. Mortgage s Guide to the TRUTH! Mr Mortgage – RECORD-BREAKING people who have no chance in getting a home loan today. people who have no problem paying a lower monthly rent, but have unfortunately gotten stuck in this whole mortgage implode […]

  32. […] Record-Breaking CA May Foreclosure Report […]

  33. […] Record-Breaking CA May Foreclosure Report […]

  34. […] Mr. Mortgage s Guide to the TRUTH! Mr Mortgage – RECORD-BREAKING people who have no chance in getting a home loan today. people who have no problem paying a lower monthly rent, but have unfortunately gotten stuck in this whole mortgage implode […]

  35. Have no fear little one’s, when all is lost it is only a beginning. The new united Americas. Within three years(deflation,depression needed)the greatest development is on its way. Building of infrastructures,railroads the autobahn(already in progress in texas),powerstations
    new seaport on the gulf(japanese/korean owned) and the end of all borders.
    Things have been set in motion and cannot be stopped. Life, will just go on some more.

  36. […] Banks took back 26k homes last month in CA. In the past few months 98% of the homes purchased in foreclosure were bought back by the foreclosing bank, which goes to show how bad the market is. I wrote about it in last month’s Foreclosure Report. […]


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