The next few months will be interesting in the default and foreclosure reporting and tracking business. In my day job as Clark Kent, I provide independent research to funds on the default and foreclosure universes as a whole and by individual bank; research that is nearly impossible to find anywhere. From this, I bring my blog readers as much free information as I can, including very detailed monthly foreclosure and housing reports that get very granular, dissecting the sectors in ways others can’t.
That being said, we have some changes coming to the default and foreclosure universes in CA in particular, which is 35% of the total foreclosure count and 45% of the dollar volume of the nation. These changes will impact the numbers and likely show the market is improving quickly. This also may give the impression that the housing market is improving. I will be on this story like pump on Cramer in order to bring you the real story.
Be careful drawing any conclusions from the media headlines reporting declines in default and foreclosure activity until you have checked with me first. Even national reports may be impacted as CA represents such a large percentage of the national volume.
The reality is that laws such as this only delay the process, which I will be able to track in real time and bring you the results of my findings. Unless lenders radically change their position on loan modifications with massive principal balance reductions and new fixed rate loans to replace the toxic trash, it will likely have little impact other than a delay of the inevitable.
Now to pay the bills…for those funds who would like independent research to stay ahead of this dramatic change, please contact me via email. – Best, Mr Mortgage
Notice: Expect Pre-Foreclosure Volumes in California to Drop Significantly Over The Next Several Weeks
Background: On July 8, 2008, California Governor Schwarzenegger signed Senate Bill 1137 into law. Commonly known as the Mortgage Relief or Foreclosure Reform Bill, it addresses a variety of issues in an attempt to mend the current foreclosure “crisis”. The most significant part of the bill is the new requirement placed on the lenders, loan servicers, and/or their agents to prove that they have attempted to communicate directly with delinquent borrowers about their financial situation, and have considered potential arrangements to avoid foreclosure. The proof of this activity must be filed with the recorded documents – typically an affidavit attached to the Notice of Default (NOD) or Notice of Trustee’s Sale (NTS).
Issue: The bill went into effect with recordings on or after 9/8/2008. The CA foreclosure process is managed by a trustee, and they were already processing volumes well above their capacity. Many of them are now having a difficult time managing the changes and are scrambling around to set up the processes that support the bill. As a result, we have seen the recent volume of new ND and NT filings decline significantly. In the case of Los Angeles County alone, the previous combined ND/NT filing rate was around 600 – 700 per day. On Monday, 9/8/08, there were less than 100 filings
Message: There isn’t a data problem! This should be communicated more as an adjustment period for the industry and it will work itself through as required processes are established. This only affects California, but it certainly could have an influence on snapshot statistics of a national view
The bill itself can be found here.
Note from reader…after I put this story out a blog reader, Henry, sent a response I thought worthy of reposting. I absolutely agree.
Hello. We are receivers – court-appointed and private party.
Many financial institutions have simply stopped initiating single-asset foreclosure proceedings, in all states, because they are overwhelmed, because losses can no longer be hidden after foreclosure, and because wishful bailout-or-bottom thinking persists to this day.
The majority of failed subdivisions and condominium projects – tens of thousands of individual homes and condos – will never go through foreclosure, because lenders (banks, hedge funds, pension funds, insurance companies, etc.) want to avoid contingent liability. Lenders, receivers, trustees, and sometimes, the developers themselves, are arranging asset sales that transfer title directly from the defaulting borrowers to the real estate equivalent of jobbers.
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