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Re: R/E Booms- Mortgages??
A few thoughts:
1. Very few properties had been going back to to the bank until very recently (most were purchased by outside bidders), so despite my earlier post, we are probably more than 6 months away from such an event.
2. When a property did go to the bank, you are correct that there was a good chance they would profit, though that's quickly changing.
3. While the homeowner in foreclosure may disagree, I think banks have been anything buy aggressive. Most homes aren't sold until well after a year since the homeowner missed their fist payment. Yet in CA, the bank can take the property to sale in less than 120 days.
4. While the number of properties going back to the bank has made a "hockey-stick" turn up wards from recent levels, I believe the total number of foreclosures is still too low in most markets to create any real problem for the banks.
5. Profit or not, the bank will want to maximize the return. These properties are now assets on their books. That said they have ZERO interest in managing or maintaining these properties so it's an even higher priority to minimize holding periods.
6. I do believe banks will start to discount properties to unload them. But I seriously doubt that it will happen in any recognizable wave. It will simply be a normal response to days on market increasing and their desire to minimize holding periods.
7. As I mentioned in another post I'd use caution shorting these guys for this reason alone. We are not yet seeing national foreclosure activity that I would consider alarming. I understand that some markets have skyrocketed, and perhaps some local players will be hurt. To really effect the regionals, however, we still need to see a large increase in foreclosure activity.
The one place I'm seeing what appear to me to be staggering losses is in piggyback loans. This is the 20% portion of an 80/20 100% financing package that is used to avoid mortgage insurance (PMI). We are now beginning to see quite a few of these loans made in early to mid 2005 get completely wiped out when the 1st mortgage forecloses. I imagine the PMI vendors are happy to not be involved.
Hope that helps.
Originally posted by metalman
1. Very few properties had been going back to to the bank until very recently (most were purchased by outside bidders), so despite my earlier post, we are probably more than 6 months away from such an event.
2. When a property did go to the bank, you are correct that there was a good chance they would profit, though that's quickly changing.
3. While the homeowner in foreclosure may disagree, I think banks have been anything buy aggressive. Most homes aren't sold until well after a year since the homeowner missed their fist payment. Yet in CA, the bank can take the property to sale in less than 120 days.
4. While the number of properties going back to the bank has made a "hockey-stick" turn up wards from recent levels, I believe the total number of foreclosures is still too low in most markets to create any real problem for the banks.
5. Profit or not, the bank will want to maximize the return. These properties are now assets on their books. That said they have ZERO interest in managing or maintaining these properties so it's an even higher priority to minimize holding periods.
6. I do believe banks will start to discount properties to unload them. But I seriously doubt that it will happen in any recognizable wave. It will simply be a normal response to days on market increasing and their desire to minimize holding periods.
7. As I mentioned in another post I'd use caution shorting these guys for this reason alone. We are not yet seeing national foreclosure activity that I would consider alarming. I understand that some markets have skyrocketed, and perhaps some local players will be hurt. To really effect the regionals, however, we still need to see a large increase in foreclosure activity.
The one place I'm seeing what appear to me to be staggering losses is in piggyback loans. This is the 20% portion of an 80/20 100% financing package that is used to avoid mortgage insurance (PMI). We are now beginning to see quite a few of these loans made in early to mid 2005 get completely wiped out when the 1st mortgage forecloses. I imagine the PMI vendors are happy to not be involved.
Hope that helps.
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