For those who are forum members, then you are probably familiar with the foreclosure thread. For those that are not members, I recommend you join, as there are some great topics, even beyond housing. But, in that thread, I try to update it to show what is happening with the foreclosure numbers, both in OC as a whole, as well as Irvine. Anyway, the idea of sharing these stats on the main blog were suggested, and I will be posting them periodically. I would like to do it every day, but I can’t say I will always be able to find the time. I will do these posts in the evening, so that everyone can enjoy the post of the day.
For those that are not familiar with the process, or the abbreviations, here are the basics…
NOD = Notice of default. This is the first stage, and it is recorded 90 days after the first missed payment.
NTS = Notice of trustee sale. This is the second stage, and it is recorded 30-90 days after the NOD. This is posted in a newspaper, like the Irvine World News, and lists the time and place of the auction, the address, the NTS amount, and various other legal info. It has to be published for three weeks.
Trustee sale/REO = back to the bank, or someone bought it at the auction. This is the final stage, and it is when the owner loses the house.
What a way to start the new year, but with record NODs and foreclosures!
NODs 2156, or 103 per day, and an increase of 18.7% from last month.
NTSs 1185, or 56.4 per day, and a decrease of -3% from last month.
Trustee sales 824, or 39.2. and an increase of 18.1% from last month.
Just how bad are the trustee sales? Comparing the worst month on record in 96, there was 1 foreclosure for 832 owner occupied homes in OC, and in 2008, it is 1 foreclosure for 746 owner occupied homes.
How about adjusting for household population? Will it look better that way? In 96, there was 1 foreclosure for 3903 people, and in 2008, it is 1 foreclosure for 3706 people. Well… it looks like it is worse than even the worst month on record. Considering NODs are double than what they were a year ago, and nearly double from the average of last year, then I suspect it will only continue to get worse. Since the ratio of NOD to foreclosure is about 50%, then 2008 could bring a month with a 1000+ foreclosures. This is starting to get really ugly, really, really fast.
Yesterday, 41 homes went back to the bank at the Santa Ana courthouse. Some of the lenders still do not get it, and they are holding tight to what the NTS amount is. However, there are many lenders that do get it. There are more, and more lenders discounting the minimum bid $100k-$200k below the NTS amount.
My favorite foreclosure of the week, went back to the bank for $1.65mil, with a NTS amount of $2.11mil, a $460k discount from the amount owed on the loan. I thought Newport Coast, and the high end was immune? This place is so new, that zillow only has one satellite photo of a completed home, and that is if you click on west.
There weren’t any homes that went back to the bank in Irvine yesterday, but this one in Tustin Ranch did for $882k. It sold for $610k in 2001, and then someone shut off the ATM.
Today there were 22 homes that went back to the bank, and one condo on Fairview in Santa Ana sold for $102.5k, but it sold for less than half of the NTS amount of $211.5k. This must have been a scratch and dent lender, or an IB who bought a mortgage pool for $0.30 cents on the dollar, and they still made a profit.
This week two homes in Irvine went back to the bank. 16 Salton #65, for $545k, and 106 Kazan St., for $292k. Currently, there are 44 homes in Irvine scheduled for the auction, from Monday to 3/20/08. More will be added, and some will get canceled, but we will see how it goes. There are a bunch in Quail Hill, including a big one with an NTS amount of $1.5mil. Finally, there are four homes in Woodbury scheduled for the auction, including one on Rising Sun, just across the street from the pool.
I hope everyone enjoys this post, as well as those to come. Comments, questions, and suggestions are welcome…
“including a big one with an NTS amount of $1.5mil.”
“with a NTS amount of $2.11mil”
What thoroughly amazes me about these amounts are that only $1.1mil at most qualifies for the mortgage interest deduction. And even amounts not subject to AMT decrease, have the same effect on overall tax liability because the MI deduction is still used in the AMT calculations to figure the reductions of the total itemized deductions.
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IR what is the address of the Quail Hill 1.5 mil NTS?
IR,
Can you explain more detail on the NTS? How does it work?
Thanks
This is graphrix’s post, and he will be able to answer your questions.
BTW, The favorite foreclosure can be found here:
https://www.irvinehousingblog.com/2008/01/06/stillwater/
I only followed about 1/3 of what you wrote, but it sounds bad…
I guess those big mortgages are pretty costly when you can’t deduct all the interest.
In honor of you graph, I fired up my subscription to RealtyTrac. All your talk of foreclosures got me psyched up to see what was going back to the bank…
I see what you mean about the volume, even in Irvine. When I was on RealtyTrac back in the summer, there didn’t seem to be nearly as much. Oddly enough, I couldn’t find much of anything in our target home spec. At least in terms of Irvine, lots of smaller places, some bigger but usually older. Lots of Woodbury and NW II places it seems. Too bad we don’t want to buy in either…
Kind of surprised that 32 Gentry in Woodbury isn’t up as a short sale. $1.29M at purchase price. That’ll kill some comps if it goes back to the bank and they get aggressive with pricing…
It is 51 Momento. It was a while ago that they received the NTS, and it will probably be postponed or delayed somehow before the auction date of 2/13. I drove by it, and it is nice on the outside. The downside is it is on the corner to the entrance of the street, so the traffic might be on the high side. The highlight is the size of the backyard, and it didn’t seem as close to the neighbor’s home as some of the others. Still, $1.5mil is a bit much, but we need to wait and see what the lender wants for the minimum bid first.
* Some of the lenders still do not get it, and they are holding tight to what the NTS amount is. *
I think you are mixing lenders and servicers. Don’t forget that most loans were sold off. The servicers almost have to initially list for the amount owed to avoid a lawsuit from the loan holder. If the loan holder comes after them they can simply say, “We tried to get the full amount owed, but the property wouldn’t sell for that price.”
I think that is part of what you are seeing and why this will all take some time to unwind.
They are also pretty costly when the borrowers have to begin paying *more* than the interest.
There weren’t any high end homes like this one financed by exotic mortgages like option-ARMs, were there? I mean, the people who were buying these homes over the past 3 or 4 years were all multi-millionaires, right? I’m sure the majority responded “cash, of course” when the realtor questioned them on financing.
Hundreds of billions in option-arms will be resetting over the next 3-4 years. Any guess as to where the vast majority of these type of loans were given? Many of the apparent “rich” living in high-end coastal communities will become 909ers in order to afford a roof over their heads.
The housing bust is “just getting it’s legs”.
Of course, that’s just my opinion, I could be wrong.
I was out in Banning yesterday and foreclosures are topic #1 out there. The only construction going on was frantic finishing of their mall. My guess is OC will be like them in 6-9 months.
Graph, it is finally getting more exciting (for us renters) to see the light at the end of the tunnel. Keep up the great posts.
Graphix – This post is great! Foreclosures are what will define where the market is going six to nine months out. That’s why Santa Ana pricing has collapsed – all the subprime foreclosures.
Question for you – Is everything going by trustee sale or are the lenders starting to go through the judicial foreclosure process? I can’t for the life of me understand why they aren’t going JF and seeking deficiency judgments on all these refi loans.
I am not sure what more details you are looking for, but I will give you some additional info, and if you still have some questions, then please ask.
The NTS is basically the lender’s notice that the deadbeat hasn’t paid his/her mortgage for about six months now. They are legally obligated to place a classified ad, in at the least a weekly newspaper (why the Irvine World News and Orange City News of the OCR are the most popular), and the ad must run for three weeks. It will have the borrower’s name, address, when the loan was recorded, and the amount that is owed, plus any fees or back interest the lender is seeking. The foreclosure auction then happens at the Santa Ana court house, Placentia court house, or the court house in Orange. It will list the location, with the day and time of the auction. It will not be updated if it is postponed or canceled.
Let me know if you have any more additional questions, and I will be happy to answer them. I can’t recall if you are a forum member or not, but if you are seriously interested, then the foreclosure discussion thread has some great info.
See many prior posts.
Judgments are very hard to collect, even if the debtor has money. And most of these people don’t. You have to FIND the money. People who walked away, and still have money become very good at hiding it. How is the bank going to know if the debtor has it hidden in the Sealey? Or, in their mother’s safety depost box? You don’t think they are going to tell the truth do you?
I don’t know what the gardnishment laws are out there, but a lot of salary is exempted here. And I think part of that is federal law. Not sure, because i don’t do too much collections.l The risk of loss probably exceed the benefits. Also, it is something new and different, and banks are not good at being creative or foreward thinking.
I can foresee the lenders bidding below the NTS as time goes on.
Eighteen years ago I worked in the tax area for an insurance company. We had a lot of commercial loans that went belly-up after the changes to the tax laws in 1986. At the time, our company’s practice was to bid the amount of the outstanding debt at the foreclosure sale, plus we would add in things like the outstanding interest and costs.
This had the affect of delaying our loss recognition on the loans and creating a capital loss when we were ultimately able to dispose of the property (after holding onto the REO for a period, of course).
As part of a suggestion program, I recommended our company bid 80% of the loan amount. First, the lower bid might encourage other bidders to purchase the property and we would avoid having the property as REO. Second, the lower bid created an ordinary loss on the loan, and set a lower basis on the ultimate sale of the property (generally limiting our capital losses, which could only be offset against gains, unlike ordinary losses).
The suggestion was turned down for about 9 months, until another person took over the investment area, and he immediately approved the suggestion.
I haven’t dealt with this type of issue since that time so maybe the tax laws have changed and the situations aren’t parallel. But the lenders don’t really want the house, because REO is a headache, a strain on their capital, and they probably don’t see a floor either. So I think you will see lots of lenders making a discounted bid of the loan amount.
By the way, the $1.65 MM bid on the $2.11 MM amount is a discount of 22%–in line with the 20% discount that my company at the time adopted.
Dave
What do you say to the realtors who keep wanting to sell their “below market valued” houses that are still actually high. Nothing is moving there. We are not stupid and know that prices are still going to drop to near 2000 prices. Plus with all the REO and Forclosure properties, why the hell do I want to buy a still “over priced” house.
I have been running across listings in Maryland which make me laugh with the “remarks” stating, AS IS, BUYER WILL NOT CONSIDER LESS THAN, NO REPAIRS, on houses that have been on the market for over a year. Someone tell these people it’s a BUYERS market with forclosures across the street and a bank owned right next door!
Chris