Thinking About Accelerated Default? The Average Squatting Time Is Up to 449 Days

For those thinking about accelerated default, they can look forward to an average of 15 months before they have to leave their properties — and that is if they don't game the system for more time.

Irvine Home Address … 10 BUTTONWOOD Irvine, CA 92614

Resale Home Price …… $699,500

Suspicions lead to questions

And questions to alibis

Is it just my imagination

Or has her love turned into lies

There's a stranger in my house

Somebody's here that I can't see

Stranger in my house

Ronnie Milsap — Stranger In My House

Attention renters looking to buy: Right now, there is a stranger living in your house — squatting in your house. Banks are refusing to foreclose on delinquent borrowers and allowing them to live freely in what should be your house. Are you waiting patiently for them to foreclose and kick out the squatters? Don't hold your breath. Lenders continue to increase the time squatters get to live for nothing in your house. It isn't your imagination; it is really happening. Squatters are gaming the system in order to stay in your house, and the government and the banks are conspiring to keep it that way.

Mortgage Default Update: Homeowners Staying in Homes Longer

By Lita Epstein Jul 8th 2010 @ 12:54PM

More than 7.3 million home loans are in some state of delinquency or foreclosure, and there's no end in sight. That's because the number of homeowners who are 90 days or more delinquent jumped 9.2 percent in May 2010 over May 2009, according to the Mortgage Monitor Report from Lender Processing Services (LPS).

When you add that to the inventory of home foreclosures (3.18 percent), 12.38 percent of homeowners are at risk of losing their homes.

In 12 states the delinquency rate is even higher — over 10 percent. These include Nevada (14.5 percent), Mississippi (14 percent), Georgia (12.3 percent), Florida (11.2 percent), Arizona (11 percent), California (10.8 percent), Rhode Island (10.6 percent), Tennessee (10.6 percent), Alabama (10.5 percent), Michigan (10.4 percent), Louisiana (10.3 percent), and West Virginia (10.3 percent).

Truly abysmal numbers. We have gotten so used to numbers several orders of magnitude outside of historic norms that we don't think much of it. What are we going to do with all those mortgage holders in default?

Let them squat, of course.

The good news, if you can call it that, is that people in trouble are able to stay in their homes longer — even if they do default on a mortgage.

Thanks to the backlog from the record-breaking foreclosure activity, people in trouble might stay in their homes 449 days — starting from the time they are 30-days delinquent and ending at the foreclosure sale — which is a new all-time high.

If you had told me back in 2007 that lenders would simply allow people to live indefinitely in homes they were not paying for, I would have thought you were crazy. Isn't that going to cause everyone to quit paying? Won't that cause our entire mortgage-based property acquisition system to cease to function?

Well, we all know the answers to those questions. Many have quit paying, and strategic default is becoming the norm. If the government were not underwriting almost all new mortgages, private lenders would not be making new loans, and our system would grind to a halt. There isn't much of a private mortgage market today, and with the extreme moral hazard we are creating, investors would be crazy to put their money into mortgage loans not insured by the federal government.

Were these problems will finally surface is in the jumbo market. Right now, the spreads between conforming and jumbo are very, very large, and there is little reason to think the jumbo loan market will recover. Why would banks underwrite loans with risk at very low interest rates when government-backed loans with no risk are available?

Eventually, the bad loans and bloated prices in the jumbo market will need to clear — unless we are going to give those homes away. If lenders don't start to foreclose on these squatters soon, more will join their ranks, particularly if they no longer believe in the threat of foreclosure. Why would anyone pay when they can keep the house for free?

Banks are finally wising up and allowing more people to sell their homes using a short sale process rather than dragging their feet and waiting until they can foreclose. In March 2009 only 18,619 homes were sold using short sales. That number jumped 120.4 percent to 41,030 in March 2010. But even with that improvement, there were foreclosures on152,654 homes in March 2010 versus 90,695, an increase of 68.3 percent.

Is it really "wising up" or are they merely recognizing that they already have many more foreclosures in process than the system can handle? I watch the local trustee sale market very closely, and with an 80% postponement and cancelation rate and an 18 month supply of properties, closing a few more short sales isn't going to relieve the pressure on the trustee sale backlog. Either process will put more inventory on the market, and the MLS inventory locally has already risen from 434 homes to 749 since January 1, 2010.

In the past two months more homes fell into a "worse" status. LPS found that two-and-one-half times as many loans rolled to "worse" status than "improved." The number of "delinquent loans that 'cured' [become current] declined for every category" except those greater than six months delinquent. LPS thinks the improvement in the six-months category can be credited to newly completed loan modifications.

LPS also found improvement in the success of mortgage modifications. While 19.4 percent defaulted again in just three months, in the fourth quarter of 2008. In the fourth quarter of 2009, the number of new defaults dropped to 6.4 percent.

So that may mean that the banks and the government have gotten better at finding mortgage modifications that work.

LOL! Loan modification programs that work. ROFLMAO! Those borrowers will all default again. With a back-end DTI over 70%, these borrowers still have way too much debt. The only thing the loan modification did accomplish was moving the debt from the bank's balance sheet to the government's. The ripoff of the US taxpayer continues unabated.

They couldn't afford it

Like most buyers in Irvine during the bubble, the owners of today's featured property could never afford their mortgage. Through a combination of greed and wishful thinking, they leveraged themselves into a property in hopes of HELOC riches from the boundless appreciation that was sure to come their way.

These owners put some of their own money into the deal. They probably wished they didn't.

This property was purchased at the peak in the prime season of 2006. The owners paid $804,000 using a $643,200 Option ARM, an $84,400 HELOC and a $76,400 down payment. Since they were peak buyers, they never got the chance to live off the HELOC.

Irvine Home Address … 10 BUTTONWOOD Irvine, CA 92614

Resale Home Price … $699,500

Home Purchase Price … $804,000

Home Purchase Date …. 5/31/2006

Net Gain (Loss) ………. $(146,470)

Percent Change ………. -18.2%

Annual Appreciation … -3.3%

Cost of Ownership


$699,500 ………. Asking Price

$139,900 ………. 20% Down Conventional

4.61% …………… Mortgage Interest Rate

$559,600 ………. 30-Year Mortgage

$138,476 ………. Income Requirement

$2,872 ………. Monthly Mortgage Payment

$606 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$58 ………. Homeowners Insurance

$78 ………. Homeowners Association Fees


$3,615 ………. Monthly Cash Outlays

-$689 ………. Tax Savings (% of Interest and Property Tax)

-$722 ………. Equity Hidden in Payment

$242 ………. Lost Income to Down Payment (net of taxes)

$87 ………. Maintenance and Replacement Reserves


$2,532 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,995 ………. Furnishing and Move In @1%

$6,995 ………. Closing Costs @1%

$5,596 ………… Interest Points @1% of Loan

$139,900 ………. Down Payment


$159,486 ………. Total Cash Costs

$38,800 ………… Emergency Cash Reserves


$198,286 ………. Total Savings Needed

Property Details for 10 BUTTONWOOD Irvine, CA 92614


Beds: 3

Baths: 2 full 1 part baths

Home size: 1,789 sq ft

($391 / sq ft)

Lot Size: 6,742 sq ft

Year Built: 1985

Days on Market: 107

Listing Updated: 40351

MLS Number: S610348

Property Type: Single Family, Residential

Community: Woodbridge

Tract: Bg


According to the listing agent, this listing may be a pre-foreclosure or short sale.

This property is in backup or contingent offer status.

Rare Listing in Irvine. Property is pie-shaped, opening to a very large yard on the side and rear. Lots of fruit trees in a private park-like yard. Excellent location/location/location in the middle of Woodbridge SouthLake and Irvine. Easy commute access: minutes from John Wayne Airport, 405 Fwy, Beach Cities, UCI campus, shopping, entertainment and, of course, quiet walks around Woodbridge South and North Lakes. The home doesn't have many modern upgrades but it has lots of potential in a light bright home that is truly a wonderful home in a great location. You won't be disappointed that you came to see this home. Offers are expected soon.

Rare listing? Give me a break.

Offers are expected soon? Do you feel the urgency. You better run down and make an offer quickly. It's only been on the market 107 days.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

40 thoughts on “Thinking About Accelerated Default? The Average Squatting Time Is Up to 449 Days

  1. winstongator

    Dean Baker has proposed a ‘Right to Rent’, (original description). “This change would give homeowners facing foreclosure the right to stay in their homes, paying the market rent for a substantial period of time (eg seven to 10 years).”

    Now compare that to the case of the 15 month squatter. For the case of $720k outstanding balance, 15 months of payments would come to around $60k. What would market rent be? Would the owner actually pay that, or even could they?

    From the sounds, this right-to-rent would not really work for those borrowers that needed price appreciation to keep up. This example really highlights the short-sightedness of the foreclosure mitigation efforts. Two basic ideas need to acknowledged: (1) a foreclosure is not the end of the world, (2) foreclosures & trustee sales move properties from the hands of those that couldn’t afford them to those that can.

    There may be cases where mods are 100% justified – cases where there’s equity & the income hit is temporary. Of course those need to be done, but the wholesale effort to limit foreclosures has been a mistake. A mistake caused by many of Obama’s advisors not recognizing the housing bubble, or understanding its pervasive impact in some areas – remember Geithner initially listing his NY house for more than he paid? Constant double digit price appreciation – what makes the housing market go!

    Buttonwood’s notebook

    1. winstongator

      From this, it seems like Geithner had his home listed at $1.575M, but is renting out for $7500/mo. The $7500/mo is nearly the monthly cost of ownership, given the assumptions. I would assume the AMT would hit and you wouldn’t get the full HMID, putting the TCO closer to $9k. Even then he’s only 10% overpriced – not so strong kool aid.

      1. Anonymous

        Don’t count Geithner out. Saw his housing history once ( sorry, no link) and he played the property bubble well, owning two properties and flipping one or the other up during the bubble, the cashing out of both to buy the current house which costs less than the previous two properties combined a bit before the bubble peaked.

        So given that history, and given how he needs ti be circumspect about his house given his current job (which in itself is a big career/money boost when he finally switches jobs eventually), he is doing well.

  2. winstongator

    Sorry for the multi-comment:

    Biggest Defaulters on Mortgages Are the Rich

    Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

    More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.

    By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.

    1. Freetrader

      That brief article has a characteristic bit of illogic in it left over from the Kool-Aid days of yore: the assumption that someone with a hefty loan is ‘rich’. That, of course, is laughable.

      Borrowing a lot of money does not make you ‘rich’!

      1. IrvineRenter

        Exactly. The headline should read that the biggest defaulters are the hopelessly over-leveraged pretenders.

        1. HobokenOwner

          I was about to post the same article, the synonyms ‘well-off’, ‘upper class’,’privileged’,’wealthy’ are all bandied about, but all I could think of while reading it was Big Brother’s starey eyes and the false equation ‘DEBT=WEALTH’. Thank you for reinforcing this mindset in me.

  3. cara

    “Where these problems will finally surface is in the jumbo market. Right now, the spreads between conforming and jumbo are very, very large, and there is little reason to think the jumbo loan market will recover. Why would banks underwrite loans with risk at very low interest rates when government-backed loans with no risk are available?”

    Ummmm, IR, is it BofA or Citi that has started the policy of filling this gap? There’s a demand for jumbo loans, and someone will fill it, in fact someone has already started.

    WSJ Citi pushes jumbo loans

    Citi offers a 30-year fixed rate jumbo mortgage at 5%, while its competitors in New York are above 5.6%, according to A conventional 30-year mortgage was 4.75%.

    That’s not much of a spread, and with conforming loans as low as they are, even a high spread would put jumbo rates absurdly low by historical standards.

    1. IrvineRenter

      This is a teaser rate. The entire article was a marketing puff piece. Citi isn’t going to suddenly start underwriting loans well below market rates at any significant volume. If they did, they would just lose more money, and taxpayers would pick up the tab since we own much of Citi… unless this is the government’s back door into supporting the jumbo market.

      The real jumbo spread is over 1% and with mortgage rates under 5%, that represents a 20% higher cost of money than conforming loans.

      1. IrvineRenter

        “Competitors said they have noticed Citi lowered its rates, but two banks with a big presence in the jumbo mortgage business in New York said they haven’t felt Citi’s renewed mortgage vigor just yet.

        Citi, the second largest bank by deposits after J.P. Morgan Chase in the metropolitan New York banking market, has an undersize share of New York’s sizable jumbo mortgage business.

        Citi lags behind J.P. Morgan, which has a much-larger jumbo mortgage business. But J.P. Morgan also was burnt by jumping to early into the market, resulting in rising loan losses. At Citi, troubled loans have been declining in recent quarters even in its troubled mortgage portfolios.”

        1. cara

          How exactly do you know it’s a teaser rate? With only 0.75% off, it doesn’t sound like one.

          This wasn’t the only article just the one I found first. The other article I originally read said that Citi was focusing in CA for this effort which would explain the lack of impact in NYC.

          Not that I can find it now, I’m guessing I read it from a clip in Jim the Realtor’s blog, but that’s having issues at the moment.

          Your comments are starting to read more like wishful thinking than objective analysis.

          1. Planet Reality

            “Your [Irvine Renters] comments are starting to read more like wishful thinking than objective analysis.”

            This started a long time ago on this blog. I would trace it back to a myriad of Irvine Renter quotes declaring the inability of the government policy to impact housing. Man I could probably post a few touch downs worth of quotes related to this theme.

            Irvine Renter was slow to change his tune and now features self defeatism cartoons, to face the sad reality of government manipulation.

            Of course most market like Riverside see no help, and most markets have crashed. Ironically this blog is about Irvine and not those economically depressed markets.

          2. IrvineRenter

            Mortgage interest rates are very competitive industry. People shopping for a loan will change lenders for 0.025%. Most lenders will be within 0.05% of one another. To find one lender offering a loan at 0.6% under a competitor is far outside of competitive need. If Citi really wanted to get into the jumbo game, they could offer 5.55% rates, undercut their competitors by 0.05% and get all the business they want. There is no shortage of people who want jumbo loan, but there is a tremendous shortage of people who qualify to repay them. That is the problem.

            To think that a bank would price a loan 0.6% under its competitors and underwrite a significant volume of them at that rate is wishful thinking.

          3. cara

            Still rings false.
            People have to know that they can get such a low rate at Citi in order to shop for it there. Hence the fluff piece. If they are starting from a small market share and want to gain a larger toe-hold they need both a consistently size-ably lower rate and the publicity. Sure, they only have to keep it lower for some period of time until Citi gets more recognized as the go to guy, just like ING and high savings interest or any other outfit trying to attract CD money. But the fact that their doing it shows how when a gap opens in the market someone steps in to fill it. Kinda like the return of low-doc loans for high-net-worth self-employeed folks:

            ABC news “liar loans make a comeback”

            Sadly I can’t locate where it was from which I knew Citi was doing this before refinding it on the WSJ… which is very frustrating because there were other salient and juicy details… Sorry.

          4. IrvineRenter

            All those looking to buy properties with jumbo loans hope this program is for real. Perhaps it will be. I am very dubious about an bank underwriting loans to people who can’t afford them in a market dangerously perched on the edge of utter collapse. The only think preserving prices in the jumbo market is the refusal of lenders to foreclose. With no government backing, this is the market most at risk going forward.

          5. cara

            As winstongator points out below, the point is to snag as many low LTV borrowers as possible. This is most definitely not targeted at “people who can’t afford them”. Maybe Citi is recognizing that the only way they can start offloading all these expensive squatter homes is to underwrite the market for them. The hope being that if you set enough comps you’ll stabilize a bottom.

            Yes, there’s the inherent problem of running out of these qualified buyers with loads of cash long before you’ve run out of squatters, but that’s the cartel breaking problem all over again.

            Hope is indeed a questionable business plan. But it was ironic you coming out and touting the spreads to jumbo loans just when the most recent news I’d heard was Citi getting its feet wet by undercutting the jumbo market.

          6. Soylent Green Is People

            So follow the logic… Citi tries to “buy the market” as we call it by offering sub X rates. Now they have this turd on their books that they cannot re-sell. If CD rates increase from 1.0 to 3.0%, the loan they are squatting on isn’t generating enough net income to pay the CD rate they are offering.

            Let’s say the are doing this. It’s also uncertain if they have tight underwriting guidelines. Sure, I can give you a 3.75% 30 fixed rate, as long as your LTV is 45%, your FICO is 790, and you have cash equal to the mortgage in your accounts. That kind of underwriting is the stick behind the carrot, and found quite often when shops say they are buying the business.

            It’s a foolish way of growing market share, and hardly if at all being done as advertized.

            My .02c

            Soylent Green Is People.

          7. winstongator

            From my link below, Citi does not seem to be funding these loans through deposits, but securitizing them. At that point, they don’t care where rates go.

            At some LTV, jumbo’s should have no premium over a conforming loan. Assume another 10% drop in prices, one year squatting (6% loss), and 4% transaction costs. An 80% LTV would yield no major loss. Go to 70% or 60% and there might be a gain.

            How do you price in the probability of the bank making a profit from a potential foreclosure into the interest rate?

          8. awgee

            They are not the “liar loans” of yore. They are fully documented loans which may be unusual, but which carry little risk to the lender.

    2. Planet Reality

      This is another one of those “Irvine Renter is dead wrong” moments.

      Of course someone is going to capitalize on the Jumbo market when there is a ton of money to be made. When the fed rate is held to zero and conforming loans drop to 3-4% banks will be making a killing lending jumbos at 5.5%.

      1. IrvineRenter

        In the future, when I want to pull funny quotes from the archives, yours will be among the most amusing.

        1. Planet Reality

          If that’s the game you want to play, I believe I am currently winning 3 – 0. You better catch up and make some better projections. I could probably put a touch down on the board today if I thought that was an interesting game.

          1. wheresthebeef

            Planet, since you are Mr. Know It All…I would like to hear your money making strategies in the near term. We’ve heard 500 times from you that Riverside and Vegas should be avoided like the plague. You told us you don’t own any Irvine real estate after getting badgered about that many times. So are you gambling your money in the stock market, commodities market, is your money under your mattress or in a coffee can buried in the backyard? Please enlighten us.

          2. Joseph

            3-0? You mean because you “predicted” that interest rates wouldn’t rise in 2010? Well-played, Einstein. Did you also predict the late-00’s housing crash, and rollbacks to 2003-2005 in Irvine? Or were you one of the geniuses who in 2007 were predicting no more than a 10% drop in Irvine home prices? That alone puts you at least three touchdowns behind IrvineRenter.

            Please, enlighten us some more. How are your investments doing today? Swimmingly, no doubt.

    3. winstongator

      Citi did a jumbo securitization, but if you look at the stats it was a gold-plated set of loans:

      Weighted-Average LTV – 57%. There’s enough equity in these that even if they default, they’ll make money on the deals.

      There is at least one 48% DTI in there, which I can’t see how that passed through.

      I think this is a good strategy. Tier your interest rate for different LTV’s to reflect different loss rates in the event of a default. We can all acknowledge that the likelihood of default != 0 (although that was the assumption during the bubble). A home with 50% equity that the lender takes, will end up a huge profit for the lender (scale equity & profit to more realistic numbers, some profit can still be there).

      1. winstongator

        NOT a liar loan:

        This is not stated income (liar loan) or even no-doc. The lender has apparently verified the borrower’s collateral (a 20% LTV), and has verified the borrower’s capacity (“liquid for $10 million”), and I assume the borrower’s credit is solid.

        The above example sounds like solid underwriting.

        From the Forbes piece:

        offers to make low-doc loans to borrowers with credit scores as low as 660 on the Fair Isaac Corp. (FICO) scale, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. The lender was offering interest rates 1.5 to 2 percentage points over the going rate on conventional mortgages. A borrower with a credit score over 720 might get a slightly better rate, perhaps just 1.25 percentage points over.

        A 60% LTV is not your bubble’s low-doc loan. If that home ended up defaulting and going to the bank, the bank would end up making money. Definitely not a bubble’s peak 100% LTV low-doc…

  4. jb

    Here’s some more fraud to go with this morning’s post. I found this on yesterday’s Craigslist: 14 Bayside is for rent for $1,000/mo! I wrote to the “owner” to get some info, and here is his reply:

    Thanks for the email. I own the house and also want you to know that it was due to my transfer to ( West Africa ) that makes us to leave the house and also want to give it out for rent and looking for a responsible person and God fearing person who can take very good care of the house in my absence.we are not after the money for the rent but want it to be clean all the time and the person that will rent it to take it as if it were its own..

    So for now, I am here in West Africa and will be staying here for the next 6years in our new house and also with the keys of the house for rent, we try to look for an agent that we can give this documents and the keys before we left but could not find, and we as well do not want our house to be used any how in our absence that is why we took it along with us.You can see a foresale sing i want you to know that i and my wife have wanted to sell the property but when we see that we are transfer so we decided not to sell it any more….

    We came over to Africa for a missionary work, so i hope you will promise us that you will take very good care of the house. So get back to me if you know you could take care of our house or perhaps experience you have in renting home.Hope you are okay with the price of $1000 per month and the security Deposit is $500.Get back to me with the rental application form.

    Here is the address bellow:

    14 BAYSIDE City:IRVINE State:CA Zip code:92614 County:ORANGE COUNTY

    1. IrvineRenter

      Falsely renting out the empty homes abandoned by investors is a good African spam scam. I am surprised we haven’t seen more of these. I imagine a few people will fall for it before it becomes widely known. Thanks for sharing.

      1. lowrydr310

        Weren’t there some other locally-run scams involving people collecting rental application fees on vacant houses?

        Or what about the other type where the Craigslist ad says “I was foreclosed on and want revenge on the bank – please come over and take what you want from the house”

  5. dave

    I think that it’s pretty funny when the realtor talks about quiet walks in that area. The freeway noise is quite noticeable in the mornings and evenings.

  6. newbie

    IrvineRenter, Welcome back.
    Are you sure that the 449 days is for free rent or the average time for the filing of NOD. If the latter, at least couple more months can be added to the actual FC time. I’ve seen postponed sale go on for one house for 9+ month in Irvine. A peak purchase with 20% down. Poor guy has his own money in the property.

    I should change my handle to “sucker for paying rent” (SFPR), should of been squatting.

    If a peak purchasers squats for 2 years, maybe about 3 to 4 years of rent can be saved. After FC, they can rent for 2 years while their credit score is being repaired and then use the remaining cash for a FHA loan with 10% down. They should even have money left over for improvementson the house. What a great stimulus package. Why didn’t I sign up?

    1. Doug

      After 2 years of squatting and the monthly infraction on their credit report PLUS the 100-140 point FICO hit at foreclosure, most of these people have a hard time finding a place to rent. Then it takes about 5-7 years before they can fix their credit. Most lenders won’t lend for 5-7 after a foreclosure anyway. It has “ideal situation” written all over it but the post-fc reality for these people isn’t pretty.

  7. tonye

    Hmm… here’s the flip side to low rates (including jumbos).

    The majority of homeowners are indeed homeowners. Even those of us with a mortgage because the majority have plenty of equity and are well upside on our purchase.

    Discount, of course, TRidge, QH and all that stuff at the foothills of Saddleback Mntn.

    The good side of low interest rates is that we’ve been able to refi at generation low rates. Even extending the loan a few years still makes a lot of sense since the mortgages have dropped so much.

    Indeed, most long term homeowners who did not engage in koolaid (I think most of us) are so far into the black that refinancing might free just 300 or 400 bucks a month.

    BUT, those 300 or 400 bucks a month, when multiplied by many makes a big difference to the economy, huh?

    Sure, I may have to pay an additional five years, but in reality I can make the extra payments at my discretion and with the lower interest payment we no longer have to deal with the pesky AMT every April.

    Just a thought from crowded Irvine.

    (Maybe I should rent this place and build my hoped for double wide Ponderosa on 10 acres by Virginia City). ;-D

  8. irvine_home_owner

    I’ve been to the Buttonwood home. While the floorplan is decent, the inside is “classic” (meaning no upgrades). It has a nice backyard but have been told it’s not Feng Shui friendly.

    However, Woodbridge is one of the nicer areas to live in Irvine with the lakes, pools and central location… and even though it’s been on the market for 107 days, I believe that has more to do with the short sale than the actual demand. At $600-650k, if this were a normal sale it would move quickly… which astounds me because I still think that’s too high.

  9. Shannon

    IR: Have you ever read Paul Fussell’s “Class: A Guide through the American Status System”? In addition to being uproariously funny, it’s very acute about the psychology of the middle class house “owner” and the perpetual American desire to signal wealth and status through signaling, particularly using the house. Basically, his argument is that because our society lacks other class measures (i.e. the remaining vestiges of the aristocracy and gentry in England), we resort to display. I’ve been rereading it for fun and was struck this time around (I last read it in 2006) by how much explanatory power it seemed to have when one tries to explain the psychology of the peak buyer. It’s a bit outdated at this point (he wrote it during the 1980s, when three-car garages were a sign of “top-out-of-sight” wealth, which you didn’t see because wealthy people always hide their houses), but still prescient.

  10. CA

    I think the 443 day figure doesn’t fit with California and our non-judicial FC procedures. States like FL where all FC’s are judicial are probably skewing the # higher.

  11. theyenguy

    You write …… “Eventually, the bad loans and bloated prices in the jumbo market will need to clear — unless we are going to give those homes away. If lenders don’t start to foreclose on these squatters soon, more will join their ranks, particularly if they no longer believe in the threat of foreclosure. Why would anyone pay when they can keep the house for free?”

    My response ….. Lenders will foreclose when they can no longer get commissions, points, etc on referring borrowers to Fannie Mae and Freddie Mac for the non jumbo market place … and that day is coming soon as we are reaching “the end of the age of credit” as soon the government will not be making new mortgage loans.

    Some insight from the stock and bond marketplace. We entered into the age of debt deflation, shortly after the Federal Reserve terminated its QE facilities, that is on april 26, 2010, when the currency traders sold the world’s currencies, against the Yen. Since then stock investors have suffered with world stocks, VT, US stocks,VTI, and the Russell 2000, IWM selling of 10%, 12% and 15%. And now reports abound of consumers suffering as a deflationary downdraft coming on strong.

    As stocks fell, the 10 Year US Government note, IEF, increased 5%, and the 20 year US Government bonds, TLT, increased 10%, as both are commonly perceived as a safe haven investment. This has driven down the mortgage rates terrifically.

    The next stage of debt deflation is about to commence.

    I expect failed US Treasury auctions soon, as concerns rise over commercial and apartment mortgages held by US banks rise, and as concerns rise over US deficit spending.

    Annaly Capital Management in Annaly Capital Management Announces Monthly Commentary for July details two policy developments … ”The first, came on June 23, when Fannie Mae announced increased penalties for borrowers who walk away or strategically default on their mortgages. According to their release, defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure” and ”Fannie Mae will take legal action to recoup the outstanding mortgage debt from borrowers who strategically default where allowable by law. Freddie Mac is thought to be considering a similar policy” … “The second policy decision …”

    My comments on the Annaly Capital Management commentary. First, the fact that one will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure, is of little importance; one can easily rent for seven years. Two, the fact that Fannie Mae will take legal action to recoup the outstanding mortgage debt from borrowers who strategically default where allowable by law, may come to haunt those who default, but then again the key phrase here is “where allowable by law”; and law may not allow. Third, Annaly Capital Management gets my kudos for a job well done, they are efficient in rolling over debt, and their stock market price and dividend provided to their REIT shareholders documents the good service they perform; but here is the big but: there is coming very soon failed US Treasury auctions, and there will they will not be making money because the mortgage debts will not be rolling over.

    The soon coming failed US Treasury auctions means the US Treasury is going to be out of money.

    The economic and political shock is going to be cataclysmic.

    Only strategic national defense operations will be operational. There will be no money for discretionary spending, and there will be no money flowing to Freddie Mac and Fannie Mae, and thus no more mortgage lending. Debt servicing at the GSEs will be cut by the Treasury shortfalls, causing lawsuits a plenty and a dramatic rise in interest rates across the board, liquidity will evaporate, and bank lending and corporate bond lending market places will seize up.

    A debt deflation ripple out of this cataclysm will be that many more people will stop making mortgage payments. Eventually squatters will be evicted and properties leased by the banks.

    The likely outcome of the debt deflation and competitive currency deflation crisis is that the financial sector and governments will merge where the government becomes both sovereign debt and credit seignior. Does such a concept seem strange to you? Well it would not seem extreme to President of the Bank of America, A.W. Clausen who said, in a 1979 interview with the Freeman Digest, “International Banking” on page 23: “new comprehensive politico-economic systems across peoples almost always arise out of conquest or common crisis”.

    Yes,the day is coming soon when both monetary and banking seigniorage will come through government: Uncle Sam will be the banker and lender as the financial sector and government merge.

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