[tony soprano]

Originally Posted by Superman12

First of all, Olecapt, you are well respected here. I follow your blogs. On this particular blog, I think you are wrong on this one my friend. As you know, I mentioned about my parents' home on this blog. I never mentioned my friends. I have 2 friends that mentioned to me that they haven't paid their mortgage for 3 years. They still live in their homes!!! They have received notices from their banks but no action has been taken to this date. It is clear that banks are controlling the market inventory.

Sitting vacant for three years would be somewhat unusual but it's not terribly unusual for a homeowner to stop paying their mortgage for well over a year before being foreclosed. This is the oft referred to "shadow inventory". Delinquent homeowners are also getting savvy on employing strategies to prolong the process. So yes, you have people in homes who haven't made a mortgage payment in a couple of years. These homes won't show on a bank's balance sheet as REO, but they are clearly headed there.

[costaricageorge]

I was in B of A about 6 months ago adding my wife to my accounts. My representitive told me B of A stategy is selling their properties in three stages. What they consider the lowest value homes first just cutting their losses. Then if the market starts to turn they will release what they consider more desirable homes. Finally if the market gets better they sell the most expensive ones. Not sure how long they will holdout. He assured me if they tried to sell everything right now the market would really be devastated.

[Willy702]

How do they do research on this anyways? I don't doubt the percentage is high, but 71% seems a bit out of line.

I think this could be a good case of playing with stats to make a situation seem worse than it is. First you take away any paid off home, which there are some who paid cash or have owned their homes for many years. Then you put a fire sale "value" on every home, even though most would never sell right now. Then you get estimated mortgage values which are clearly not actual numbers and then venture a guess. Voila, you can scare people into thinking a disaster looms.

[tony soprano]

Originally Posted by Willy702

How do they do research on this anyways? I don't doubt the percentage is high, but 71% seems a bit out of line.

I think this could be a good case of playing with stats to make a situation seem worse than it is. First you take away any paid off home, which there are some who paid cash or have owned their homes for many years. Then you put a fire sale "value" on every home, even though most would never sell right now. Then you get estimated mortgage values which are clearly not actual numbers and then venture a guess. Voila, you can scare people into thinking a disaster looms.

The linked article doesn't include people who own their home outright. That's the point I was making earlier in this thread - the numbers in the article refer to homeowners with a mortgage. So yes, immediately you're setting aside some portion of homeowners.

As to the comparison of outstanding mortgages to current market value, those numbers were reported every quarter to establish earnings/losses and reserve requirements. It's information also reported to the FDIC to demonstrate bank solvency and stability. I say "were" because the necessity to mark the values of homes to the current market value has been suspended. Banks are now allowed to mark the value of the homes in their loan portfolio to a value derived by a financial model that forecasts future home values.

The information is readily available. It just needs to be aggregated. In fact, I wouldn't be surprised if the FDIC makes this information available in some fashion.

[Willy702]

Originally Posted by tony soprano

The linked article doesn't include people who own their home outright. That's the point I was making earlier in this thread - the numbers in the article refer to homeowners with a mortgage. So yes, immediately you're setting aside some portion of homeowners.

As to the comparison of outstanding mortgages to current market value, those numbers were reported every quarter to establish earnings/losses and reserve requirements. It's information also reported to the FDIC to demonstrate bank solvency and stability. I say "were" because the necessity to mark the values of homes to the current market value has been suspended. Banks are now allowed to mark the value of the homes in their loan portfolio to a value derived by a financial model that forecasts future home values.

The information is readily available. It just needs to be aggregated. In fact, I wouldn't be surprised if the FDIC makes this information available in some fashion.

Sounds nice, but FDIC covered institutions sold off so many of the loans I doubt you could get a clean set of data. Add in a lot of other factors and I am certain this is just a case of taking the numbers in the absolute worst light possible and putting out a figure to shock people.

[tony soprano]

Originally Posted by Willy702

Sounds nice, but FDIC covered institutions sold off so many of the loans I doubt you could get a clean set of data. Add in a lot of other factors and I am certain this is just a case of taking the numbers in the absolute worst light possible and putting out a figure to shock people.

It's done every single business quarter - How else do you think a bank is able to report their earnings or losses if they're unable to value their loan portfolio? They just guess? How do they set aside the necessary loan loss reserves for a given quarter? More guesswork? How does the FDIC evaluate a bank's solvency? They just ask the bank, "hey, do you guys have adequate equity? Oh, okay."

It's not rocket surgery.

[Willy702]

Originally Posted by tony soprano

It's done every single business quarter - How else do you think a bank is able to report their earnings or losses if they're unable to value their loan portfolio? They just guess? How do they set aside the necessary loan loss reserves for a given quarter? More guesswork? How does the FDIC evaluate a bank's solvency? They just ask the bank, "hey, do you guys have adequate equity? Oh, okay."

It's not rocket surgery.

Do you really believe its only banks who hold loans? I have bought three homes in my lifetime, none were ever held by my bank for long and in two cases they ended up with non-FDIC entities. If a bank holds it sure you can get a decent guess at it, but banks were selling the worst of the loans off with abandon until 2008.

[007 license to sell]

There is some great info in this article in the RJ for instance the estimated count of shadow inventory for Las Vegas and the surrounding area's is from 50,000 to 100,000 homes that have been foreclosed on and haven't been released for sale.

Also the stats showing the average selling prices for the master plan communities can give an idea of what to spend in those area's.
Source: Review Journal
Expect flat home sales, prices this year

The housing market in Las Vegas is expected to chug along at about the same pace as last year, with the "shadow inventory" of bank-owned homes clouding any prospect of even modest recovery, housing analyst Dennis Smith said Thursday.

[Willy702]

What I don't get about the shadow inventory is the inflexibility of banks and probably regulators to banks hiring large managers to rent them out for at least some period of time. In Vegas it doesn't matter yet since rental vacancies are still elevated, but as that number improves it would be a great opportunity to stabilize the sales market and bring in revenues to the banks on essentially dead assets at the moment. Plus the banks would have a much better chance at selling larger numbers of houses if they packaged them up as currently renter occupied units and sold them to investor groups or even single home purchasers, say someone 5 years from retirement who wants a house in Vegas and wants to get in on low prices today, but would like to get cash flow until he moves.

[JohnG72]

Originally Posted by Willy702

What I don't get about the shadow inventory is the inflexibility of banks and probably regulators to banks hiring large managers to rent them out for at least some period of time. In Vegas it doesn't matter yet since rental vacancies are still elevated, but as that number improves it would be a great opportunity to stabilize the sales market and bring in revenues to the banks on essentially dead assets at the moment. Plus the banks would have a much better chance at selling larger numbers of houses if they packaged them up as currently renter occupied units and sold them to investor groups or even single home purchasers, say someone 5 years from retirement who wants a house in Vegas and wants to get in on low prices today, but would like to get cash flow until he moves.

Therse no incentive as long as the federal government continues to reimburse banks for the loans they took on from now defunct entities(like countrywide).