Mortgage delinquencies hit another record in 3Q

[Roland99]

http://finance.yahoo.com/news/Mortgage-delinquencies-hit-apf-3335040402.html

For the three months ended Sept. 30, 6.25 percent of U.S. mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That's up 58 percent from 3.96 percent a year ago.

Being two months behind is considered a first step toward foreclosure, because it's so hard to catch up with payments at that point.

The rate was up 7.6 percent from the second quarter. That's a much smaller jump than the 11.3 percent rise in the second quarter from the first, and the 14 percent leap seen in the quarter before that.

While the slowing growth rate is a positive sign, the increase shows there's still a lot of problematic mortgages out there, said F.J. Guarrera, vice president of TransUnion's financial services division. The company doesn't expect the figure to start declining until the middle of 2010.

Ayup....Roubini really nailed this one with a wide L-shaped recession.

[Roland99]

1. To make matters worse, check out this shell game from Bank of America!

Found in the SMW thread in LBN:


http://www.nakedcapitalism.com/2009/11/bank-of-america-foreclosure-shenanigans.html

About a week ago, I got this message from a reader:

I heard a rumor from a very well placed source that BOFA will foreclose 500,000 houses over the next 10 months. They plan to move these houses very aggressively; they will go to auction 90 days from foreclosure if they are not sold by then. Someone else, very highly placed in Fanny Mae, confirmed this and said there are at least that many again in the rest of the banking system.

Now I will be honest, I have no idea whether this is true, and when I ran it by my investors buddies, the reaction I got was incredulity “Why would BofA want to shoot itself in the foot?” was typical.

But what does “BofA” mean in the message? Is it “BofA as lender who holds the mortgages on its books” or is it “BofA as servicer, who profits handsomely from foreclosures?” Remember, the rationale for buying Countrywide was to get hold of its servicing operation. And there has a good deal of evidence that regulators are tolerating some lax valuations on mortgages. Moreover, more aggressive liquidations might be seen, at least initially, as a plus by investors. Recall when banks first started taking subprime-related writedowns, the assumption was they were putting the losses behind them. And ironically, it seemed that with each quarter, the writeoffs kept getting bigger, yet the party line each time was, “Ah yes, they have really cleaned house, now haven’t they?”

Today, I got this message from a contact in Texas:

When I went to the bankruptcy / foreclosure auctions here a few weeks ago I found out that the whole thing is a charade. Bank of America (for instance) auctions off houses that have gone into foreclosure for the amount owed plus any carrying costs which usually makes the auction price higher than what was owed. A pre-bid was submitted by Bank of America Home Loan Servicing (the rename for Countrywide) in the exact amount of the auction minimum (mortgage owed plus carrying costs). No one else bids so the house is “sold” by Bank of America to Bank of America Home Loan Servicing. In essence, the property is simply transferred from one division to another so that clear title is established. But this is counted as an existing home sale which artificially inflates existing home sales numbers. This is what was happening for most of the 102 BAC mortgages and the 130 Wells Fargo mortgages. For the house I “rent” where the original mortgage was with Countrywide (and then transferred to B of A when B of A bought the property) this is simply a process for getting the house off of B of A’s books and back on Countrywide’s books (now BAC Home Loan Servicing). As I said, it is all charade or smoke-and-mirrors or a shell game.

[TexasObserver]

2. And the irony of it all? Jeff Skilling got 20 plus years in prison for that.

The big banks are doing as the contact from Texas said. They're creating a paper trail that creates a false value for the just foreclosed property. If they actually sold the property at foreclosure to the highest bidder, they would realize horrific losses - losses that can be denied until they have a REAL sale.


If the banks have to realize the loss, that loss has to diminish their bank capital, which threatens their solvency.

[Roland99]

3. One thing I wonder is how many lawsuits will be filed by homeowners against BofA

under the grounds of requiring BofA to show proof they hold the note.

[Junkdrawer]

4. Looks like 2 birds with one stone...

1.) It helps inflate home prices (at a time Banks and their holding companies are flush)

2.) It helps produce a clean title so that an eviction notice can hold up in court.