PLAYING WITH STATISTICS: WHAT IS IN THE FORECLOSURE PIPELINE?

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EDITOR’S COMMENT: The answer is that they are all in the pipeline — past, present or future, because the housing market is in a death spiral and government will not deal with reality. So they put out figures to give a psychological boost to a market that cannot be comforted by statistics when virtually everyone knows one or more people who are in distress over their housing situation. Even the National Association of realtors has admitted to over-stating real estate activity — something they did to try to create the appearance of normalcy.

So the result is that you get wildly disparate estimates of what is in the pipeline, as in the article below, ranging from 1.6 million units to 10+ million homes. My estimate is that ultimately 20 million homes will end up in either foreclosure or some sort of litigation regarding title, enforcement of the mortgage, determining the identity of the creditor in a vicious circle that reaches back further and further into the corrupted title chain courtesy of MERS and the securitization scam in which the loans appear to have been securitized but were not. The money was simply diverted from the payee on the note and they called it securitized.

And there is a nasty rumor going around that the Banks are trying to get a national title registry through congress. I don’t blame them. There is no way for them to correct this mess without losing their shirts if they follow existing law. So they want a new law in which federal law will pre-empt state law. The constitutionality of this attempt is seriously in doubt, but if it passes it will dash the hopes of ever returning to the rule of law in this country and legalize the theft of “free” houses by servicers, law firms and Banks who don’t have one dime in the loan transaction. GET YOURSELF IN ACTION TO OPPOSE THIS EFFORT. IT IS JUST LIKE WHEN THEY TRIED LEGALIZING MERS AND TRIED TO GET THE ELECTRONIC SIGNATURE TO REPLACE THE REAL SIGNATURES OF PEOPLE ON THINGS LIKE AFFIDAVITS WHICH WOULD HAVE PREVENTED DISCOVERY INTO THE IDENTITY OF THE CREDITOR AND WHETHER THE CREDITOR HAD ALREADY BEEN PAID ON WALL STREET AND WAS STILL SEEKING PAYMENT FROM THE BORROWER AND FORECLOSING ON HOMES.

And for those of you who think that the situation will correct itself before it gets to you, think back to 2007 and 2008 when the unthinkable happened. It is still happening and you WILL be affected.

Call it what you will—the “shadow inventory,” the “distressed inventory,” the “foreclosure pipeline”—but if you ask five researchers how many houses or mortgages we should worry about, you’ll probably get at least five completely different answers. Given this, Developments examined these worrisome numbers and see how they stack up. Here’s a roundup of distress numbers, and how researchers arrived at them:

LPS Applied Analytics

 Number: 4 million loans

Explanation: This is the number of loans that have either been delinquent for 90 days or more or are in foreclosure. The latest report showed that the number of new loans entering delinquency was slowing, but the number of homes in foreclosure that have not been sold remains fairly flat, mainly because the foreclosure process has been bogged down by legal issues in many states. LPS doesn’t use the term “shadow inventory.”

Amherst Securities

Number: 8.2 million and 10.3 million loans

Explanation: Laurie Goodman, a trusted authority on housing finance issues and managing director at bond-trader Amherst, recently presented this whopping estimate of loans “that may be subject to distressed sales over time.” Amherst divides the nation’s 55 million mortgages into five categories: non-performing loans; loans that were once delinquent but are now performing and likely to re-default; performing loans that are underwater by more than 20%; performing loans that are underwater by less than 20%; and performing loans with some equity in them. Amherst considers loans that are 60 days delinquent to be troubled – most other estimates start the clock on their definition of distress at 90 days.

Barclays Capital

Number: About 3 million loans

Explanation: Barclays Capital’s Chief Housing Economist Michael Gapen produced a report looking at loans delinquent for 90 days or more, foreclosures, and REO, or bank-repossessed properties. His report does not include 30-day or 60-day delinquencies. “If you included those categories…it would be a much larger number,” a spokesman for the bank says.

CoreLogic

Number: 1.6 million homes

Explanation: Sam Khater, an economist with CoreLogic, said that CoreLogic’s shadow estimate is so low because the company uses “roll-rate analysis” to predict how many of the 90-plus-day delinquent loans out there will “roll over” to REO, meaning, how many of the country’s seriously delinquent loans will be repossessed by the bank. Then, the company estimates how many loans, once the house is repossessed by the banks, will end up listed on public multiple-listing services (making them no longer “shadow” inventory), and removes those.

Capital Economics

Number: 4.3 million homes

Explanation: Capital Economics has estimated the number of homes “waiting in the wings [that] will eventually add to the supply of properties for sale” and “prevent a normalization in the visible inventory for several years yet.” Their number is comfortably middle-of-the-road. Their definition does not include REO inventory, and it admits that in the worst-case scenario, there could be a shadow inventory of 15.3 million, using the widest possible definition of the term.

There are a few other helpful numbers out there. RealtyTrac, for example, estimates the total number of foreclosure filings nationwide, and the Mortgage Bankers Association estimates the percentage of loans that are delinquent, divided into 30-, 60- and 90-day delinquencies, but neither service opines on the total number of shadow inventory. The National Association of Realtors has used LPS and MBA data to make estimates on the size of the shadow inventory, but not consistently.

Alan Mallach, a senior fellow at the Brookings Institution who has written about home prices, says there’s no consensus on the definition of the words “shadow inventory.”

“One thing I know we can measure fairly accurately is the number of properties where there has been a foreclosure filing but they’re still in the process, and haven’t yet come out the other end. What’s harder to quantify is how many properties could be foreclosed, but the banks have decided to punt,” he says. “I don’t think 30-day delinquencies are that significant. If you look back long before we had this crisis, 30-day delinquencies, there are always a lot of them.”

In the end, the question of how big a problem the housing market faces from distressed loans, or the shadow inventory, or whatever you care to call it, probably boils down to that real-estate adage: it’s all local. If your community has a high rate default or foreclosure, or even just a lot of vacant property, it’s a good bet that the pricing pain will continue for some time to come.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
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