Foreclosures now are just ‘tip of the iceberg’

Foreclosures now are just ‘tip of the iceberg’

March 1st, 2010, 7:36 am · 108 Comments · posted by Marilyn Kalfus, real estate reporter

Despite some reports that suggest the housing crisis may be hitting bottom, foreclosures so far represent the “tip of the iceberg,” real estate analyst, investor and lender Bruce Norris says.

Norris told hundreds of investors attending a seminar he held in Costa Mesa this past weekend that numbers indicating the appearance of  firming home prices and fewer foreclosure auctions are “illusions.”

Government repayment and loan modification programs make foreclosure numbers appear lower for now, but are delaying the inevitable inability or disinclination of homeowners in trouble to hang on to property that has dropped in value by hundreds of thousands of dollars, he says.

Meanwhile, he says,  redefaults on loan modifications are “sabotaging” government efforts.

Mortgage delinquencies will continue “skyrocketing,” he says, because:

  • “The resets of the Option-Arm loans will cause a larger number of foreclosures than the subprime loans.
  • “Resets are part of the problem, but a bigger concern is the owners who owe more on their home than it’s worth.
  • “Commercial loans and credit card losses will soon add to the problem.”
  • Unemployment is a signifcant factor. He says: “I think we will fall back into recession by the end of 2010, and the unemployment rate and underemployment rate will be about 20% in 2011.”
  • Owners are finding it more and more acceptable not to make their house payments. The mindset, according to Norris: ” ‘I see my next door neighbor has stopped making his payment, and he just bought a camper.’ You can see that coming. We haven’t really been through the biggest part of the problem.”

7 Responses

  1. Excerpt from NYT – do not buy into this –

    Program Will Pay Homeowners to Sell at a Loss
    Published: March 7, 2010

    “In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.

    This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.

    More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

    For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery — the last thing it wants in an election year.

    Taking effect on April 5, the program could encourage hundreds of thousands of delinquent borrowers who have not been rescued by the loan modification program to shed their houses through a process known as a short sale, in which property is sold for less than the balance of the mortgage. Lenders will be compelled to accept that arrangement, forgiving the difference between the market price of the property and what they are owed.

    “We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a Treasury senior adviser. “

  2. The only solution is a moratorium on mortgage
    interest payments. The loan was created out of nothing to begin with, so only the amount created at the time of the loan actually exists. The interest does
    not exist, so it can never be paid back.
    Unless Congress wises up to this mathematical
    fact, foreclosures, homelessness and unemployment
    will continue to grow.
    The math involves 40 years of exponential growth
    in the interest. The old French proverb, used to explain exponential growth goes like this, “It took 30 days for the lily pads to cover the whole pond. On what day did the lily pads cover half the pond? ” Congressman’s answer: DA! on de 15th day right!
    Math teachers answer: “No asshole, on the 29th day
    and we are now at the 29th day.” I’m giving you an F
    for simple math, now get out of here, go home and let
    a math expert have your job!

  3. I need to understand this piece of the iceberg. Just read from money markets blogg that fanni and freddi are making the big banks buy back hear this buy back 21 billion in bad loans I think it was over 200 bilion they origionally shelled out yet those bastards lost nothing in reality right and here we have an expert giving investment advice who doesn’t even get it . The banks are apparently whining and snivvelling because they get 50 cents they say on the dollar. Cry me a river what a joke

  4. Jan,

    I hear ya. I had to leave my house a year ago. I’ve managed to keep my cat with me since then, but it hasn’t always been easy. But I did have to relinquish 16 smaller pets when I left. That was one of the hardest things I’ve ever had to do. And even though I found them a good home, at least 4 of them [that I know of] have since died. I like to think they’d still be alive if I’d been able to keep them.

    I’d love to find an attorney who’d take my case on contingency, so I could sue the living hell out of the Bank of New York for damages. Personally, I’d love to sue them right off the planet.


  5. Coupled to this dislocation is that, as families are forced from their homes by the pretender lenders (keep in mind that the Notes were long ago paid by a combination of the PMI [private mortgage insurance] and CDS [credit default swaps purchased by the securitizers in order to peddle the indenture tranches to people such as the pension fund in Stavanger, Norway], another vast pool of victims will emerge: – the family pets. Those evicted with pets will find a “no dogs” clause in the rental agreements, so the dogs (and cats) will end up abandoned, on the street, or dropped at shelters. With 50% of all homes having pets, where are 4,000,000 dogs going to go for a new home? Answer: they will be slaughtered en masse.

    Get set for the next apocalypse. Death by pretender lender.

  6. What if the Lenders got wise that they were operating with inflated property value numbers to start with?

    Would they turn to the appraiser for their loan losses. OMG, think of all the fast and cheap reports that were written to hit the Sales Price on every FHA deal in the last 2-3 years, where the buyers are finding out they have no equity.

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