NOD Upswing

N-O-Default notices rise

A report by RealtyTrac says first-time default notices were
filed on 78,880 homes last month, marking a nine-month high and
up 33 percent from July. It was the biggest increase since
August 2007. Even so, notices were down 18 percent from the same
month last year and were down 44 percent from the monthly peak
reached in April 2009 during the tail end of the recession. The
rise in default filings did not suggest that a new foreclosure
problem was on the horizon, but that some of the backlog related
to documentation problems was being worked out of the system,
said Mr. Sharga, senior vice president at RealtyTrac.
Foreclosure activity was halted temporarily late last year due
to claims that lenders relied on "robo-signing," where documents
were signed without reviewing the case files.

Total foreclosure filings—which include default notices,
scheduled auctions and repossessions—were sent to 228,098 homes,
a 7 percent increase from July but down 33 percent from August
2010. Bank repossessions fell 4 percent to a six-month low of
64,813 homes. Repossessions have come down 37 percent from the
peak of 102,134 hit in September 2010. Nevada once again had the
highest state foreclosure rate with one in every 118 homes
receiving a foreclosure filing in August. Nevada has held the
top spot for over four years. Even so, Nevada saw a 3 percent
decrease in filings as scheduled auctions and bank seizures
eased.

Foreclosure Freeze

Housing market faces long, cold winter: Altos

Low interest rates and a glut of inventory failed to
substantially stimulate a weak housing market this summer,
according to Altos Research. Based on summer statistics and shaky
economic indicators, Altos is predicting a "long, cold winter"
with nothing on the horizon to suggest improved housing market
activity through the fall and winter. Home prices in July rose in
14 of the 20 metro areas surveyed for the Altos Research
Mid-Cities Report and inventory increased in 12 of the markets.
"The housing market in the United States is in a constant state
of flux. Volatility is the norm and the rules of yesterday's
market no longer apply," Altos said. Eight of the 20 markets saw
their housing inventory levels decline, while six of 20 markets
noted a drop in median prices. The Federal Reserve Bank of Dallas
recently said it expects home prices to bottom out by early 2012,
with market volatility somewhat limited to certain hard-hit
areas, such as Arizona, California and Nevada. The Fed said
markets like Texas, where jobs have been created during the
recession, could see the tide shift by the early part of 2012.

Finally Some Good news

S&P: Mortgage default rate drops below 2% in July

The default rate on first mortgages dropped to 1.93% in July,
according to Standard & Poor's. S&P, in conjunction with the
consumer rating firm Experian, monitors the rate of defaults
within asset-backed securities. First mortgage defaults declined
from 2.02% in June and 3.24% one year ago. Second mortgage
defaults showed a steeper drop to a rate of 1.25% in July, down
from 1.4% the month before and 2.77% last year. Defaults actually
dropped across the entire ABS spectrum covered by the two firms,
reaching a composite default rate of 2.06% in July. It's down
more than a full percentage point from one year ago. While
defaults were down, delinquencies remained elevated. According to
Lender Processing Services, the delinquency rate on mortgages
went up by 2.4% in July. More than 4.4 million loans are
considered 30 days late or worse. Erkan Erturk, a credit analyst
at S&P, said "The firming of these rates suggests that consumers
continue to bolster their financial positions by paying down debt
and not incurring excessive charges despite elevated unemployment
and economic weakness, which we consider a positive for auto,
credit card, and other types of consumer ABS credit."

Freddie MAC dumps record #'s REO

Freddie Mac sold roughly 31,000 previously foreclosed and
repossessed homes in the first quarter, a new record for the
company as both government-sponsored enterprises shed inventory
from the end of last year. Combined, both Fannie Mae and Freddie
hold 218,000 REO properties as of the end of the first quarter,
down from roughly 234,000 at the end of 2010, according to their
filings. In the first quarter of 2011, Freddie holds roughly
65,000, compared to its larger sibling Fannie, which holds
153,000 REO in its inventory. While both GSEs made progress in
cutting down this portion of the nation's inventory of foreclosed
homes, which continues to drag down home prices, inventory has
elevated since one year ago. Both Fannie and Freddie held
163,000 properties in the first quarter of 2010, almost what
Fannie holds currently by itself. Repossessions at Freddie
increased by nearly 1,000 in the first quarter, and the holding
period for these homes averaged 191 days before being resold.
This varies significantly from state to state, especially as
servicers restart foreclosure processes in different areas of the
country. Servicers paused the process late last year to correct
procedural problems. "We expect the pace of our REO acquisitions
to increase in the remainder of 2011, in part due to the
resumption of foreclosure activity by servicers, as well as the
transition of many seriously delinquent loans to REO," Freddie
said in its financial supplement.

Rising Foreclosures

A rise in foreclosures

Foreclosures in some markets are on the rise, according to one survey of courthouse auctions. However, the numbers do not indicate a peak in foreclosure sales has been reached. "Despite months of slow sales, we've simply returned to prior levels, which to me indicates banks remain reluctant to aggressively foreclose despite the time it takes to foreclose being at or near record levels," said S. O'Toole, founder and CEO of ForeclosureRadar. "And large inventories of properties [are] still scheduled for foreclosure sale." Foreclosure auction sales grew as much as 50% in some states during January as foreclosure moratoriums came to an end, sending hundreds of distressed properties back to the auction block, foreclosure data firm said Tuesday. "While the increase is significant, we've seen larger surges after moratoriums or delays have played out in the past," said O'Toole in an email. "For example in California after the delays caused by Senate Bill 1137 we saw a surge in N
otice of Default filings that far eclipsed any prior period.

That is not the case here." In Arizona, notice of trustee filings jumped 10.9% between December and January, the first increase recorded in six months. Foreclosure sales in Arizona also spiked with ForeclosureRadar recording a 56.2% rise in the number of homes sold back to the bank. The southwestern state also experienced a 52.7% increase in foreclosure sales to third-parties on a month-over-month basis in January. California — one of the state's hit the hardest by unemployment and falling real estate prices during the recession — saw its back-to-bank foreclosure sales jump 51.1% between December and January. Sales of foreclosed homes to third parties in California also rose 52.8%.

Foreclosure's Froze By Banks

Foreclosure On Temporary Freeze

Like last year, Freddie Mac and Fannie Mae, the two government-controlled mortgage giants, are freezing all foreclosure evictions on mortgage loans they own or back from Dec. 20 through Jan.3. For some of the big private banks, who also usually observe a freeze during the holidays, the situation is a little different this year, thanks to moratoriums they already have in place because of the robo-signing scandal. That freeze was initiated to give the banks time to examine whether they violated any legal procedures in processing foreclosures and to correct and refile questionable documents they uncover. A spokesman for Bank of America, Rick Simon, said that made addressing this year's situation a little awkward but it would still observe its usual holiday policy.

"Bank of America's practice in recent years [is to hold off on] foreclosure sales or evictions from late December through New Year's Day on loans held in our investment portfolio or that are owned by investors who give the bank delegated authority," he said. A spokesman for Chase Mortgage, a division of J.P. Morgan Chase, said its robo-signing-connected moratorium makes an additional holiday freeze moot; it will still be several weeks before it starts to evict borrowers again. Wells Fargo's holiday freeze will run the same two week period as Fannie's and Freddie's and will, like Bank of America's, include all loans it holds in its portfolio. For the other loans it services, it will follow guidelines from investors and from the states where the properties are located. With the number of bank repossessions amounting to around 100,000 a month recently, the temporary reprieve could affect tens of thousands of borrowers in default.

Foreclosure Filings Down

Foreclosures fall 9% :

According to a report released by RealtyTrac, Foreclosure filings of all kinds, including notices of default, notices of auctions and notices of auction sales, dropped 4.4% during October, but it's not because fewer people are losing their homes. Instead, the market is seeing a temporary stay from banks freezing foreclose auctions to review loan documents. The drop in repossessions came after increases in four of the six previous months, topped by an all-time high in September, when 102,000 people lost their homes. In October, 93,246 homes were repossessed.

Rick S., Senior Vice President of RealtyTrac, believes there could be a further drop-off in November, because the impact of the freeze was not fully reflected in the October report. While that may result in further declines in bank repossessions, Rick expects it to take many months before overall foreclosure rates really improve. There is still a very large backlog of borrowers who stopped paying their mortgages long ago but who have not yet been served with a single foreclosure filing and so are not being counted in RealtyTrac's statistics. "Today, servicers are waiting longer and longer to put people in foreclosure," said Rick. "It's not unusual for someone in default go six to nine months without receiving a notice of default."