Retired foreclosure expert Ramsey Su has a theory that could render the meteoric rise in notices of default (NODs) to date slightly less alarming.
It all comes down to that local favorite: second-lien mortgages. More commonly known as piggyback loans, these mortgages allowed home purchasers to make smaller (if any) down payments and were thus in fairly widespread use in recent years.
The theory is that some homeowners are doubtless in default on both their primary mortgages and their piggybacks. Every such borrower might be served with two NODs — one for each mortgage. The number of NODs filed could thus be overstating the number of homeowners in trouble as compared to what we saw in the early 1990s, when piggyback mortgages weren’t as ubiquitious.
read more at voiceofsandiego.org
I think you mean that the
I think you mean that the number of NODs filed could be OVERstating the number of homeowners in trouble, not understating.
Thanks, good catch…
Thanks, good catch… changed here and (soon) at voiceofsandiego.org.
If it’s true then all it
If it’s true then all it means is that the gap between the number of NOD properties to foreclosed properties is lower than indicated by your previous graph. It’s the number of foreclosures that will have the impact; the number of NODs is only a leading indicator to foreclosures.
Exactly, Bugs. And, correct
Exactly, Bugs. And, correct me if I’m wrong, but I think we’ll have well over 1,000 Trustee Deeds in San Diego County by the end of this month. Given the rate of increase in both NODs and Trustee Deeds it appears that we’ll be above 5,000 Trustee Deeds this year. That’s one hell of a big number given the recently-noted dramatic decline in sales (reflecting tighter lending standards). While a few weeks does not a trend make, it now would not be surprising to see 20,000 home sales in San Diego County this year, with 5,000 represented by Trustee Sales. That, friends and neighbors, would be a debacle.
A few days ago, I took
A few days ago, I took advantage of my foreclosure.com subscription to check out this theory. I randomly chose 10 Poway homes in NOD status. I found 8 had high liens in default, and 2 had low liens ($500K vs. $90K range). I checked the tax records on the low lien homes to make sure they were piggybacks. On each property, I checked every associated link (0-4 on each one), to make sure I got older records. I spent one hour on this exercise.
Here’s an example: these people have 4 liens, but only ONE lien, the smallest one, has an NOD. World Savings did not file an NOD on the other liens. Maybe the owner defaulted only on the HELOC?
$ 60,000
(sold 12/98 for $218K, loans are $75K in 8/04, $419K in 7/05, $60K in 11/05 and $432K in 10/06 all through World Savings; no other loans have an NOD)
$97K
The piggyback loan had an NOD filed, but the $388K first lien did not.
The other 8 liens were, as I said, larger amounts.
On 3 Poway properties, there are 2 liens from the same lender, but an NOD is only filed on the 1st bigger lien. Not sure why.
Conclusion: Every property I checked, regardless of the number of liens, had only one NOD filed.