On a serious note, the ups and downs of the distressed pipeline do happen, but the capacity of the system to process those properties takes the gyrations out of it and the inventory is delivered at a measured pace. I don’t think the system has the ability to flood anything, a steady stream is about all they can provide and that doesn’t cause huge fluxuations in prices unless the buyers stop. It’s the only conclusion I can come to as to why the holders of distressed properties wouldn’t have tried to get everything out on the market while it’s being snapped up in hours and while rates are low, who knows how long this little “short term sellers market within a longer term buyers market” will last.[/quote]
The amount of work to accomplish a foreclosure using the trustee sale method is minor, bordering on trivial. Most of the work is handled by the computer system, which produces the required action documents on a pre-programmed schedule when the payments don’t show up. Send the property to auction without price restrictions, and the auction buyers will take all the risk and do all the clean-up, moving the prices appropriately lower in the process.
The work becomes substantial only when the goal is to avoid foreclosing. This is the policy adopted by the federal government to avoid exposing the insolvency of the banking system, and to protect the people downstream from them who would suffer devastation to their retirement funds and other investments.
The federal government is carrying out the policy by greatly affecting both supply (downward due to suspension of mark-to-market, direct rescue money) and demand (upward due to artificially low interest rates, low down-payments, down-payment assistance).
