Invisible Inventory or Not

[peterb]

The whole process starts with NOD’s. From this point on, the owner of the mortgage has a fair amount of freedom as to how fast they process it. I think the fastest a property can go NOT from NOD is about 6 months. The mortgage could get cured in this time period or a short sale could happen as well. If the mortgage is 5 years old or less, then the odds are good that the debt is higher than the market value of the property. So a short sale is about all that could save the property from becoming an REO. But still, how quickly a lender wants to get the property back is really up to them. And then once it is REO, they may not list on the MLS…they may put it in an auction pool.
So, you can see how listings can be very misleading way to discuss “inventory” at this time.
Mr. Mortgage estimates that 70% to 80% of NOD’s will end up being REO. This may be a better way to get a handle on how much inventory is really out there or will be in the next 12 months.
Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time rather than dump them all at once and clobbered with losses in one quarter. The losses may be worse than having a bunch of non-performing loans on their books. At least for a few quarters anyway.

Bruce Norris, the famous buyer of distressed property in the Riverside County area, is focusing very strongly on the auction environment these days as he feels the situation for REO’s is so huge that lenders are forced to use auctions rather than just list them on the MLS.

[gdcox]

‘Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time’.

Thanks for explaining that Peter.

I have seen in so many places that accounting/tax rules are distorting the way in whihc many elements of the financial crisis are or are not being revealed.
I presume auctions have the advantage , to the extent mortgage lenders think as a group or are dominant in an area, that properties sold at auction are not considered to be comps and hence do not depress further the process of selling other bank owned via MLS

[gdcox]

‘Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time’.

Thanks for explaining that Peter.

I have seen in so many places that accounting/tax rules are distorting the way in whihc many elements of the financial crisis are or are not being revealed.
I presume auctions have the advantage , to the extent mortgage lenders think as a group or are dominant in an area, that properties sold at auction are not considered to be comps and hence do not depress further the process of selling other bank owned via MLS

[gdcox]

‘Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time’.

Thanks for explaining that Peter.

I have seen in so many places that accounting/tax rules are distorting the way in whihc many elements of the financial crisis are or are not being revealed.
I presume auctions have the advantage , to the extent mortgage lenders think as a group or are dominant in an area, that properties sold at auction are not considered to be comps and hence do not depress further the process of selling other bank owned via MLS

[gdcox]

‘Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time’.

Thanks for explaining that Peter.

I have seen in so many places that accounting/tax rules are distorting the way in whihc many elements of the financial crisis are or are not being revealed.
I presume auctions have the advantage , to the extent mortgage lenders think as a group or are dominant in an area, that properties sold at auction are not considered to be comps and hence do not depress further the process of selling other bank owned via MLS

[gdcox]

‘Another factor that may be influencing this is that the lender does not have to declare a loss on their books until the property is actually sold at a loss. So they may also want to “parse” out the properties over time’.

Thanks for explaining that Peter.

I have seen in so many places that accounting/tax rules are distorting the way in whihc many elements of the financial crisis are or are not being revealed.
I presume auctions have the advantage , to the extent mortgage lenders think as a group or are dominant in an area, that properties sold at auction are not considered to be comps and hence do not depress further the process of selling other bank owned via MLS

[peterb]

You’re welcome. One thing I’ve really noticed about this down-turn in the real estate market is that it is very far from “normal” or like anything that’s come before it here in CA. So I would think outside the box about this whole scenario.i.e…it’s so bad this time that lenders are in serious trouble and they hold the debt. How does it effect them? How will they behave based on this threat to their survival?
It may not be too long before they stop automatically sending out NOD’s at three months of non-payments. They may start sending out “counseling appoinments” or something along these lines to avoid the process and get the loan changed, etc….or they may wait to send out NOD’s for 5 months? I dont know, but odds are they will get very creative in order to hide the dissaster that is confronting them.
So I would not out a lot of faith in the standard data points like inventory on the MLS. “This aint your dads recession.”

[peterb]

You’re welcome. One thing I’ve really noticed about this down-turn in the real estate market is that it is very far from “normal” or like anything that’s come before it here in CA. So I would think outside the box about this whole scenario.i.e…it’s so bad this time that lenders are in serious trouble and they hold the debt. How does it effect them? How will they behave based on this threat to their survival?
It may not be too long before they stop automatically sending out NOD’s at three months of non-payments. They may start sending out “counseling appoinments” or something along these lines to avoid the process and get the loan changed, etc….or they may wait to send out NOD’s for 5 months? I dont know, but odds are they will get very creative in order to hide the dissaster that is confronting them.
So I would not out a lot of faith in the standard data points like inventory on the MLS. “This aint your dads recession.”

[peterb]

You’re welcome. One thing I’ve really noticed about this down-turn in the real estate market is that it is very far from “normal” or like anything that’s come before it here in CA. So I would think outside the box about this whole scenario.i.e…it’s so bad this time that lenders are in serious trouble and they hold the debt. How does it effect them? How will they behave based on this threat to their survival?
It may not be too long before they stop automatically sending out NOD’s at three months of non-payments. They may start sending out “counseling appoinments” or something along these lines to avoid the process and get the loan changed, etc….or they may wait to send out NOD’s for 5 months? I dont know, but odds are they will get very creative in order to hide the dissaster that is confronting them.
So I would not out a lot of faith in the standard data points like inventory on the MLS. “This aint your dads recession.”

[peterb]

You’re welcome. One thing I’ve really noticed about this down-turn in the real estate market is that it is very far from “normal” or like anything that’s come before it here in CA. So I would think outside the box about this whole scenario.i.e…it’s so bad this time that lenders are in serious trouble and they hold the debt. How does it effect them? How will they behave based on this threat to their survival?
It may not be too long before they stop automatically sending out NOD’s at three months of non-payments. They may start sending out “counseling appoinments” or something along these lines to avoid the process and get the loan changed, etc….or they may wait to send out NOD’s for 5 months? I dont know, but odds are they will get very creative in order to hide the dissaster that is confronting them.
So I would not out a lot of faith in the standard data points like inventory on the MLS. “This aint your dads recession.”

[peterb]

You’re welcome. One thing I’ve really noticed about this down-turn in the real estate market is that it is very far from “normal” or like anything that’s come before it here in CA. So I would think outside the box about this whole scenario.i.e…it’s so bad this time that lenders are in serious trouble and they hold the debt. How does it effect them? How will they behave based on this threat to their survival?
It may not be too long before they stop automatically sending out NOD’s at three months of non-payments. They may start sending out “counseling appoinments” or something along these lines to avoid the process and get the loan changed, etc….or they may wait to send out NOD’s for 5 months? I dont know, but odds are they will get very creative in order to hide the dissaster that is confronting them.
So I would not out a lot of faith in the standard data points like inventory on the MLS. “This aint your dads recession.”

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