[Mr_Brightside]

I’ll add to this that I know of new an eight unit project downtown that’s on the edge of foreclosure. I’m putting together a blog post for it so stay tuned.

[Mr_Brightside]

This is a very interesting topic. We have been discussing a specific project on the thread below. On it I came to the conclusion that this particular project would not cease construction based on some research I did. Any other opinions or insight are always welcome. I do think this type of problem will be the source of additional weakness but that each project is very specific.

http://www.sdlookup.com/Forums/General/tabid/57/forumid/617/tpage/1/view/topic/postid/5953/Default.aspx#5953

[Mr_Brightside]

This is a very interesting topic. We have been discussing a specific project on the thread below. On it I came to the conclusion that this particular project would not cease construction based on some research I did. Any other opinions or insight are always welcome. I do think this type of problem will be the source of additional weakness but that each project is very specific.

http://www.sdlookup.com/Forums/General/tabid/57/forumid/617/tpage/1/view/topic/postid/5953/Default.aspx#5953

[Mr_Brightside]

A friend of mine is a recently elected HOA president, this topic came up over drinks one night. He thought that they get their money while I didn’t think that was the case. My view was the HOA fee is more like a cable bill and is the problem of the underwater owner not the bank that holds the first mortgage.

I’m still not completely convinced myself although DaCounselor seems to know what he’s talking about.

Are there any more references to actual case or anything specific?

I think this is an important issue in our current market.

[Mr_Brightside]

I doubt they’ll get much on the recovery. What is a dead bank worth that owns a bunch of bad mortgages?

The mortgages would also get liquidated by the FDIC at a discount price as well, this will likely kill any equity that could be left over if the fees for all this don’t take the rest. I suppose the good news is that whoever takes over the mortgages will be able to take on short sales and REO action as they’ll own the paper at 50 cents on the dollar.

This entire situation could start playing out more and more. Should be interesting.

[Mr_Brightside]

I used E*Trade, it’s a very good platform in my view. The user interface is the best I’ve seen.

What are I don’t like about E*Trade is I have had issues with getting executions on some thinly traded ETFs that I used as part of a trading program that implement from time to time. I also think their margin rates are high. If you are in Power E*Trade the customer service people are quick to get to and are quite knowledgeable.

I also have an Interactive Brokers account which had great margin rates, interest on short balances (the main reason I have the account) and incredibly fast execution.

Basically if you do regular standard trading I’d recommend E*Trade. If you’ve been at it for awhile you mind want to open an Interactive Brokers account.

[Mr_Brightside]

A key difference between Boston in the 90s and now is the advent of adjustable rate no money down mortgages. This means that the payments are going to go up and many people don’t have much money down anyway. This to me indicates a lot of foreclosures as the only practical thing to do is to walk away.

[Mr_Brightside]

I’m sure there are some folks out there that fit this profile:

Made a lot of money selling mortgages on 100% commission

Bought properties figuring the market would double; easy money.

Maxed out 401(k) plan as a means of trying to shelter some of the income.

Roll forward to Fall 2007

Commission income dried up

Properties in a tailspin

401(k) plan in ruin

This has got to hurt.

[Mr_Brightside]

I’m sure this doesn’t work for every distress case however, assuming the original mortgage has been sold by Countrywide to Wall Street and it’s resident is some MBS somewhere then really Countrywide isn’t losing any money directly on the bad mortgage (sorry hedge funds) but they are stuck with a servicing obligation which is a bit of a problem and this could be a way out of a fraction of bad deals. They also would make some level of profit on the workout loan. All that said these loans would almost assuredly have to be held in the portfolio so there is a limit to how much you could do this.

Interesting situation but as noted it’s rumor. The market will come up with ways to try and manage its way out of this situation.

Net net my guess is less than 5% of the foreclosures fit this model. Anything investor owned is going to to the REO route.

[Mr_Brightside]

This is interesting as basically seems like a way to get the bad financing cleared out and replaced with new debt that is ostensibly manageable without having to make the people move, leave a big mess and have to sell the property and probably most important you don’t have to negotiate anything with the current mortgage holder, the process is known and clear and pretty clean.

There is still probably the 1099 issue for the mortgage holder as they did get their debt reduced.

[Mr_Brightside]

I dropped by La Boheme today and made some comments over at the SDLookup.com forums. The short summary of my conclusion is that the “auction” is more sales gimmick than a distress sale auction.

I think in order to get a true distress sale the developer/investor would need to be insolvent which DH Horton is not.

http://www.sdlookup.com/Forums/General/tabid/57/forumid/617/tpage/1/view/topic/postid/3552/Default.aspx#3552

[Mr_Brightside]

If you think about it I’m imagine that some of these people that are getting evicted probably put a Craiglist ad that basically tries to sell everything in the place, sell the cabinets, counters, appliances, basically anything and take the pricey shower head with you. While I’d never do this again there are going to be people that figure they can get $1,000 cash by liquidating these parts of the property.

Clearly this is of very low ethics, is it illegal though? This makes the properly worth easily $25,000 less than if they just moved out.

[Mr_Brightside]

Since the last sale was in early 2004 you have to wonder if this was not a remodel/flip gone bad but more a rip the place apart because of foreclosure frustration.

The nice floors and shower already indicate a remodel took place. In fact why tear the shower head off?

[Mr_Brightside]

I’m not sure that’s as much of a market move as a technology datafeed change of some sort. I have a login for the site and while it shows new activity on a daily basis it’s not a large delta from the day before.

It’s still very interesting to see the level of distress that’s out there.

[Mr_Brightside]

This entire situation has been so predictable. There will be a drive to bailout these companies on the guise that this is hurting the end consumer, which it is of course, the problem is they are stuck with their mortgages and are going to have to walk away from their properties. This might as well be millions of cracked slabs as they only thing to do is to walk.

What I’ve been saying for quite some time is that securities industry style regulation, which is very hard core, will be applied to the mortgage and real estate industries. The securities business has been through countless scandals which is why it’s hyper regulated in its current state.

BTW I’m a free market capitalist and I hate regulation and I’d rather have a caveat emptor model on both sides, the borrower side and the buyer of the debt side, however the political process is as predicable as bubble economics so this is going to happen.

The markets were calm this week as a reaction to the Fed Discount Window rate cut. There is very little chance that five years of warped economics are going to be fixed by 50bps. There are more total losers out there that haven’t hit bottom yet; CFC might just be one of them.

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