Tuesday, March 16, 2010

If a Tree Falls in the Forest, and No One Is Around To Hear it, Does it Make A Sound?

More importantly: if a lender doesn't foreclose on a delinquent borrower, and thus the non-forclosure isn't counted in official foreclosure numbers, does it mean things are better?

From HousingWire, via Calculated Risk:
"Using LPS data, for all loans more than 90 days in arrears, the average days delinquent is now at 272 days—up from 204 days in early 2008. For loans in foreclosure, the aging numbers are even more staggering: loans in this bucket average 410 days delinquent, up from 260 days delinquent in early 2008.

Ponder those numbers for just a second. On average, severely delinquent borrowers have gone more than 9 months without making a mortgage payment—and yet foreclosure has not yet started for them. For those borrowers who are in the foreclosure process, it’s been an average of 13.6 months—more than one full year—since they last made any payment on their mortgage."

We can ask the same question about employment data:  if an unemployed worker stops looking for work and is no longer counted as unemployed, have we fixed the problem?

Green shoots! (/sarcasm)



Andrew said...

All these free months of living in one's home may be the reason consumer spending seems to be stronger than expected. Without having to pay the mortgage, disposable income rises as more and more people go delinquent and aren't forced out of their homes!

Jon from Bkln said...

we need another saying: lies, damn lies, statistics, and statistics that are related to the 2010 "recovery."

sure, it doesn't roll off the tongue as well, but the nonsense spouted every day by EVERYONE has long ago moved into the surreal.

thank god for the internets, though, 'cause everyone's B.S. will be perfectly fossilized for future enjoyment.

I-Man said...

Extend and pretend, KD... you know the drill.


You're into that band from Vermont?
We should talk sometime, KD. (Took a peek at your profile)

Hit I and I up at Dread Capital sometime. Good to see you're still dropping fine posts.


scharfy said...

Well hell no the banks don't want the upside down house back.

This begs the following, oft asked, philosophical question:

If a bookie lets the kid who works at Burger King get into him for 50k on credit, who's to blame, whats the split, legally, ethically, and practically...

These little workouts must occur if this nation is to regain traction. We need orderly and speedy default and renegotiations to happen, and fast. This suits both parties. The chips have to fall where they may.

Lenders and borrowers have to make music.

If the 2008 crisis is a proxy, we will paper over everything until the bitter end, though.

Kid Dynamite said...

scharfy - i think you know where i stand on that hypothetical...

this is a bit different though - after all, it is actually probably/possibly/potentially in the bank's near term financial best interest to write down principal on loans instead of foreclosing... of course, this may cause them all sorts of future problems if it leads OTHERS to think they can get the same deal, etc etc...

but basically, if the house is worth $200k and the mortgage is $400k, the bank is still not getting the $400k back if they foreclose - they get at best the $200k, minus the extensive foreclosure costs...

furthermore, the banks 1) want to pretend that they don't really have to write the stuff down (which is why they don't want foreclosures OR principal writedowns and 2) they don't want to foreclose because if they do then they HAVE to write down the value of the loan on their books, AND they know that there isn't a booming housing market to liquidate the asset into...

triple whammy. so they just extend and pretend!