Comments on: Quelle Surprise! Banks Taking Big Losses on Real Estate Disposals

By: Toby

Toby — Wed, 13 Aug 2008 21:16:00 +0000

Data set appears to be highly heteroskedastic. Can you print the metrics on this? Probably valid from about 8 to 18%. The lower numbers look questionable though. As bad as things are, losses are not that high.

By: Anonymous

Anonymous — Wed, 13 Aug 2008 20:19:00 +0000

You guys remember hearing reports that Fannie was offering unsecured installment loans to bring borrowers current on their mtgs. I always felt they were doing it to avoid reporting the loans as deliquent. Shameful IMO.

By: CV

CV — Wed, 13 Aug 2008 19:59:00 +0000

Loss Mitigation has failed badly! I have friends that are trying to work with the banks to keep their homes but and it’s unfortunate they have to deal with the most incompetent and unprofessional of personnel, these are professional people CPA’s, Doctor’s and it’s embarrassing that they would hire such complete morons and idiots @ $10 an hour to save money, many so inexperienced and young, IQ less, talking to other people on the other who are professionals with families in such a demeaning way without a clue, it’s no wonder why most major banks will go insolvent at some point in time in 2009. How about a CEO take a million less in salary and hire some good people with good incomes that will make a difference, It might not mean an overnight success but a prolong opportunity to survive. It is worth it! I’m glad some institutions are being sued it’s about time.

By: Anonymous

Anonymous — Wed, 13 Aug 2008 18:49:00 +0000

I spoke to a builder friend of mine and he has five houses he cannot give back to the bank, they wont take them,,,,,,,he has ot made a interest payment in over 9 months,,,,,

By: Barley

Barley — Wed, 13 Aug 2008 15:23:00 +0000

A f/u

If a person is sitting pretty in a REO and has maintained homeowner’s coverage by purchasing a homwowner’s policy, a flood policy, or an earthquake policy a claim may be denied because “they” were not or “are not” the homeowner at the time of the accident.

Get advice from a local professional insurance broker who might well advise a change towrds renter’s insurance (contents not house)…

By: Barley

Barley — Wed, 13 Aug 2008 15:13:00 +0000

"Along with such expenses as insurance, lawn care and maintenance, banks are being hit with higher costs"

I might point out that many homeowners insurance policies have a condition whereby if the occupants/owners are away, traveling or otherwise not there, they must ensure that somebody visits the property (usually weekly). This condition is to protect the insurer and mitigate any losses if damages or accidents occur. Now, if a property is vacant, and there is a homeowner’s policy that is in force, and if the owner can’t prove the weekly visits, coverage can be denied should something happen.

I suspect there are a lot of insurance brokers out there that might now be cautious about selling a policy to anybody who is in or near default/foreclosure and a lot of insurers out there who are tightening their underwriting standards.

The upside is that we should see healthy profits for insurers who peddle homeowner’s policies (claim denied!) but softer sales as long as the housing market remains in this depressed state.

By: TR

TR — Wed, 13 Aug 2008 13:11:00 +0000

I live in a suburb of Cleveland and while I have not heard of subdivisions being plowed under I have been in the market to buy a new house and have looked at 3 REO homes. All three are in very very wealthy suburbs with excellence schools and services. All three houses were total disasters inside. 2 of the 3 were so bad fixing all the problems would negate the discounted price (they were about 100k below what other houses were selling for nearby) 1 of the 3 was so bad you could only tear it down. Based on my limited observation, I would guess in some cases the banks are actually holding property that is going to require them to completely write off the value and possibly be forced to pay for the demolition. I can’t stress enough the shocking conditions of the houses on the inside, they just look like someone willfully destroyed everything they could. The fact these houses are in such nice beautiful rich areas makes you scratch you head. I know in 1 of the cities they are just tearing down the houses and leaving vacant lots – allowing the next door neighbors to buy the lots or using them for ‘green space’ – but I think the city pays the bank $1 for the house. I can see this happening a lot. If these types of properties are on the books for even $50k then expect more write downs.

By: joebek

joebek — Wed, 13 Aug 2008 11:31:00 +0000

Re: “We’ve heard stories of subdivisions in Cleveland being plowed under for farmland. That’s extreme, of course, but it isn’t hard to imagine that in some areas, the houses that don’t sell readily will eventually go for very distressed prices, potentially for as little as the value of the improved land.” Actually, in the end large land areas, e.g the Michigan peninsula, Long Island, will be restored the wilderness. This is the next frontier of progressive environmentalism. Wolves on Long Island. Are you ready?

By: Richard Smith

Richard Smith — Wed, 13 Aug 2008 11:00:00 +0000

Looks as if they’ve fitted an exponential curve to the data. If that’s an appropriate model that can be extrapolated (very important “if” – why is that curve exponential, exactly??), it implies that “on average” the foreclosure losses reach 100% *well before* the annualised HPA rate declines to zero. In fact around a 1.5% HPA is low enough to give a complete wipeout on foreclosure. If this very dodgy extrapolation is actually reasonable, it does look as if just not bothering to foreclose might be a perfectly rational choise for the banks, given what house prices have done over the last couple of years.