A foreclosure filing every 13 seconds

its a feeding frenzy out there for foreclosures. multiple offers for foreclosures at 59 west seventh, 4 sexton court.... and other former foreclosures getting flipped 4 months later like 136 west sixth. remember: cash is king!

If you think it's bad now, wait a year or more. The subprime adjustable rate mortgages have already peaked and bottomed. That's good. However, due to the longer initial low interest periods inherent in these groups, prime, Alt-A, and option ARM resets just started ramping up in April.

For the next couple of months, these will rise and reach an intermediate plateau in June. This plateau will last for about a year and then will start rising again in May of 2010 peaking in August of 2010. They'll then tail off a bit until May of 2011 where they'll ramp up again but not as high as the 2010 peak. Finally, in October 2011, they'll start moving down again to hit bottom rates in early 2012.

Contrary to what the pundits are saying, this has a long way to go.

The number of ARMs among prime, alt-a, unsecuritized, and options are higher overall than subprime however, it's also more likely that prime and alt-a would have been able to refinance into fixed mortgages at the recent low rates. If they weren't able to, with rapidly rising mortgage rates, those ARMs are going to reset to much higher rates and defaults among those categories are likely to rise signficantly.

Alt-a mortgages are better than sub-prime but worse than prime.

Unsecuritized mortgages are a mixed bag. Some are so good that the mortgage originator wanted to keep them and didn't sell them into the securitization market (MBSs). The others though, are so bad that no one wanted them. Consider that at the time, the standards were pretty low for what the securitization market wouldn't buy.

Option ARMs are a scary mix of mortgages and likely to suffer really high default rates. They're composed of those exotic mortgage types such as "interest only" mortgages and even those where the initial low payments were less than what the interest amounted to so the amount owed after several years is guaranteed to be more than what the home is worth even in cases where the home prices didn't go down.

Sad times and we're paying the piper for the multi-year banquet and spending spree that the country just binged upon.

Multiple offers if you can actually close the damn sale. Several friends made offers on other properties which were accepted but the banks sat on the offers and 8 months later still no sale.

it's all about "price discovery". The banks are loath to unload properties at heavily "discounted" (relative to 2005 prices) as they will be forced to book losses
immediately. This kills earnings and will cause another huge leg down in pricing across the board.

Hung (#4): I agree with you. I wrote this comment in response to one of Rona's posts last week:

'I have heard rumors from several credible sources that banks are dragging their feet selling REO. The reason for this is that REO assets have not been adequately written down on bank balance sheets. The book value far exceeds market value. This means bank executives have a choice. They can either unload REO now and realize big losses (note: this will affect their current bonuses), or hold onto REO and delay the day of reckoning.

If the rumors are true, it's easy to see why the short sale process is so cumbersome. And frankly I don't see how a couple thousand dollars of “incentives” sprinkled here and there will change anything.'

Seems like you've heard the same thing. What are your sources? I'm interested in learning more about this.

It doesn't matter, because jerks are still outbidding themselves hand over fist in the Boston area. Nothing like having to compete with 10 other young families to buy a house. This is what happens when you lock out first time home buyers for 12 years. You get a real estate market that will NEVER recover (recover meaning have prices return to sane levels, last seen in the early -mid 1990's in this area). If you own a property here, you're in paradise. You'll never lose money, apparently. If you're just trying to buy your first house and raise a familiy, and don't really care about making money off of real estate, you're in a dark, hot, firey hell here.

My advise- leave Boston, move to somewhere where you can buy a house outright in cash with your downpayment money, and never look back. Yes, you won't make as much money as you would here, but you also won't have a mortgage, so it really doesn't matter.

Ahh, another "Sky is falling" article intent on generating "heated" conversation and debate. What a Country! God (and anyone else for that matter) bless America! To address several of the topics mentioned above, In no particular order.
Anyone that thinks the banks / lending institutions want to hang onto repo'd REO properties is smoking bananas. The reason it takes so damn long to "sell" a majority of foreclosed properties is (for example); 1) the property was abandoned mid winter and all the pipes froze (creating all manner of problems) and a "fail" inspection rating. 2) All copper plumbing that made it through the winter (and wiring), was ripped out by environmentally conscious recyclers, and again, resulted in a negative inspection rating. 3) Previous homeowner makes the decision not to pay the mortgage, oh, and property taxes as well, resulting in all sorts of legal issues involving those funny little words "lien" and "title".......resulting in a big mess that an army of Attorneys’ wouldn't touch with a ten foot pole. You think the Mega Banks (or Mom and Pop Banks) have the manpower to clear away these issues in a timely manner? NFW! 4) And about multiple bids on foreclosed properties, read my lips "t h i s i s a g o o d t h i n g". There may be more foreclosures on the way, but the sooner they get inhabited again, and their new owners start paying their mortgages and taxes, the better off we all will be.
5) And I am sorry but if there is a place in this country where for the amount of a 10% down payment (let alone 3.5%) on your typical Boston home, you can purchase the home of your dreams in cash, I sure as hell can’t (won’t) stop you and wish you good luck with that.

Max, those are some great points about reasons why properties aren't moving. Unfortunately, they are so specific that they obviously represent a minority of the properties banks are holding... Do you really think it's that illogical to say that a bank is holding its properties so it doesn't have to write down huge losses?

And to your comment about multiple bids on foreclosed properties being "a g o o d t h i n g" because the sooner they get inhabited again, the better off we all will be.. You should reread Overpriced Boston's comments on the impact on 1st time buyers. The priceswere/are inflated and people need to accept that.

Many lenders will not take a request for a loan modification seriously until a homeowner is delinquent in their mortgage payments. In addition, as I understand it, some loan modifications also forgive some or all overdue payments. So, if you are a homeowner trying to negotiate a loan modification with some lenders, the only way to get the lender to the negotiating table is to become delinquent in your payments. That means that many lenders are actually giving incentive to homeowners to fall behind in ther mortgages and increase mortgage delinquency statistics! Obviously, record unemployment is also increasing these numbers.
A couple of reasons that it takes so long to get a short sale approved is because many lenders simply do not have enough staff to handle the volume. In addition, they will not even begin the short sale process, which includes a thorough investigation into the seller's financial and employment situation and an appraisal of the property, until an offer is submitted on a particular property.

Joe, Admittedly the points I mentioned as reasons REO properties are not moving (processed) as fast as everybody would like are specific examples and were not meant to represent all possible reasons. However, I do know for a fact that more than half the REO properties in the Boston metropolitan area have issues with their systems (plumbing, electricity, heat, etc.) ,or Title issues related to liens placed upon them for outstanding taxes due or other Title transfer issues from the last sale transaction, all slowing down REO sales. I agree that your point about Banks being reluctant to show (reveal) losses is plausible and most likely happens more times than not.
As far as first time home buyers are concerned, Boston has been a tough area to purchase a first home for many people as prices over the last several years have escalated beyond approach for many, which is exactly why so many people are bidding on these REO (or short sale) properties. Their "reduced" prices are extremely attractive to young families looking to buy a home of their own. Because Boston (and Eastern Mass) has such a diverse population, as far as household income is concerned, it is no wonder first time home buyers (young families) got priced right out of the market when you had the "Jones" with their six figure incomes swooping in and buying up all the affordable (by two year old Boston standards) homes. And yes, prices were inflated because of this, yet two years ago we had bidding wars on those over priced homes. For good or bad, there are people that have money, and there are people that don't, and if there was a way to level the playing field, life would be better for everyone........or we could do as my old buddy Steve T. exclaimed, "eat the rich".

MAX (#7): Good points. What's your source of info on this? (Not arguing with you, I'm just curious to learn more about what's going on.)

Regardless, your inkling that banks require more time/money to get properties in condition for sale also suggests they may be carrying REO at inflated values on their books. Let's face it... An REO asset carried on the books at $500,000 with appliances ripped out, vandalism, and damaged plumbing might not really be worth $500,000, especially in a falling market.

Lance, look for that Deutsche Bank analysts' report estimating that distressed inventory is anywhere from one and a half to two times MLS inventory.

If you think it's tough here, I'm helping relatives buy a bank-owned property out of state and it is tough. It takes the owner two or three days just to answer a question. When they accepted the offer they sent a three page addendum that basically indicated that up and including the closing they could halt the sale for no cause. They won't repair anything and require a deposit and $50.00 per day per diem in order to extend the offer if it takes more time than anticipated to close.

Overpriced Boston, check sales volumes on the Warren Group. Boston area is having the worst year for sales in 20+ years. There is so much inventory and shadow inventory it's crazy. I wouldn't worry too much about it. Go rent a nice townhouse for a couple of years as the "owners" here lose money.

And it is true that you can purchase a very decent place in other states at half the cost. Money is often the same there, but jobs are harder to get. (This is one of the misunderstandings about pay here. The typical pay in other states is roughly the same, but the top end is not .)