Although some factors in the country’s economic recovery are suggesting “economic stabilization and growth,” the housing market’s shadow inventory and massive volume of REO properties are slowing things down, according to an Equifax report released last week[1]. These high numbers are contributing to the “continued rise of severe mortgage delinquencies and write-offs,” which, according to Equifax, have not yet peaked. Until this happens, the economy will not be able to truly stabilize and begin to recover, analysts fear.
However, not everyone agrees with the report. In fact, CoreLogic reported at the end of June that the foreclosed and shadow inventory was actually shrinking in some areas of the country[2]. CoreLogic data indicates that the shadow market volume might have peaked months ago, and Sam Khater, chief economist for the firm, went so far as to say that “it’s showing there are improvements in some segments of the market.” However, he did emphasize that “it doesn’t mean housing distress is over, but it does show that the pipeline of distress is beginning to ease.”
Of course, many experts attribute the decline in the shadow inventory and REO volumes to the fact that lenders are hesitant to foreclose until issues like legalities in MERS foreclosures and the robo-signer settlement are finalized. Do you think that this is an “artificial” improvement or do the numbers really indicate that things are getting better?
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[1] http://nationalmortgageprofessional.com/news25717/reos-and-shadow-inventory-stunting-us-economic-rebound-study-shows
[2] http://www.bloomberg.com/news/2011-06-22/u-s-shadow-inventory-shrinks-as-foreclosed-homes-sell-corelogic-says.html
It need not and should not be an artificial improvement. If our government does its duty to serve “the people” and not the banks they will take action to protect consumers and force banks to modify mortgages and reduce principal obligations as retribution and punishment for the banks and mortgage servicers’ illegal acts. That would make the improvement permanent and allow homeowners to stay in their homes if at all possible, thus reducing the ‘shadow inventory’. Let the recovery begin!
From everything I’ve read that is generated from the real estate community and the host of its misguided and misdirected minions, in my best estimate, the shadow inventory has absolutely nothing to do with the housing recovery. This is another one of what I term “false assumptions” that HousingWire, CoreLogic and other mortgage industry stooges are pontificating because they are being spoon-fed information from the entities that caused this “shadow inventory” in the first place, albeit unconveyable. I sat in on a phone call with 65 title agents who are very much aware that the big banks are buying up title companies so they can “whitewash” the very titles they’ve clouded; and now you in the real estate community who sell REO’s for these sinister entities (the Big 9 as I like to refer to them as … the ones who were given Consent Orders by the OCC) are going to find yourselves caught up in the middle of litigation. The first round of lawsuits for wrongful foreclosures are including the real estate brokerages that managed to turn a blind eye to unmarketable title to let the bank that sold these properties “indemnify” everyone, meaning the bank is going to self-insure. I hope you have good errors and omissions coverage because the first few times it gets tested, you’re not going to have an E&O carrier anymore. When I hear factual information coming out of a major title company to the tune that one-third of the housing market in Kansas City that has MERS mortgages and/or refinances between 2003 and 2008 are uninsurable, that means you can’t sell the property, THIS is where the real problem lies. In tandem, it’s not just title issues, which title companies are now going to require additional authentication for in order to issue a policy (otherwise they’ll exclude your chain of title as to unrecorded documents in Schedule B), the real issue is now that the major banks have done the dirty and circumvented the county recorder’s offices using their contrived electronic MERS system, the lenders now see fit to tighten credit. This is no accident. This is part of batting clean-up and the chain of title does NOT match the chain of custody of the note. Using the MERS system means the mortgage and the promissory note were split. According to the U.S. Supreme Court in Carpenter v. Longan, when that happens, the note is a nullity! That further convolutes and sends over 70-million titles into such a tailspin the only way to legally fix them is to perform a quiet title action in the local state courts. Instead of allowing these cases to move forward in an attempt to settle these issues, what do the banks do? Instead of proving their claims in state court, they remove the cases to federal court and file motions to dismiss and act as if there’s nothing wrong with the mess they’ve made. These foolish judges who don’t see this for what it is compound the problem. This is the real problem behind your shadow inventory.
My challenge to you (since I do chain of title assessments = COTAs) is that you give me one set of recorded docs with MERS on them and I’ll find you title issues that the title companies I work with won’t insure. If Chicago Title won’t insure these properties, what makes you Realtors out there think you can sell them without repercussions? Now think about this shadow inventory article and blame that for the lack of a housing recovery. The problem with all of you is you depend on mortgage brokers to survive. These mortgage brokers work with the big banks to continue to do the same modus operandi that caused the shadow inventory in the first place: predatory lending and securitization of mortgages. You’d think the investors would wise up after the first go-round, but no! They obviously need to be screwed again! If that wasn’t the case, I wouldn’t be getting emails from them saying they think they just invested in a million-dollar problem (because they got a quit-claim deed from some major bank that couldn’t prove they owned the house they foreclosed on if they had to) that they can’t flip. Wait until the former homeowner finds out he was wrongfully foreclosed on.
You Realtors have a good war chest to pay attorney’s fees to defend you in these suits? Try 70-million MERS mortgages on for size. The county recorders are just now starting to grapple with this problem and by the middle of 2012, when election year campaigning starts, I predict you’re going to see hundreds of them get voted out of office on the platform that the recorder was negligent and cost the county millions of dollars in badly-needed revenue because they allowed MERS to circumvent the 400+ year old property recordation system that is mandated by statute. MERS and its member banks are private corporations that will have to answer to the mess they’ve made of the county land records the last 13 years. You Realtors will be answering to angry homeowners with their property law attorneys as to how you managed to convey a home (their home) with unmarketable title. By the time they get done with you, you’ll be lucky if they don’t take your home for damages. The title companies who really care about their underwriting standards and reducing their exposure risk will be the ones testifying against you in court.
Many banks are working and have been working with borrowers to help them modify their loans. The problem is these borrowers have lost their good core jobs and many of them simply cannot find jobs to replace the ones they lost. They jobs they do find pay MUCH less than their old jobs! They can no longer make their payments and they cannot sell the home for what they owe the lender. Until the private sector realizes that the key to prosperity is abundent, good core jobs; we are doomed to fail! We are slowly slipping down the slope to serfdom!!
There is another wave coming. There have been so many false (hope giving) scams and people taking advantage of the current market to line their wn pockets. The government programs are just extending the recovery. Government doesn’t know best, these are people who have no practical experience in the market. I learned long ago thet “Book Learning” only outlined concepts but not the real world. It is like combat, the best laid plans go out the window when the first contact is made, combat is fluid and so is the business world. We still have another two years to go, if the government gets out of the way. Take the hits and lets recover.
Dear Mr. Ellis: This is the best letter I have read in a long time.
Dave Krieger is right. He is one of the few people that knows what he is talking about. The lack of knowledge among realtors is abysmal. The vast majority of the realtors I know are financially illiterate. They have no idea of the consequences of their actions.
Thanks
Anthony Garcia
All great posts! I literally laughed out loud reading this and specifically Sam Khater (Corelogic’s) comments. Is he vying for a post on Obama’s sinking ship??
What ever drugs he is on, I would like some!! Just look at the data of the NOD’s compared to withdrawn properties that is currently happening on Courthouse steps across the nation! This is not new and has been happening the past several years-”Extend and Pretend” has been going on way too long. We have one heck of mess ahead of us…Curently home sales in most counties in CA are 50%+ distressed(REO or ShortSales), meaning we have 50%+ LESS home buyers looking to buy….Those “home owners” who have lost their home in a distressed manor will not be buying a house with what is happening to thier credit and the current lending situation. Where are we going to find that 50% gap in people to buy all that stagnant inventory?
I have some ideas but I am interested in any of yours.