REO - R.I.P?

NEW -> Contingent Buyer Assistance Program
I don't doubt that banks would like to speed the process, and please the Fed at the same time, by pushing short sales.



But for all the reasons mentioned, I don't think that dog will hunt.





All that will happen is that there will be an additional 3-6 month delay as the banks hold off on foreclosing while pushing short sales. Then they will see that this strategy is a failure, and resume the foreclosure process again.



another 6 months free rent for the parasites.
 
Correct me if I am wrong, but in order to avoid PMI didn't most people with 0 down take out 80/20 loans?



If so wouldn't the second be obliterated by a short sale?
 
[quote author="trrenter" date=1255126545]Correct me if I am wrong, but in order to avoid PMI didn't most people with 0 down take out 80/20 loans?



If so wouldn't the second be obliterated by a short sale?</blockquote>
Yes, but doesn't the 2nd get hammered in a foreclosure also, so what is the difference? Other than maybe the 2nd will get a token amount to approve the short sale?
 
[quote author="awgee" date=1255130384][quote author="trrenter" date=1255126545]Correct me if I am wrong, but in order to avoid PMI didn't most people with 0 down take out 80/20 loans?



If so wouldn't the second be obliterated by a short sale?</blockquote>
Yes, but doesn't the 2nd get hammered in a foreclosure also, so what is the difference? Other than maybe the 2nd will get a token amount to approve the short sale?</blockquote>


I guess the difference is choice.



In a foreclosure the holder of the second has no choice. In a short sale they do have a choice.



For the holder of a first the short sale may actually make them whole where as the holder of the second realizes all the losses.



Just thinking out loud trying to figure out the mechanics.
 
The party in the second position has a responsibility to say NO to the short sale. The only way it works is if the first and the second work out some deal where the second gets paid something in lieu of lying down for the first.



In a foreclosure, the decision to wipe out the second it made for them.



No second is going to willfully lie down for the benefit of the first without compensation. The bondholders of the second would certainly sue if they did.
 
What we're seeing in the trenches goes like this:



SS Accepted sales price: $425k



Loans: $400k 1st, $150k 2nd.



Appraisal: $390k



The 1st TD is still somewhat in the clear. They knuckle down and accept the $390k appraisal so they can get out of Dodge.



The 2nd counters saying they want the buyer to take the $390k price, but pay $10k towards the sellers payoff. The 2nd holds the entire deal hostage. Most buyers walk.



House eventually sells for $400k or so to all cash or goes to foreclosure because of the unwilliness of parties to realize they are hosed with no great way out of this. Thats how things are now. What might happen in the future is capitulation on the part of Jr lien holders or 1st TD holders in the same predicament. "Capitulation" at the point of Government intervention. The only other path then are BK Cram Downs which would open up a land rush evironment within our court system.



My .02c



Soylent Green Is People.
 
[quote author="Soylent Green Is People" date=1255142970] The only other path then are BK Cram Downs which would open up a land rush evironment within our court system. </blockquote>


Think about the chillng effect that will have on auto notes for a second...and then think about everything else that falls down the same slippery slope.
 
[quote author="Soylent Green Is People" date=1255142970]What we're seeing in the trenches goes like this:



SS Accepted sales price: $425k



Loans: $400k 1st, $150k 2nd.



Appraisal: $390k



The 1st TD is still somewhat in the clear. They knuckle down and accept the $390k appraisal so they can get out of Dodge.



The 2nd counters saying they want the buyer to take the $390k price, but pay $10k towards the sellers payoff. The 2nd holds the entire deal hostage. Most buyers walk.



House eventually sells for $400k or so to all cash or goes to foreclosure because of the unwilliness of parties to realize they are hosed with no great way out of this. Thats how things are now. What might happen in the future is capitulation on the part of Jr lien holders or 1st TD holders in the same predicament. "Capitulation" at the point of Government intervention. The only other path then are BK Cram Downs which would open up a land rush evironment within our court system.



My .02c



Soylent Green Is People.</blockquote>
Soylent - May I respectfully suggest that government intervention will not help, and in reality will only cost more. It will cost the taxpayers instead of the banks or the borrowers, and the end result will be more harmful than helpful and more expensive than the original write down.

For example, consider the $8,000 tax credit. It costs approx $50,000 for each home to be bought that otherwise would not have been bought, because all the folks who would have bought anyways also get the $8,000. That $50,000 is reflected in a false appreciated price of the homes being sold/bought and is actually borrowed money. It does nothing to relieve the problem which is debt, not foreclosure. Home prices would be less and more affordable without the $8,000/$50,000 tax credit. The government solution is exacerbating the very problem it purports to solve, and it will result in more foreclosures.





There is no government solution to these problems. These problems were created by government intervention in the marketplace, ie. fed manipulated interest rates and fractional reserve banking. The more folks rely on the government to solve a problem that the government created, does not know how to solve, and does not exist to solve, the worse these problems will get and the longer the pain will last.

There is <strong>NO</strong> government solution. The solution is foreclosure, bankruptcy, and the free market.
 
[quote author="awgee" date=1255146082][quote author="Soylent Green Is People" date=1255142970]What we're seeing in the trenches goes like this:



SS Accepted sales price: $425k



Loans: $400k 1st, $150k 2nd.



Appraisal: $390k



The 1st TD is still somewhat in the clear. They knuckle down and accept the $390k appraisal so they can get out of Dodge.



The 2nd counters saying they want the buyer to take the $390k price, but pay $10k towards the sellers payoff. The 2nd holds the entire deal hostage. Most buyers walk.



House eventually sells for $400k or so to all cash or goes to foreclosure because of the unwilliness of parties to realize they are hosed with no great way out of this. Thats how things are now. What might happen in the future is capitulation on the part of Jr lien holders or 1st TD holders in the same predicament. "Capitulation" at the point of Government intervention. The only other path then are BK Cram Downs which would open up a land rush evironment within our court system.



My .02c



Soylent Green Is People.</blockquote>
Soylent - May I respectfully suggest that government intervention will not help, and in reality will only cost more. It will cost the taxpayers instead of the banks or the borrowers, and the end result will be more harmful than helpful and more expensive than the original write down.</blockquote>


Since when has that been an issue for the government?
 
Awgee - I have no disagreement with you here. There isn't a solution that IS a solution with what we're seeing from the Government today.



Its as if the markets have been put on a heart lung machine which has resulted in a flatline: no brain activity whatsoever. People talk about "zombie banks"...well, we're in a zombified market thanks to Uncle Sugars intervention. Short sales simply postpone the inevitable, employing thousands of "negotiators" who certainly have no idea what they are doing. A mighty and significant change in how business is done is required. Unfortunately no one has the onions for radical action today. I'm only offering my .02c as to what is either going on or likely to go on, although I am quite enamoured with the equity sharing option as one way out of this morass.



Cram downs are the nuclear (or nook-u-ler to use a Bush'ism) option, the stick over the banks heads to incentivise them to rush the short sale option in lieu of REO expansion. Cram downs won't happen and I suspect the banks already have come to realize this.



My .02c



Soylent Green Is People.
 
[quote author="Soylent Green Is People" date=1254967301]Our servicing department sent out a global email to the troops saying that their <strong>focus has turned from REO to Short Sale structuring as a way to mitigate losses</strong>. I'm guessing that other servicers are doing the same.



The Treasury is now doling $$ incentives for SS completion to servicers and discouraging (by talk mostly) banks from taking the foreclosure route. With mods rising and SS's being the norm, this may mean a slow end to REO's in the numbers we've seen this year.



SS's will rise but a coming wave of REO's? I'm having second thoughts. What are yours?



Soylent Green Is People</blockquote>


That's what I have heard, also.
 
<a href="http://www.doctorhousingbubble.com/fha-loans-the-choice-of-housing-comrades-how-government-backed-loans-are-creating-another-problem-for-the-housing-market/">Dr. Housing Bubble</a> in the help the FHA program is providing.
 
<a href="http://tpmcafe.talkingpointsmemo.com/2009/10/12/wont_you_please_come_to_chicago/#more">Weekend vacation in Chicago?</a>



<blockquote>Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago, October 25-27. A large coalition of labor, community, and consumer organizations are organizing a protest at this "Showdown in Chicago"



A big turnout at this event can make a real difference. Just to review the scorecard, most of the country is still suffering the fallout from the bankers' irrational exuberance of the housing bubble era. The Congressional Budget Office (CBO) and other forecasters expect the suffering to endure for years to come.



. . .



But not everyone is suffering. Thanks to the bailout programs put in place last fall, most of the country's major banks are back on their feet. In fact, in the most recent quarter, bank profits hit a new record high as a share of all corporate profits.



And the banks are sharing their wealth. Many of their top executives and high performers will be getting bonuses this year worth millions of dollars, in some cases the bonuses will be in the tens of millions.



In the meantime, in elite Washington circles people are busy making plans for a national sales tax so that the government can limit the fiscal damage caused by the bankers' recession.



. . .





This is a case where the divisions are not left-right, but of the elite against everyone else. When Congress was debating the TARP bank bailout last fall, members of Congress were hearing calls from people across the political spectrum who were outraged that their tax dollars were going to the banks that had wrecked the economy. A higher percentage of Republicans than Democrats ended up voting against this bankers' pi?ata.



The policies that will rein in the banks: reform of the Federal Reserve Board to make it democratically accountable, a tax on financial speculation to pay for the bankers' mess, and restrictions on the bank abuses of consumers that caused the carnage have support from people on both the left and right.



A bill that would require the Fed to disclose what it did with more than $2 trillion in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.



This is exactly the sort of alliance that gets the elite worried. Reining in the power of the financial industry will be a long hard fought war, but it is one that must be fought. President and Nobel peace prize winner Barack Obama may not have been able to bring the Olympics to Chicago, but everyone who wants to retake our country from the banks can bring their backside there on October 25th. </blockquote>
 
[quote author="awgee" date=1255171992]<a href="http://www.doctorhousingbubble.com/fha-loans-the-choice-of-housing-comrades-how-government-backed-loans-are-creating-another-problem-for-the-housing-market/">Dr. Housing Bubble</a> in the "help" the FHA program is providing.</blockquote>


Fixed that for you...
 
[quote author="no_vaseline" date=1255133090]The party in the second position has a responsibility to say NO to the short sale. The only way it works is if the first and the second work out some deal where the second gets paid something in lieu of lying down for the first.



In a foreclosure, the decision to wipe out the second it made for them.



No second is going to willfully lie down for the benefit of the first without compensation. The bondholders of the second would certainly sue if they did.</blockquote>


Have the banks ever considered doing batch negotiations?



Say, every 1st and 15th of the month, BofA and Wells meet...



Wells: "Hey, so I got 50mil in loans on short sale which you've got 10mil on secondary leins"

BofA: "I've got 75mil in loans on short sale which you've got 15mil in secondary leins. Tell ya what, I'll show you $10mil in leins you have on my property and we can waive those, or for $2.5mil we call it even on the whole batch"



Seems like at least for the large banks, this could help. You batch things together so you don't have to consider them all separately, and you can push things through more quickly, plus you can swap assets versus there always being a winner and always being a loser.



Delroy
 
[quote author="Soylent Green Is People" date=1255147058]Awgee - I have no disagreement with you here. There isn't a solution that IS a solution with what we're seeing from the Government today.



Its as if the markets have been put on a heart lung machine which has resulted in a flatline: no brain activity whatsoever. People talk about "zombie banks"...well, we're in a zombified market thanks to Uncle Sugars intervention. Short sales simply postpone the inevitable, employing thousands of "negotiators" who certainly have no idea what they are doing. A mighty and significant change in how business is done is required. Unfortunately no one has the onions for radical action today. I'm only offering my .02c as to what is either going on or likely to go on, although I am quite enamoured with the equity sharing option as one way out of this morass.



Cram downs are the nuclear (or nook-u-ler to use a Bush'ism) option, the stick over the banks heads to incentivise them to rush the short sale option in lieu of REO expansion. Cram downs won't happen and I suspect the banks already have come to realize this.



My .02c



Soylent Green Is People.</blockquote>


Are the banks even willing to lend in short sale situations? I mean, obviously a few loans are being underwritten, but are they willing to supply the capital required to channel the flood of foreclosures into short sales when they will have to hold those loans on their books?
 
[quote author="Nude" date=1255501634][quote author="Soylent Green Is People" date=1255147058]Awgee - I have no disagreement with you here. There isn't a solution that IS a solution with what we're seeing from the Government today.



Its as if the markets have been put on a heart lung machine which has resulted in a flatline: no brain activity whatsoever. People talk about "zombie banks"...well, we're in a zombified market thanks to Uncle Sugars intervention. Short sales simply postpone the inevitable, employing thousands of "negotiators" who certainly have no idea what they are doing. A mighty and significant change in how business is done is required. Unfortunately no one has the onions for radical action today. I'm only offering my .02c as to what is either going on or likely to go on, although I am quite enamoured with the equity sharing option as one way out of this morass.



Cram downs are the nuclear (or nook-u-ler to use a Bush'ism) option, the stick over the banks heads to incentivise them to rush the short sale option in lieu of REO expansion. Cram downs won't happen and I suspect the banks already have come to realize this.



My .02c



Soylent Green Is People.</blockquote>


Are the banks even willing to lend in short sale situations? I mean, obviously a few loans are being underwritten, but are they willing to supply the capital required to channel the flood of foreclosures into short sales when they will have to hold those loans on their books?</blockquote>
From what I can tell, lenders are willing to lend on short sales or any other sale, but under much stricter underwriting. Of course, Soylent can give you the ultimate scoop on that as he is in the trenches.
 
[quote author="awgee" date=1255507854][quote author="Nude" date=1255501634]Are the banks even willing to lend in short sale situations? I mean, obviously a few loans are being underwritten, but are they willing to supply the capital required to channel the flood of foreclosures into short sales when they will have to hold those loans on their books?</blockquote>
From what I can tell, lenders are willing to lend on short sales or any other sale, but under much stricter underwriting.</blockquote>
Which is my point: stricter standards means a smaller pool of qualified buyers, meaning even though the banks on the sell side might be inclined to do SS over FC, the banks on the buy side aren't going to be able to find enough buyers who meet the new standard and actually *want* to buy now... at least, not enough to meet the supply of delinquent homeowners.



<blockquote>Of course, Soylent can give you the ultimate scoop on that as he is in the trenches.</blockquote>


I love that, I really do.
 
Banks will lend against any collateral. They appear though to want to exit the REO business and run their own version of Loan Modifications for troubled home owners - AKA Short Selling to new buyers.



My .02c



Soylent Green is People
 
[quote author="EvaLSeraphim" date=1255403778]<a href="http://tpmcafe.talkingpointsmemo.com/2009/10/12/wont_you_please_come_to_chicago/#more">Weekend vacation in Chicago?</a>



<blockquote>Those disgusted by the bank bailouts, and the bankers who brought us this recession, will have a chance to make their views known when the American Bankers Association has its annual meeting in Chicago, October 25-27. A large coalition of labor, community, and consumer organizations are organizing a protest at this "Showdown in Chicago"



A big turnout at this event can make a real difference. Just to review the scorecard, most of the country is still suffering the fallout from the bankers' irrational exuberance of the housing bubble era. The Congressional Budget Office (CBO) and other forecasters expect the suffering to endure for years to come.



. . .



But not everyone is suffering. Thanks to the bailout programs put in place last fall, most of the country's major banks are back on their feet. In fact, in the most recent quarter, bank profits hit a new record high as a share of all corporate profits.



And the banks are sharing their wealth. Many of their top executives and high performers will be getting bonuses this year worth millions of dollars, in some cases the bonuses will be in the tens of millions.



In the meantime, in elite Washington circles people are busy making plans for a national sales tax so that the government can limit the fiscal damage caused by the bankers' recession.



. . .





This is a case where the divisions are not left-right, but of the elite against everyone else. When Congress was debating the TARP bank bailout last fall, members of Congress were hearing calls from people across the political spectrum who were outraged that their tax dollars were going to the banks that had wrecked the economy. A higher percentage of Republicans than Democrats ended up voting against this bankers' pi?ata.



The policies that will rein in the banks: reform of the Federal Reserve Board to make it democratically accountable, a tax on financial speculation to pay for the bankers' mess, and restrictions on the bank abuses of consumers that caused the carnage have support from people on both the left and right.



A bill that would require the Fed to disclose what it did with more than $2 trillion in loans to banks and other financial institutions was originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.



This is exactly the sort of alliance that gets the elite worried. Reining in the power of the financial industry will be a long hard fought war, but it is one that must be fought. President and Nobel peace prize winner Barack Obama may not have been able to bring the Olympics to Chicago, but everyone who wants to retake our country from the banks can bring their backside there on October 25th. </blockquote></blockquote>


Dumb luck just so has it... that I have pics of said protest coming. Stay tuned!
 
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