Distressed Inventory Report 3-6-10
Holding steady and trending downward that seems to be the trend this week. All areas held steady or reduced their distressed inventory. 98008 which had been seeing increasing inventories since the first of the year for the first time held steady. West Bellevue (WB) saw decreasing inventories even though four new homes came through foreclosure. This was a project foreclosed on by Frontier Bank. South Bellevue (SB) seems to be holding steady also. What did go up was the listed inventory both foreclosed and short sale. Hopefully the lenders are starting to get their acts together and figure out how to get the foreclosed homes on the market quicker and most importantly deal in a timely manner with short sales. These lenders figured out how to do automated underwriting and approve a loan in a millisecond; they should institute the same system for a short sale. A short sale is just a loan approval in reverse. It takes the same documentation: proof of unemployment, proof of lack of income, proof of depleted assets. The party applying for a short sale would fill out a form similar to a loan application documenting their financial condition and then when a sale occurs an appraisal would be ordered just like in a normal sale. There is no reason this cannot be done in a 30 day period like a normal sale. This approach would save the lenders millions and make them much more efficient. Just like a normal loan there could be a pre-qualification process to see if the seller would qualify based on hardship. If not then the issue of deficiency could be addressed at that time.
Handling the short sale in a timely manner would be one of the single best things for the economy and the lender. The value of the assets secured would be preserved since the seller is directly involved and a condition of the short sale approval could be that the property be delivered in good condition; not trashed and gutted. The lender by not having to take as many homes back and manage the sale of a vacant asset would save about 20% over a foreclosure. In addition by streamlining the process there would not have to be as big of a buyer premium on the price since the buyer could have some degree of security of knowing the status of the sale in a timely manner.
The problem is bank managements. I have found them to be incredibly arrogant and out of touch and take very little responsibility for their own decisions. The tendency is to deny the problem, even now; by contracting to outside servicers who all vie for their business by saying they can do it cheaper. The last thing considered is the condition of the property, the borrower’s situation and the buyer; in other words the human element. Bank managements give the servicers very narrow guidelines and think that by issuing guidelines and beating their chest and threatening they can actually make things better. There is not one iota of creative or innovative thinking which is what you pay managements for. The foreclosure crisis is a reflection on the condition of American upper managements and their failure to actually create, innovate and lead.
Enough of my rant here is the spreadsheet: Bellevue Foreclosure Report 3-6-10