Distressed Inventory Report 11-20-10

By George Thurtle

The numbers have peaked and show a slight decline from the October/early November spike. It was speculated this Spike was the major lenders reviewing their foreclosure practices to make sure they were in compliance. If that is the case the back log was pretty shallow. Also you will see that the NTS inventory is being reduced after a large spike. This would imply steady market activity this week. The distressed inventory available continues to degrade. Of the new NTS inventory only four of them were homes. The other was low end condos in older conversion buildings. In addition the average age of the NTS inventory continues it decline to being older. The new construction inventory now except for a couple of cases is almost all gone and if you survey the MLS most of your new homes are “presale” listings meaning the builder has secured the lot and will only build the home if there is a buyer. You will see this trends continue because of tight credit and the builders who¬†are left are very adverse to market risk.

At the street level I do not see the second wave of ARM resets that everyone was talking about. If the lenders are smart they will reset those rates to more rates and work with those customers. Many of those ARMS will only go into default if they try to bump the rate too much. Those lenders who made the the “Option ARM” loans where a payment rate is set at 1% but the note rate is 7% and the difference accrues to the principle amount should have to eat their own junk. These loans were made to raise the internal rate of the¬†Mortgage Backed Securities.¬†¬†They were nothing but a scam. They were buried in the offerings and constructively manipulated the portfolios to enhance¬† them for sale, i.e. fraud. The investors who bought these things were thought they were getting a higher yield but with very little differential risk. The borrowers who took out the loans thought they would push what they really owed down the road. However the investors and the originators of these loans are a lot smarter and more sophisticated and should bear the brunt of their own greed. Any upper management executive at any lending institution who knew they were offering this type of security should have their bonuses set aside in a reserve fund to pay for the short fall of this junk. That also goes for the securities dealers who sold them and the rating agencies who gave this junk a AAA rating. The lack of personal responsibility by upper management is appalling. Enough of the rant, the spreadsheet is below.

The spreadsheet is here: Bellevue Foreclosure Report 11-20-10

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