Does fewer foreclosure notices being filed mean that the foreclosure process is (temporarily) becoming even slower than it has been in the past? Does it mean that the homes of mortgage borrowers who are “underwater” and have decided to use the ‘strategic default’ strategy are not becoming part of the shadow inventory?(2) Does it mean that borrowers who have fallen on hard economic circumstances are not continuing to squat in the homes they financed with the easy mortgages they were able to get when economic conditions seemed better? Are such borrowers still squatting, biding their time and saving money, until the foreclosure notice comes and the marshal forces them out of the home? Does fewer foreclosures notices being filed mean that defaulted squatters will have even longer to save money (by not paying their mortgages) before the foreclosure notice is filed and marshal forces them to leave the home in which they are squatting?
Is it possible that filing foreclosure notices has slowed because of seasonal factors? Home purchases normally decline significantly over the holidays (during the Thanksgiving and Christmas Holidays and past the New Years Holiday). If you held the mortgage on a defaulted residence would you want that residence vacant for three or four months until the Spring home buying season begins. Is it possible that the large mortgage servicers and investors [like the Government’s GSA’s, large banks and public and private pension plans] are concerned about the public relations ‘fallout’ from continuing foreclosures, at a high rate, during the holiday season? Is it possible that mortgage lenders are delaying foreclosures so they can digest their past losses on foreclosures, and hopefully offset future losses on foreclosures against future investment revenue from other asset classes and from fee income? [Are defaulted, but not yet foreclosed homes, still “the pig in python”? (see note below)]
It seems that filing foreclosure notices is an activity which the holders of the mortgage investment can control, or ‘time’ - depending on a number of factors some of which can benefit them. As, the number and the speed of foreclosure filings varies, watch very closely for changes in the shadow inventory.
1. Foreclosure Filings Fall – But Not in All States By Teresa (Real Estate) at MSN - Pub. October 11, 2012, at: http://realestate.msn.com/blogs/listedblogpost.aspx?post=89cc9dfd-19e4-48c2-b...
2. For a definition of the shadow inventory see the third paragraph of the October 9, 2012 article, CoreLogic Reports Shadow Inventory Continues to Decline in July at: http://www.corelogic.com/about-us/news/corelogic-reports-shadow-inventory-continues-to-decline-in-july-2012.aspx
CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of properties that are seriously delinquent, in foreclosure and held as real estate owned (REO) by mortgage servicers but not currently listed on multiple listing services (MLSs). Roll rates are the transition rates of loans from one state of performance to the next. Beginning with this report, cure rates are factored in as well to capture the rise in foreclosure timelines and further enhance the accuracy of the shadow inventory analysis. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed non-listed properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory.
NOTE: The pig in the python, see: