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As I have noted a number of times: by the Fed (and FDIC, and others) providing infinite cash lifelines to the big banks, the need to sell foreclosed homes to free up capital is no longer existent. In addition, some anecdotes are now showing up as to the extent of losses in REO sales.
Of course some of the REO sale losses could also be corruption on the back end as well...
Another possibility is that the sales that are occurring are in places where no recovery is going to happen no matter what - for example Detroit or Flint.
http://www.nytimes.com/2009/07/05/bu...1&ref=business
Of course some of the REO sale losses could also be corruption on the back end as well...
Another possibility is that the sales that are occurring are in places where no recovery is going to happen no matter what - for example Detroit or Flint.
http://www.nytimes.com/2009/07/05/bu...1&ref=business
But the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.
Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.
Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.
Given losses like these, Mr. White said he was perplexed that lenders and their representatives were resisting reducing principal when they modify loans. His data shows how rare it is for lenders to reduce principal. In June, for example, 3,135 loans — just 17.2 percent of the total modified — involved write-downs of principal, interest or fees. The total loss from these write-downs was just $45 million in June.
Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.
Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.
Given losses like these, Mr. White said he was perplexed that lenders and their representatives were resisting reducing principal when they modify loans. His data shows how rare it is for lenders to reduce principal. In June, for example, 3,135 loans — just 17.2 percent of the total modified — involved write-downs of principal, interest or fees. The total loss from these write-downs was just $45 million in June.
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