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Are we being duped with bad news?

16 years ago

Why are foreclosures counted twice? With many 80/20, 90/10 etc. loans, each is a foreclosure, the first and the second, why? Just because there are two notes being foreclosed on? Data can be manipulated in many ways, and this looks to me like one that suits somebody for some reason, I wish I knew why.

http://efinancedirectory.com/articles/Organization_Accused_of_Plumping_Foreclosure_Numbers_for_News_Media_and_Congress.html

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Comments (25)

muddbelly
16 years ago
They should count twice since there are 2 different loans that are not being paid. The lender on the second note is paid nothing if the first mortgage is not paid off. Percentage wise - those second lenders have much more to lose...
dabunch
16 years ago
Muddbelly-
DUH....but it's ONE piece of property!
I don't care if you have five loans on a piece of property. It's only one house.
It should be counted as ONE, not multiple.
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OK, So a robbed and mangled Shakespear (SP) It should read "Beware yon Casius, he has a lean and hungry look" SEE THE FOLLOWING: Sludge Fertilizer Program Spurs Concerns April 13, 2008 11:15 AM EDT BALTIMORE - Scientists using federal grants spread fertilizer made from human and industrial wastes on yards in poor, black neighborhoods to test whether it might protect children from lead poisoning in the soil. Families were assured the sludge was safe and were never told about any harmful ingredients. Nine low-income families in Baltimore row houses agreed to let researchers till the sewage sludge into their yards and plant new grass. In exchange, they were given food coupons as well as the free lawns as part of a study published in 2005 and funded by the Housing and Urban Development Department. The Associated Press reviewed grant documents obtained under the Freedom of Information Act and interviewed researchers. 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skylyn
16 years ago
The fact is Bernie, no matter how the numbers are sliced, the foreclosure rate is rising almost everywhere at a dramatic pace. I know you and your fellow Realtors(tm) don't want to hear it, but the majority of the nation's (major) markets are in the dumps. Call it spin, blame it on the media, wring your hands and gnash your teeth about data you don't like, but the facts are the facts. It is about darn time that Realtors(tm) woke up and started dealing with the market as it is instead of how they wished it was. We don't need or want cheerleaders, or spinmeisters. We need realists.
qdognj
16 years ago
I also agree that it only 1 home in foreclosure,regardless of how many loans are held against it...perhpas a better statistic could be # of loans vs # of homes in foreclosure...Lets not shoot the realtors for this housing debacle,start with the mortgage brokers, then the purchasers who should have read the terms of these loans and determined that they may or may not be able to afford the loan when it resets...
novahomesick
16 years ago
Nice post, skylyn

LetÂs face it. The data available on the housing industry is seriously flawed from foreclosure counts; to the pace of new home sales (which donÂt count cancellations); to margins of error that would blow a statisticianÂs mind; to the spin placed on every bit of housing news appearing in the press every day. No single data point will tell us very much. The spin on month-to-month numbers is just thatÂspin.

But if we look at the aggregate, we can learn a great deal about market trends. If we listen to various analysts argue the data, we can learn a very great deal and take some of our emotions off the table during the buy/sell process.

The "Look Out Below!" stories have been published in the financial press and in the local press for months. The bloggers have been on it for several years. Now, the stories have finally percolated up to the national level. The events of the last month (AHM, Bear Stearns, grim sales statistics, lenders pulling out of the Alt A market, Countrywide's growing defaults in the prime home equity sector))coupled with a depressing market outlook at the ground level have pushed the momentum of coverage up to the desks of the national news reporters. For crying out loud, the housing debacle was even satirized on the Jon Stewart show.

If the mortgage reset charts published by Credit Suisse are accurate, a lot of bad news is coming our way. Once the average American figures out exactly how this boom was financed and the depth of Wall StreetÂs opaque involvement, I expect youÂll hear more as the clamor for regulatory action strengthens. No hue and cry over dirty data is going to contradict what peopleÂs common sense will tell them once they take the time to listen.

One note for the realtorsÂI suggest they contact their national and local associations and ask for some new spin that will actually help jump start markets. Get those dues you pay working for you. Right now, consumers are listening and beginning to roll their eyes. How many times can Larry Yun and the NAR revise their incredibly inept forecasts? I like realtors and see great value in what they do. But, IÂm on the verge of going solo because the "ItÂs a great time to buy" spin makes my teeth ache. Realtor credibility is heading south fast. I think your association owes you better guidance.
muddbelly
16 years ago
Don't get you panties in dabunch - its how they have been doing it. The latest increase is from the past levels WHERE THEY COUNTED TWICE AS WELL. 5 loans should count once? If you were a stockholder in the company holding those 5 loans, would you want 1/5th of the debts counted? DUH - maybe...
skylyn
16 years ago
And while we're on the subject of bad data, why does it seem like no one cares about how flawed and inaccurate DOM has become? I see serial re-listing going on (complete with new MLS numbers) everywhere and everyone seems to just turn a blind eye to it. How can anyone trust the average DOM numbers when they are being manipulated like crazy? On top of it all, this is something Realtors have direct control over but I don't seem them complaining about that. I think I'll blame it on the media, yeah, that's the ticket!
talley_sue_nyc
16 years ago
actually, a falling market usually IS a great time to buy.

Buy low, sell high.
berniek
Original Author
16 years ago
The subject matter is, why are multiple loans on one property considered multiple foreclosures, not what NAR has to say about the housing market, or why some MLS's don't have cumulative days on market (CDOM) stats like my MLS.
It did not used to be possible, where buyers were able to get several loans up to 100% to avoid MIP, like it was popular over the last few years.
I believe by counting multiple foreclosure on one property and say it's xxx% above the foreclosure rates in the late 80's and early 90' is not a fair comparison. (besides the increase in population and homes in a given market)
novahomesick
16 years ago
Talley Sue,

I agree with you, in general. Trouble is the falling market in my area (and many other boom markets) is that we haven't seen much change in prices. Our average SFH is still 7 times median family income. So, there is still a big disconnect between price, value, and affordability. IMHO, if one bought in my market now, they'd still be buying high. So, no...it's not a great time to buy in my area. It may be better than 2005 but it ain't great.
C Marlin
16 years ago
actually, a falling market usually IS a great time to buy.

Buy low, sell high.

I agree and I'm not an agent.
I am a realist. I see opportunities in this market.
skylyn
16 years ago
Bernie,

The fact is, every measure of foreclosure activity across the country is trending up big time. ALL OF THEM. Even if this one particular group has some distorted data, no one (well, almost no one) is questioning this trend because it is, at this point, established as fact. On the other hand, it could all be a vast right-wing (or is it left-wing?) media conspiracy. I find it funny that the Realtors(tm) are now coming out of the woodwork during this market, questioning data and blaming the media, when they were virtually silent on these two issues during the run-up. It makes one wonder...
stonegray
16 years ago
We've long been duped...I've always enjoyed the discussion that FSBO's underprice their homes, or get less money than they would have with an agent....

If that's true, then it means when you buy one ought to look only at FSBOs!
berniek
Original Author
16 years ago
"I find it funny that the Realtors(tm) are now coming out of the woodwork during this market, questioning data and blaming the media, when they were virtually silent on these two issues during the run-up. It makes one wonder..."

I don't recall where multiple loans were counted as multiple foreclosures in the past, and I certainly don't blame the media, they are just the messengers as far as I am concerned.
So, you think I should have raised a stink about buyerÂs possible problems getting multiple or IO loans and that would have made a difference?
In the last 5 years, I've only had 2 buyers, one 80/20, the other with an IO loan, it just wasn't important to my clients, or me, neither of those clients had any problems because of it.
skylyn
16 years ago
"I don't recall where multiple loans were counted as multiple foreclosures in the past"

Uhmm, Bernie, we've been over this already. All of the independent tracking services are reporting increases in foreclosures. One particular tracking service happens to count multiple loans.

"and I certainly don't blame the media, they are just the messengers as far as I am concerned."

Okay, then why the thread title, "Are we being duped with bad news?" Maybe I'm just inferring too much from your title...

"So, you think I should have raised a stink about buyerÂs possible problems getting multiple or IO loans and that would have made a difference?"

Yes. I wish more people (myself included) would have spoken out about this several years ago. Would it have changed anything? Probably not, but at least we could have said we tried...
berniek
Original Author
16 years ago
"Uhmm, Bernie, we've been over this already. All of the independent tracking services are reporting increases in foreclosures. One particular tracking service happens to count multiple loans."

Yes, the one that has been over reporting is used in congressional hearings and used to justify national policy by the Federal Reserve. You talked about speaking up earlier about IO and 100% loans etc., I think this ranks right up there in importance, but than I might be wrong, I didnÂt see the loan problems coming either.
qdognj
16 years ago
couldn't see it coming???
Come on now, writing 100% loans or better, without documentation,with adjustable rates, to people who don't understand the possible and most likley upward adjustments to these rates, and you couldn't see this would end in an ugly fashion???
That lame excuse might fly for some of the uneducated purchasers who got into this predicament, but only some of them..For any alleged real estate professional, ie realtor, or mortgage broker to say such is simply unbelieveable!!!!
skylyn
16 years ago
"Yes, the one that has been over reporting is used in congressional hearings and used to justify national policy by the Federal Reserve. "

So? They were right. Foreclosures are increasing, NODs are climbing through the roof. And exactly what national policy was changed as a result of the reporting? Rates weren't changed...

On an off topic note, Alt-A mortgages croaked today... >>>pours a 40oz out for my homies...
novahomesick
16 years ago
Sorry, bernie, to have taken your thread in a direction you clearly did not want it to go. I looked at the thread title and saw a broader topic about the validity of most housing industry data. Still, I don't think one had to be a housing market analyst to have seen the handwriting on the wall 2 years ago. Creative mortgage financing was never designed for the average person. Didn't anyone wonder exactly how so many people were suddenly able to buy homes and at such high prices? I'm surprised at everybody's surprise that there would be a fallout.

The Fed and Congress draw data from a range of sources and RealtyTrac is just one more source.

But it does sound like RealtyTrac is aware their data is being misconstrued and is on a path towards remedying the situation.

FROM THE LINKED ARTICLE:

---"RealtyTrac has acknowledged that discrepancies can be caused by foreclosure process variances, such as two lenders trying to foreclose on one house at the same time, but maintains their monthly data is more accurate than the quarterly data collected and published by the Mortgage Bankers Association.

RealtyTrac's numbers represent each stage of foreclosure (notices of default, notice of auction, and bank repossession a.k.a. REO) where MBA's numbers do not.

'The Mortgage Bankers Association doesn't capture the REO because by then, the loan is dead,' said Sharga

Rectifying the Situation

To make everyone more comfortable with the data being provided, RealtyTrac recently announced they would be using a new methodology from here on out when reporting foreclosures.

According to Sharga, too many people are confused by the current report. The plan is to break down the numbers into terms that are more easily understandable.

RealtyTrac's July foreclosure report is expected to be the first report to reflect this new methodology."-----
berniek
Original Author
16 years ago
"Didn't anyone wonder exactly how so many people were suddenly able to buy homes and at such high prices? I'm surprised at everybody's surprise that there would be a fallout."
I can't speak for NAR the Feds or anyone else, only about the 2 buyers that used the IO loan and 100% financing. The IO buyer worked for Goldman Sachs and had better plans for his money, and the other 100% (80/20) buyer wanted to keep his money in the bank.
One has to understand that my market is and has not overinflated like some along the coasts. The first buyer paid $235k, the second $175k and ech home had either 3 or 4 bedrooms, 2 1/2 baths and a 2 car garage with 2,700 sqft and around 2,300.
The majority of my buyers went Conv. with $ down or VA financing, to say I should have had a crystal ball and anticipated a "fallout" in my environment is asking alot.
However, as was mentioned, RealtyTrac says they will make adjustments in their reporting.
novahomesick
16 years ago
Bernie,

Detroit? Our experiences are so different. I think it proves that, although parts of this housing story are national in scope, ultimately all real estate really is local. According to Business Week's Map of Misery, Michigan doesn't have too much toxic loan exposure.
laura1202
16 years ago
novahomesick wrote:
Bernie,
Detroit? Our experiences are so different

If I am not mistaken, Berniek is in Colorado.
novahomesick
16 years ago
Laura, You are right. I stand corrected. Thanks
saphire
16 years ago
At the end of the day there are Two aspects to this

Yes there is the fallout from 1 or 2 or 5 lenders not being paid on the house. Which cannot be good for prices. Then there are those same 5 lenders not able to make new loans because

1. Has closed
2. Another got an infusion of capital to stay afloat but does not have money to lend
3. Another can only lend at higher rates than last year because of the risk premium to making loans has gone up because rates have increased or this is what the secondary market demans
and the other two cannot make loans to anyone that is not a prime borrower, regardless of their ability to pay. I can no longer get the Alt A I could have gotten and I have excellent credit and can afford the house I wanted. So I am not in the market right now. So there are fewer buyer chasing the same houses. Supply and demand

As for it being the time to buy, not yet. You still hear about people talking about lookng for bargains. You have to buy when everyone you know thinks your crazy for buying
uncledave_ct
16 years ago
If more people are over-extending their credit, and have no cash reserve so they need 80/20 or 90/10 combos to afford a home, and were banking on the equity in their homes but now find themselves upside-down in a falling market, it's no wonder foreclosures have increased. Whether you slice it according to number of individual homes, number of loans, or loans per home, the trend toward multiple loans on a single property is disturbing. It tells me that home prices have become, and remain, way out of control, putting homeownership out of the comfortable reach of more Americans. The question, is this good for our economy?

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