March 2010 NOD/NOS/TD Activity

A quick disclaimer to consider when looking at these figures – March was a freakishly long month, coming in at 23 business days.  The average is about 21 days, and February was 19 days.

March NODs totaled 998, up from February’s 931, and second only to the record 1068 NODs recorded in August 2009.  NOSs when berserk, totaling 794, up from 406 in February and setting a new monthly record.  TDs increased significantly to 284, from February’s 180.

The graph full size with all the data is here.

[April 7, 2010 update – click on the chart below to see the NOD/NOS/Trustee sales chart from Ticor Title]

It’s getting busy on the courthouse steps buying at Trustee’s Sales.  NRES / Page is being joined by Greenstreet (10), Mayfair (5), ROI (4), and Fortis (3).  Interestingly enough, the long time Investor’s Club members that I’ve previously profiled (Arif, Pettie, McAllester, Flower) are being pretty quiet right now.  Wood is Good bought at GSR unit for $11K if I remember correctly, but otherwise have been pretty quite.  there are still some deals to be had – NRES bought 33-171-02 today for $36,600 on a property with $258,977 debt.

The story on the courthouse steps is really what is NOT selling there, even with the 63% m/m increase.  inclinejj told me that one week last month, of the 126 properties he was tracking, only 4 went TD.  The rest were withdrawn or postponed.  Where are they going? (rhetorical question)

Something else I’m seeing  is driving me to distraction.  First wave investors that are being foreclosed on are purchasing NEW properties at Trustee’s Sales.  I know of one investor who lost a property on a TD, and the same week purchased 2 properties for cash at the courthouse, and has just purchased another.  There is probably a lot more of this going on that I don’t see, but name recognition comes with perils.  This is just wrong.

 

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About Mike McGonagle

An architect, business owner, and compulsive public records hacker, Mike reads the tea leaves of the local real estate market from a unique perspective.. A former Chicagoan, Mike earned his MArch from Harvard University. Mike can be reached at mike@macassociates.com or 775-345-7435. His continued musings can be found on the REreno.com blog.
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30 Responses to March 2010 NOD/NOS/TD Activity

  1. Avatar Reno Ignoramus says:

    Mike:

    Two thoughts;

    1) It will be interesting if the big increase in NOSs translates into an increase in TDs, or if these too will fade into oblivion.

    2) Too bad you have be so discreet now after your previous fine threads naming names that had to be pulled down. Head shot ads tells me they are realtors. Thus, colleagues of Guy, about whom the truth must not be spoken on this blog.

    I remember the first time you had to become dummied down. You put up another site, but it never got any traction, did it?

  2. Avatar LikeBigBottoms says:

    “NOSs when berserk, totaling 794, up from 406 in February and setting a new monthly record. TDs increased significantly to 284, from February’s 180.”

    This, absolutely, positively, must be the bottom….

  3. Avatar Jay says:

    I am guessing that neither Guy or Mike, want to deal with lawsuits or further ceast and desist orders (if I remember correctly).

  4. Avatar inclinejj says:

    The Truth, you can not handle the truth!!!!

    When you track 120 properties in one week there is alot of work that goes on behind the scene.

    You have to keep active on all these properties move the sales along that postpone. Keep an eye on the ones that are scheduled to go to sale, get the opening bid. Check comps. Watch the sale a couple hours or even the day before. Figure out how much to bid, call trustee for status, go to the bank and get cashiers ready. Go to courthouse and wait around. Check out and note how many fellow “sharks” are standing around. Bullshit a bit with the other “sharks”. Take 10 phone calls from the office who is also keeping track of sale. Wait for sale. Bid

    Then if you get the property you have to secure the property, make sure you put insurance on it asap, get into the property check condition, secure property so people don’t break in, make sure previous owner got everything out, get property ready ie fix up for rent or sale.

    These guys could be laying low knowing the next wave of foreclosures are coming. Sometimes people show up buy a few properties and you never see them again. Other times the money or captial dries up. Other times they burn themselves out, doing all of the above.

    Sorry, to say knowing full well, the 2nd wave of foreclosures is just starting we are no wear near the bottom!!

    The only question no one knows is how many more waves are we going to have???

  5. Avatar NVKID says:

    FROM RNR –

    Reno attorney and real estate investor William Thornton has filed a complaint with the Nevada Real Estate Division against local real estate figures Karen Greathouse and Nancy Fennell of Dickson Realty.

    Thornton accused Greathouse of conducting a “pocket listing,” which he wrote means that “the agent fails to advertise the property in order to avoid sharing the commission with another agent (by representing both the buyer and seller) or only to share the commission with agents with whom they have a special relationship.” At issue is the sale in August of a home at 2550 Lakeridge Shores East in Reno, a lakefront property that had been foreclosed, acquired by Bank of America, and sold for less than the $807,500 BOA paid for it. It was assessed at $753,515.

    The $371,000 listing on the house appeared just before the close of business on Aug. 16. Reno resident George Ritter offered that amount on Aug. 17, later increased to $455,000 before the house was sold. Thornton offered $400,000 on Aug. 18 and $500,000 on Aug. 20. In a sale that took many weeks to close, the property was sold for a reported $371,250 to a firm called 7 Figures LLC and was later put back on the market at $699,000 with Greathouse as agent.

    In October (“This Toxic House,” RN&R, Oct. 22), Greathouse responded to Thornton’s charges by saying that her selling to him “would have been bank fraud, as well, because … Mr. Thornton’s wife is a blood relative of John Cavanaugh.” In his complaint, Thornton argues that limitation applies only to short sales, which the Lakeridge home was not.

  6. Avatar Sully says:

    Since the reset last year of Option Arms was postponed, this years batch should be larger in size. It will take a couple months for the data to hit then rise during the summer.

    About Sep/Oct (right before elections no less) the extent of these NOD’s and NOS’s should show some significant increases. This is also the traditional
    timeframe for a major market correction.

    Combine a growing fire with an explosive fuel and the only result can be a real big fire!

    All the talking heads in Washington are not going to contain this outbreak, I don’t care how many controversial issues they throw out there. Chances are the elections will throw a curve ball at Obama and the current way of doing business will change dramatically.

    As, what appears to be the norm, the Fed throws more money at the problem – it will continue to get worst. As far as calling a bottom or not, probably won’t make any difference as no sales = no market.

    One thing for sure, we are no where near the end of this!

  7. Avatar E.Edward says:

    Realtors,…… The all-knowing zero liability forecasters and investors of other peoples hard earned money…….

  8. Avatar billddrummer says:

    To LBB,

    You’re absolutely right. Things can only get better from here.

  9. Avatar DonC says:

    Sully says “Since the reset last year of Option Arms was postponed, this years batch should be larger in size.”

    I’ve read that the resets do not appear to be generating near the number of defaults previously projected — apparently many of those mortgages are already in default.

    But yes, clearly the overhang has not been worked off.

  10. Avatar DonC says:

    YIKES! In addition to delusional sellers, we now have delusional relatives who want to be short sale buyers as well as delusional writers. That was a hilarious story.

    Proving that assessors are always overly optimistic, the flipper(s) who bought the house in foreclosure have now put it on the market at $100,000 under the “unrealistic” appraisal. Maybe the good part is that the neighbors who feared the foreclosure sale would kill their comps didn’t need to worry — plenty of sales in the area. Maybe the bad part is that these other sales establishes the listing price of $699,000 is above market — but at least $1,000,000 under what the neighbors think the house (and their own) is worth.

  11. Avatar inclinejj says:

    Reno attorney and real estate investor William Thornton has filed a complaint with the Nevada Real Estate Division against local real estate figures Karen Greathouse and Nancy Fennell of Dickson Realty.

    Can we have a link? or was it the link I posted?

  12. Avatar MikeZ says:

    [Sully] “Since the reset last year of Option Arms was postponed…”

    ?? Apparently, I missed this news. When did this happen?

  13. Avatar smarten says:

    FWIW, a “pocket listing” is not one where an agent intentionally refrains from listing his seller’s property on the MLS or advertising it to other agents, in order to avoid paying agents of his/her choosing a sales commission [or pocketing both sides of commission]. It’s one where a seller informally gives an agent a non-exclusive right to sell his/her property and potentially realize a sales commission as a result of his/her efforts. So I think attorney Thornton is off base.

    Now the agents in question may have some potential liability to their principle [which may represent unethical conduct], Bank of America, but IMO Mr. Thornton and his clients have no standing to make complaint.

  14. Avatar DonC says:

    What I’m loving is the capsule headline for the story — “Bank of America sold a million dollar house far below value, helping to drain local tax funds.”

    Is this journalist on drugs? Obviously a house on the market for $699,000 isn’t exactly a “million dollar house”. Secondly, assessors exclude strange transactions when calculating house prices. For example, Zillow excludes the earlier foreclosure sale when calculating the possible value range for houses in the neighborhood. FWIW Zillow sets the value range for the “million dollar” house between $534K and $716K, which is consistent with the prices for other houses on the market in the neighborhood as well as with other recent transactions.

    IHO this is story is all about how some people feel “entitled”.

  15. Avatar MikeZ says:

    @Sully
    Ok, I see now, the postponed reset was because the basis rates remained low.

    You’re expecting a larger-than-normal reset, but why? I see LIBOR still falling (now below 1.0!) and the Fed Prime stable.

    You must see some indication that the LIBOR or Fed Prime are going to rise signficantly this year?

    Explain, please.

  16. Avatar Sully says:

    NO, I expect a larger number of ARM’s resetting, have no opinion of the amount of reset. As any rate of reset will probably cause these loans to go into default, if they are not already.

  17. Avatar MikeZ says:

    [Sully] “As any rate of reset will probably cause these loans to go into default, if they are not already.”

    Well, geez, Sully “explosive fuel on the fire” and “uncontainable outbreak” sounded like you’re expecting massive defaults, not just the marginal loans to go bad.

    I show LIBOR lower now than 12 mos ago, so any ARMs pegged to LIBOR will be neutral or reset downward.

  18. Avatar Sully says:

    MikeZ, read up a little bit about these Option Arms. Many had teaser rates, some as low as 1%. LIBOR for the last year makes little difference on the teaser rate. Bring the teaser rate up to the going rate and see what you end up with.

  19. Avatar DonC says:

    Sully – I read somewhere, maybe the WSJ but really can’t remember, that the expected defaults triggered by the resets were turning out to be something of a non-event because may of the borrowers had already defaulted. Is this what you were alluding to when you commented “if they have not already”?

  20. Avatar MikeZ says:

    [Sully] “MikeZ, read up a little bit about these Option Arms. Many had teaser rates, some as low as 1%. LIBOR for the last year makes little difference on the teaser rate. Bring the teaser rate up to the going rate and see what you end up with.”

    Teaser rates?! Sully, I haven’t see a teaser rate that lasted more than a year, have you?

    The only teasers that should be adjusting this year are brand new loans. All the others have long since expired.

  21. Avatar Sully says:

    MikeZ, don’t worry about it.

  22. Avatar DonC says:

    MikeZ – I think the Business Week article was a little confusing. It indicated that the problem was major in 2009 but that was not really the case. Option ARMS usually have a fixed rate for five or ten years, mostly five, and lenders started extending them in earnest in 2005. So the vast majority would reset in 2010-2011. You can see that from the graph in the article. They’re more a less a two year phenomenon.

    Calender 2009 would have been a bit early for Option Arm resets — very few would have been due for a reset. In this sense the article exaggerated the number of resets in 2009 and therefore exaggerated how important it was for the lower Libor rates so solve the problem. It would have been considerably more accurate if the article had said that to the extent there would be a limited problem in 2009 the low interest rates would mostly eliminate the problem. But that wouldn’t make for a very interesting article.

    However, as I keep mentioning, it appears that many who had Option Arms have already defaulted so there isn’t going to be a new huge wave of Option Arm defaults. At this point the anticipated slug of defaults on Option Arms hasn’t materialized. That’s a good thing since it means these defaults are baked in so to speak, but the bulk of the resets are in 2011 so we’ll have to see if current experience continues forward. You’d expect at least some up tick.

  23. Avatar Sully says:

    DonC, you’re probably right in the effect these ARMs are having. I was trying to use something real estate related to show a catalyst. I probably should have used the consumer spending index or current unemployment report, as both are fabricated to look good but don’t include all the details in media reports.

    So, even without the ARMs creating a problem, the strategic defaults probably will make up the difference. I did say it would take two or three months for the data to show up in NOD’s – so it’s a moot point to dwell on interest rates right now.

  24. Avatar billddrummer says:

    Does anyone have any data on the number of Option ARM loans that are subject to reset because their deferred interest cap amount has been reached?

    Resetting because of higher interest rates is a non-issue (right now, anyway). But I wonder whether people who took out neg-am loans 3-4 years ago have seen a jump in their payments when the deferred interest cap is reached, anywhere between 110%–120% of the original loan balance, depending on the deal.

    Payment shock could be extreme.

  25. Avatar DonC says:

    billddrummer asks “Does anyone have any data on the number of Option ARM loans that are subject to reset because their deferred interest cap amount has been reached?”

    I don’t think the banks were required to break out the numbers for Option ARMS. So what we have are educated guesses rather than hard numbers on the number of Option ARMS, and nothing but complete guesses on the number that would reset. That’s difficult in part because, as Sully has pointed out, lower interest rates mean more of the payment is going to principal reduction, preventing the reset cap from being obtained and thus delaying the reset to the five year mark.

    The Business Week article cite by Sully indicates that $1T of the Option ARMS may reset in the next two years. I’ve seen numbers as high as $1.2T. However, keep in mind that these numbers may be overestimating the problem for a couple of reasons. First is that the borrowers may have already defaulted. As of last year 40% or so of the Option ARMS were delinquent. Second many of the loans may have been restructured. Federal Federal Bank of California, which specialized in Option ARMS, was closed in December. If memory serves me correctly 50% of their loan portfolio had been restructured. I think the most common restructure of an Option ARM was to freeze the interest rate at a very favorable rate for five or even ten years so that the borrower was sure to pay down principal, eliminating the possibility of negative amortization.

  26. Avatar John Newell says:

    From what I hear, DonC is right – many 5/25 ARMs are already delinquent and/or have been restructured. Further, as indicated above, the low prime rate will help many ARMs that are scheduled to reset and have not been restructured. The people I have spoken with do not expect the same carnage we saw in 2008 when the 3/27 ARMs reset.

    That having been said, a fair number of five year interest only loans are still floating around out there (although fewer in Reno than in Vegas, Phoenix and LA, from what I hear), and it is unlikely that refinancing for the amount due will be available for those loans. Some people I have talked to recently believe that the banks will reduce the principal owed on many of these loans in order to refi and not have to take the houses as REOs. Anyone else hear anything on this?

  27. Avatar skeptical says:

    This chart that Mike so generously provides at the beginning of each month is, for me, some of the most important data I get from this site (aside from the various catfights that rage from time to time…).

    Mike already referenced earlier in the month that the clip continues. The question will be: what was the nature of foreclosure activity in April, and going forward?

    Distressed sales will depress prices. Period. How many more distressed sales will occur before this area is finally “cured” of its supply overhang?

    I look at that beautiful bell curve of median prices and ppsf over the last 10 years, and I begin to wonder if the bubble has worked itself out? Then I think about the massive shadow inventory, the mountain of foreclosures ahead of us, and to the inevitable end to the govt programs to artificially prop up the market, and I get my two boys, pack ’em up in the pickup, and, like InclineJJ, I go fishin’……..

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