The wave of defaults on subprime mortgages, loans made to the least creditworthy home buyers, is spilling into the lower tiers of corporate credit, said Anders Maxwell, managing director of New York-based investment bank Peter J. Solomon Co.,
You have to be kidding me. Now the reason for these "corporate credit events" are subprime mortgages? Next it will be the weather...anything but mangement's bad decisions. Now "walk-away" is the new subprime, which was the new black.
The March numbers show that overall foreclosure activity so far this year continues to run nearly 60 percent above the levels we saw last year, said James J. Saccacio, chief executive officer of RealtyTrac. On a year-over-year basis, default notices were up nearly 57 percent and bank repossessions were up nearly 129 percent, but auction notices were up only 32 percent, indicating that more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender. This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction.
James, we used to use the active voice a lot more, and people "didn't pay the mortgage and entered foreclosure". Now we follow the leader ("mistakes were made") and use the passive voice so the loans "were walked away from", shifting the personal responsibility factor.
Yah...this isn't ending any time soon. Massive 'wealth' destruction...paper wealth.
I do wonder if the FOMC arguments about reduced inflationary fears are correct: we really are looking at real deflation across the economy - where on earth will consumers come up with cash? Even during the recent 'boom', they sure as heck weren't 'earning' it through production.
I'm still waiting to see the earnings bloodbath spread (significantly) beyond the IBs and CBs. Automotive and Retail are a start, as are early indicators like shipping (UPS, FedEx, CSX, etc.).
OTOH, the last sliver of land I need to pick up to (re)join my other parcels may yet be mine for a reasonable price. I've been betting against a specu-vestor for nearly 18 months now, and it looks like I may win this game of chicken.
Though the headline may not support the meaning that is common here, the fact is, you either walk away from a foreclosed house, or you are thrown out by the sheriff/police.
Up until now, at least, the forceful eviction stories seem to be in short supply, whereas the stories of homes gutted and vandalized by their departing former mortgage paying 'owners' are legion. As are the stories detailing how soon to be former mortgage payers are finding another place to live - either renting or with family.
Arguably, much of the foreclosure activity has been of unneeded housing - people can find somewhere else to stay without the need of being forcefully evicted. (Waste on such a scale is truly American - most nations simply can't afford to build 'excess' housing for something like 10% or 20% of their population.)
As a personal measuring stick - when the talk of forceful evictions become common, especially of people with nowhere else to go, the discussion will shift meaningfully from 'recession' to 'depression.' We likely have a good ways to go before that point. Unfortunately, 'homelessness' will not be a good measure, as seen in the Reagan years - lots of people without housing, but no sense of crisis as in the Depression, since somehow, the homeless were easily categorized as not being like 'us.' If forced evictions become common, that will probably change.
Actually MOM, what I would like to see is shareholders "walk away" from companies whose upper-management (and the boards that put them there) can't just use straight-talk. All these assclowns should be retired and barred from running public companies ever again. Then Bloomberg could report:
"Shares of GS lost 50% of their value today after a speech by CEO Blankfein when shareholds walked-away. As you recall a similar event happened last week after Wachovia's investor conference call."
rent_to_own writes:
Though the headline may not support the meaning that is common here, the fact is, you either walk away from a foreclosed house, or you are thrown out by the sheriff/police.
Fair enough, but if that watered-down definition of "walk away" is the one we're going to use maybe we should make that clear. The phrase has usually been used to describe a borrower who has the income to support the mortgage but chooses to leave anyway, as opposed to a borrower who doesn't have the funds to make the payments.
Here's another gem from the WSJ today, reporting on J&Js earnings:
Absent favorable currency effects, the health-care product maker's drug sales would have declined.
And in some alternate-universe sort of way that I have yet to understand, this means their stock price should rise...when their actual business is slumping and their entire profit is due to temporary arbitrage. The mind reels...
Heard twice yesterday at work about buying across the street and then let your house forclose. The attitude was you are screwed anyway. Neither have done it yet.
Um, Yalt-- when ipodius said subprime was the new black,I think it was a fashion joke, as in 'pink is the season's new black', I.e., it is the new reliable standby - rather than a commentary on race. You may be reading something into that which isn't there.
Lousy way to present the data as 30% of homes have no mortgage to foreclose.
So we are really talking of one in 375 at this time. Does being in "some state of foreclosure" mean that someone is in a long 2-300 day process I have read about here? And do we know what number have already been graduated from this process and already been foreclosed say in the last 12 months?
Any idea of the backlog waiting to be processed for foreclosure?
Finally any idea of short sales
I guess I am asking does anybody really have a handle on the number of people in the process of losing or have lost their homes?
It will be interesting to see how many home owners walk away. I wonder if watching all these CEOs of major financials drive their companies into the ground with assinine and reckless business practices, and then walk away with platinum parachutes; I wonder if all that will influence home owners decisions to walk away.
Now "walk-away" is the new subprime, which was the new black.
ipodius | 04.15.08 - 9:59 am | #
"Subprime" was even better than "black", because the reader was free to plug in whatever ethnic or other social group they particularly hated.
Yalt | 04.15.08 - 10:08 am |
Yalt, if I recall you are not a born/raised American?
The expression "x is the new black" refers to fasion.
black is always in style. so as example, when a new color comes in style (let's pretend it's pastel), fashionistas will say "pastel is the new black"
now people use that for anything that's becoming a new trend or fashionable...
so in this case subprime was the new black, but is replaced by walkaway which is the new black.
This article is using "walk away" in the traditional sense of stopping payments and, well, walking away from the house, without any additional restrictions on why the ex-homeowner is giving up. There's been a recent attempt to stigmatize "walking away" as only applying to ruthless defaulters who are well able to pay the mortgage but I see no reason to go along with that. "Walk away" isn't reserved for the the ruthless and irresponsible in other contexts like accidents; why do so with mortgages? "Default abuser" or "reckless defaulter" of maybe even "cheater" would be better for people who are trying to shaft the bank with a loss they themselves could take.
Anonymous writes:
Um, Yalt-- when ipodius said subprime was the new black,I think it was a fashion joke, as in 'pink is the season's new black', I.e., it is the new reliable standby - rather than a commentary on race. You may be reading something into that which isn't there.
It may not have been in ipodius's post, but it's out there. More than once I've been in a conversation, whether in person or on the net, where someone's slid from "subslime" to some sort of racist or otherwise bigoted comment amount the borrowers.
yes, please excuse my pop-culture references, but it is a rather trite fashion saying. "This season neon blue is the new black" meaning you should burn whatever classy item is hanging in your closet and run out to waste more money on what everyone else is wearing. Sort of like selling that perfectly nice 1950's cape to buy some badly-built, overpriced 4000 sq ft monstrosity. So I think the phrase is very apt here.
And kp, math still works, except those new colloraries that IBs and hedgies were using to make a perpertual money growth machine out of crappy mortgages.
More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement.
If that is correct, and assuming that 31% of US homeowners have no mortgage, then the "some stage of foreclosure" rate among mortgage holders would be somewhere around 1 out of 371.
What does walking away mean anyway? If the debtor has any other assets or a good income, won't the bank eventually come after them to pay the difference between what they owe at what the house brings in foreclosure? If I'm right about that, wouldn't it be in everyone's interest for the homedebtor to sell the house for the highest price possible?
Does walking away only apply to people with no networth and no income to garnishee?
Maybe they're using it as in the phrase "There was a major 12-car pileup on the Eisenhower but everybody walked away?". Yes, to date most people in foreclosures haven't killed themselves (or been forcibly evicted at gunpoint). That too may change.
Actually, Charles, it's the exact opposite - they're setting it up as the walkers could pay but just aren't - those ruthless ruthless nasty people! - in other words, behaving exactly as their mas simplified model of homo economicus would have predicted - except that that sort of behavior is only sanctioned in big companies. And, given a few more mass-consumption articles, it will be common knowledge that it's these nasty, nasty walkers that are doing all the damage, just as it's those nasty sub-primes' fault as though no-doc Alt-A's and let's streamline, rightsize and efficientize loan applications to instant-approval behavior had nothing to do with things either.
I'm with Yalt--us native Midwesterners have to stick together.
It does no good to use the term "walk away" to mean a foreclosure with voluntary vacating rather than legal eviction. I just do not think that's what the media is trying to get at with that term. It is perfectly "normal" to see borrowers vacate "voluntarily" the day of the FC sale or just before that without requiring the sheriff to show up and throw them out. There is no correlation of that to the original cause of the delinquency.
It not a question of what "the technical definition" is because there isn't one. That is why this meme is in play. Yalt is correct that it's a phrase like "subprime" onto which people can project their beliefs or assumptions about "bad borrowers."
Bought a plastic 40-gal. trash can with locking lid a couple of months ago. It's in the garage, slowly filling up with staple food in bulk, double-wrapped and dated. About half-way there.
"ipodius writes:
What a waste of time Bob. I'm going to the gym more and buying ammo. But happy that people like you are storing things for me!"
Cute. But being actually serious, it also helps to live in a town that has some social cohesion instead of an I-got-mine 'burb. For all that's wrong with Santa Cruz, we all pitch in when things go bad. I was here in '89 for the quake, and I saw.
Your hypothetical urban raider wouldn't have a chance here, nor in most established towns.
Not that I actually expect a breakdown in the food distribution system -- just shortages at worst. And some of what I've got I'd share with the neighbors -- who've got kids -- if need be.
I think "walking away" has become the avatar to excuse their failure to correctly model the unprecedented percentage of NODs proceeding all the way to NOTs and ultimately REO status.
The numbers, not surprisingly are way off.
If we look not at total households, but
households with mortgages (51M) we get about one in 245 are in the process of foreclosure.
Rob Dawg - I agree that walking away is the new excuse for model failure. I'm waiting for the transcript where an analyst says "If you can't quantify it, how come you know the problem is due to walk aways?" It sounds like Wachovia is pluralizing anecdotes.
ipodius - sorry to go way up thread, but I liked your comment about shareholders walking away. When the shares of the MI I own are worth nothing, how can I walk away? If I had paper stock certificates I might mail them to the CEO.
There's still a small part of the bay area where prices have held up and there are people with a stake in their homes, but in much of the region, fewer than half of the residents have equity in their homes. I'll guess we'll get to see if people really act rationally and walk away very soon.
There's still a small part of the bay area where prices have held up and there are people with a stake in their homes, but in much of the region, fewer than half of the residents have equity in their homes. I'll guess we'll get to see if people really act rationally and walk away very soon.
With the horrible traffic situation in the Bay area, the only rational way out of town is walking...
One nice outcome, from my point of view, of using the term "walkaway" is that it makes the borrower seem like it is he who is making the decision. This will lessen support for bailouts, since it's hard to feel sorry for people who are making a cold financial decision.
So, if you are against bailouts and if you think that foreclosures help with price discovery and reaching the bottom sooner, then all the "walkaway" talk may get be helpful.
And, given a few more mass-consumption articles, it will be common knowledge that it's these nasty, nasty walkers that are doing all the damage --Scav
I am completely lost about the concept of walkaways. Isn't there a system in place to make who can pay their bills pay them? If someone has money in the bank or a good income, won't the lender sue them and garnishee his wages?
My understanding of banking is there's no way just to walk away from a debt and pretend like you never owed it. People keep talking about making the cold financial decision to walk away, as if that just eliminates the debt. If people owe the bank money and have money or income, won't the bank eventually come after the debtors for what they owe?
If they idea is that people just plan on having such low income and assets that it's not worth the bank's time to sue them, as cold financial calculations go that one is pretty lame. I thought the purpose of a financial calculation was not to be broke. It sort of defeats the purpose if part of your plan is to stay broke or in hiding.
think herds - think overloading the system. Little fish live in schools because it's more likely the predators (hey, a natural shark/lawyer joke snuck in!) will grab the neighbor doing and not you. Govt's and companies are going broke, so what they're counting on the system breaking down. Funny thing about logic, there are lots of logical ways to come to different decisions.
And some people wonder what is going wrong in the U.S., even when expressed tongue in cheek
My tongue was firmly implanted in my cheek. As I've posted, i'm not one of the "food-store keeping while waiting for jesus to come in the clouds" type.
As far as I can tell from historical literature, current civilization has been preaching the apocalypse for a little over 2000 years now, but the world and humanity stubbornly go on leaving these people looking rather silly. And if we had such a social breakdown that this became necessary, you're neighbors wouldn't be so nice to you. They'd be killing you for your store. That's human nature underneath it all, and on the same lines as the PETA folks that think animals are just people too.
In "no-recourse" states, the lender gets to repossess the collateral (the house), but no more than that.
Walking away from a mortgage under those conditions results only in a hit to borrowers FICO score for x years (5-7?)
There is debate over how many people are truly walking away - ie, they have income & or assets which could cover the mortgage, but are choosing not to.
Some people are actually walking Spanish, but are calling it "walking away" to save face.
Peterbob writes:
One nice outcome, from my point of view, of using the term "walkaway" is that it makes the borrower seem like it is he who is making the decision. This will lessen support for bailouts, since it's hard to feel sorry for people who are making a cold financial decision.
So, if you are against bailouts and if you think that foreclosures help with price discovery and reaching the bottom sooner, then all the "walkaway" talk may get be helpful.
Well, yes, that's precisely the point behind the talk of walking away--people tend not to feel sorry for someone making a cold financial decision, and if you can convince them that that someone is the borrower and not the bank, you might be able to swing public sentiment in the direction of aid for the banks and investors instead of for the borrowers.
Without a concerted effort on the part of the investor class and their public relations minions, that would be a hard sell.
Charles, "Walk-Away" refers almost exclusively to non-recourse secured lending.
Meaning, you owe the mortgage or the bank gets the house you put up as collateral. (When you took out the mortgage, both you and the bank agreed on a value for the house.)
Simply put, I either pay the mortgage or the bank gets the house.
I can't or won't pay the mortgage, bank; so sorry- I'll just leave these keys right here by the sink. Bye!
The bank is now the proud owner of a house. The really cool people leave the bank a nice fern, like a house-warming gift.
In states where a bank is allowed to pursue what is called a deficiency judgment, this no longer plays out the same way, and yes, people get garnished if they fail to pay their mortgage. In short, they lose their home and owe money on it anyway.
Once more, in Florida, all loans are recourse, and lenders virtually never, including now, go after borrowers who owe them more money than the house was worth.
Lenders probably have half the number of people they need to truly deal with things as they are set up now.
Lenders would have to figure out which people would worth going after.
Suppose the house was trashed afterwards because the lender didn't take care of it?
Suppose the borrower has only a little extra money? Suppose the money is tied up in such a way as the lender can't get at it--in IRAs and such.
The same lenders who drive a car borrower crazy, where far less is at stake, do nothing to mtg borrowers.
Suppose the borrower answers and says, (assuming honesty here), hey, Mr Bank, you picked out the appraiser, and it was properly appraised, and then after the fact we both found out that real property does NOT always go up. You could have required more down, you could have required a confirming appraisal you are supposed to know about real estate. . .present that to the judge and I'd think you'd get at least a third of them to refuse to grant a deficiency.
And even after that. . . collecting judgments is HARD.
Also, in normal times, borrowers were embarrassed by the whole thing. They'd leave early so as not to be humilated before the neighbors.
Of course, in normal times, people who got foreclosd out of their house had no money. Maybe this "have no money" thing is so deeply engraved on the collective conscious of the banks and since we know banks don'tlike to think about anything, they are just going with the old,old rule.
Anyway, I think that the same reasoning is everywhere at present. Some years from now, maybe this old debt will be bought up, pennies on the dollar from collection agencies. But you have to get the defaut first.
Finally, if you add up all the forecloses that are finished, and all the ones to come, I think you will at least be equal to the ones in some stage of foreclosure right now. And probably 2 or 3 times that. I think, subtracting out the people who own 100%, you are going to see totals of one out of 50 before this is over.
rent-to-own: "Up until now, at least, the forceful eviction stories seem to be in short supply, whereas the stories of homes gutted and vandalized by their departing former mortgage paying 'owners' are legion."
Maybe, but that is another phenomenon I'd like to see actual data on before concluding that it is common. Sure it happens - I saw that U-Tube too. Does it happen a lot?
Re: Note that the "walk away" headline isn't supported by any evidence in the article.
The walk away part is in first paragraph>>
"U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners lost their homes to lenders."
more owners lost their homes
They are not in these homes and have "walked away"
Watched "The Dark Ages" last night on History & was reminded of this: "Man is neither unique nor central nor necessarily here to stay. But he is a product of circumstances special to the point of disbelief. And if man in his current predicament seeks a fair mystique to see him through, then I can only suggest that he consider his genes. For they are marked. They are graven by luck beyond explanation. They are stamped by forces that we shall never know. But even so, in the hieroglyph of the human emergence certain symbols must stand for all to read: Change is the elixir of the human circumstance, and acceptance of challenge the way of our kind. We are bad-weather animals, disaster's fairest children. For the soundest of evolutionary reasons, man appears at his best when times are worst." --Robert Ardrey, "Cain's Children," in African Genesis
"And if we had such a social breakdown that this became necessary, you're neighbors wouldn't be so nice to you. They'd be killing you for your store. That's human nature underneath it all, and on the same lines as the PETA folks that think animals are just people too."
Then I must live in a better town than you do. Or you must never have been through a natural disaster and watched people pull together.
Putting away extra food isn't just done for the apocalypse; it's done for hard times coming. We had those in the '30s. People in the cities starved. Civilization did not break down. But it would have been nice to have a little extra put by.
The same lenders who drive a car borrower crazy, where far less is at stake, do nothing to mtg borrowers.
Thank you LawyerLiz. You explained it better than anything I've seen since the housing bust started.
It seems to me that if it's true that many homedebtors are "walking away" from bills they could afford to pay, mortgage servicers will have to hire some collectors like car lenders and credit cards do.
I suspect, though, that many of the people making this cold financial calculation aren't making what I would consider a calculation. I suspect that most have no money, no assets to speak of, and a modest income. At least half their after tax income probably goes to service debt. That means they can just barely pay their bills, assuming they have no setbacks such as unexpected repairs to their car or home. To say that such people who are broke are "making a cold financial calculation" is glamorizing the situation.
There may be some people with significant net worth who are gaming the system. I suspect the banks will catch on and go after these people (at least in recourse states).
Oh, please, EVERY creature, great and small on this earth is massively improbable.
All creatures are bad weather creatures. The ones who survive, that is. The ones who aren't, don't survive. That includes us. That pseudo-mystic quote is riduculous and designed to make us feel good. People are also at their worst when times are tough. In fact, I'd like to see some proof that people are actually better when times are really tough. Not when we're all pulling together after a catastrophe, but when it looks like some of us will survive only at the expense of others.
My biology professor once remarked that humans were really just a fantastically elaborate system evolved by our gut bacteria as a protective environment and a source of high-quality food.
Massively improbable, maybe, but it's really nothing to feel all that good about....
Walk away? more like crawl. A local mortgage broker with advertorial in paper was pushing how you could devote 65% of income to PITI, "look at how much home you can buy!" Many did just that, and then discovered that they were pushed to the wall. The payments can be made, but it is soul crushing, the cost over twice what rent had been for them. The only justification they had for the pain was the "investment" that the home provided, that they had bought "NOW, before you are locked out forever!"
There may be a decision there, a possibility of making the payments that is discarded, but it is the rational decision of self and family preservation.
Lawyer Liz: Ardrey was not a mystic or a philosopher, but an anthropologist with special interest in man's aggressiveness & social behavior. It seemed appropriate to the discussion of community under times of duress.
FURST!
Thank you for changing the subject, CR. Phew.
Check this out from Bloomberg on corporate BKs:
The wave of defaults on subprime mortgages, loans made to the least creditworthy home buyers, is spilling into the lower tiers of corporate credit, said Anders Maxwell, managing director of New York-based investment bank Peter J. Solomon Co.,
You have to be kidding me. Now the reason for these "corporate credit events" are subprime mortgages? Next it will be the weather...anything but mangement's bad decisions. Now "walk-away" is the new subprime, which was the new black.
Remember all it well until,
Borat walks from his failed chicken coop flip,
Then it's time for panic.
"Walk away" comes from a paragraph in the RealtyTrac press release:
Foreclosure Activity Increases 5 Percent in March According to RealtyTrac(R) U.S. Foreclosure Market Report
The March numbers show that overall foreclosure activity so far this year continues to run nearly 60 percent above the levels we saw last year, said James J. Saccacio, chief executive officer of RealtyTrac. On a year-over-year basis, default notices were up nearly 57 percent and bank repossessions were up nearly 129 percent, but auction notices were up only 32 percent, indicating that more defaulting homeowners are simply walking away and deeding their properties back to the foreclosing lender. This deed-in-lieu-of-foreclosure process allows the lender to take possession of a property without putting it up for public foreclosure auction.
I'm just waiting for the first time I see a bankrupt corporation described as "walking away".
James, we used to use the active voice a lot more, and people "didn't pay the mortgage and entered foreclosure". Now we follow the leader ("mistakes were made") and use the passive voice so the loans "were walked away from", shifting the personal responsibility factor.
Now "walk-away" is the new subprime, which was the new black.
ipodius | 04.15.08 - 9:59 am | #
Word.
"Subprime" was even better than "black", because the reader was free to plug in whatever ethnic or other social group they particularly hated.
And "subprime contagion"...well....
Yah...this isn't ending any time soon. Massive 'wealth' destruction...paper wealth.
I do wonder if the FOMC arguments about reduced inflationary fears are correct: we really are looking at real deflation across the economy - where on earth will consumers come up with cash? Even during the recent 'boom', they sure as heck weren't 'earning' it through production.
I'm still waiting to see the earnings bloodbath spread (significantly) beyond the IBs and CBs. Automotive and Retail are a start, as are early indicators like shipping (UPS, FedEx, CSX, etc.).
OTOH, the last sliver of land I need to pick up to (re)join my other parcels may yet be mine for a reasonable price. I've been betting against a specu-vestor for nearly 18 months now, and it looks like I may win this game of chicken.
Though the headline may not support the meaning that is common here, the fact is, you either walk away from a foreclosed house, or you are thrown out by the sheriff/police.
Up until now, at least, the forceful eviction stories seem to be in short supply, whereas the stories of homes gutted and vandalized by their departing former mortgage paying 'owners' are legion. As are the stories detailing how soon to be former mortgage payers are finding another place to live - either renting or with family.
Arguably, much of the foreclosure activity has been of unneeded housing - people can find somewhere else to stay without the need of being forcefully evicted. (Waste on such a scale is truly American - most nations simply can't afford to build 'excess' housing for something like 10% or 20% of their population.)
As a personal measuring stick - when the talk of forceful evictions become common, especially of people with nowhere else to go, the discussion will shift meaningfully from 'recession' to 'depression.' We likely have a good ways to go before that point. Unfortunately, 'homelessness' will not be a good measure, as seen in the Reagan years - lots of people without housing, but no sense of crisis as in the Depression, since somehow, the homeless were easily categorized as not being like 'us.' If forced evictions become common, that will probably change.
Actually MOM, what I would like to see is shareholders "walk away" from companies whose upper-management (and the boards that put them there) can't just use straight-talk. All these assclowns should be retired and barred from running public companies ever again. Then Bloomberg could report:
"Shares of GS lost 50% of their value today after a speech by CEO Blankfein when shareholds walked-away. As you recall a similar event happened last week after Wachovia's investor conference call."
rent_to_own writes:
Though the headline may not support the meaning that is common here, the fact is, you either walk away from a foreclosed house, or you are thrown out by the sheriff/police.
Fair enough, but if that watered-down definition of "walk away" is the one we're going to use maybe we should make that clear. The phrase has usually been used to describe a borrower who has the income to support the mortgage but chooses to leave anyway, as opposed to a borrower who doesn't have the funds to make the payments.
Here's another gem from the WSJ today, reporting on J&Js earnings:
Absent favorable currency effects, the health-care product maker's drug sales would have declined.
And in some alternate-universe sort of way that I have yet to understand, this means their stock price should rise...when their actual business is slumping and their entire profit is due to temporary arbitrage. The mind reels...
Heard twice yesterday at work about buying across the street and then let your house forclose. The attitude was you are screwed anyway. Neither have done it yet.
Um, Yalt-- when ipodius said subprime was the new black,I think it was a fashion joke, as in 'pink is the season's new black', I.e., it is the new reliable standby - rather than a commentary on race. You may be reading something into that which isn't there.
Lousy way to present the data as 30% of homes have no mortgage to foreclose.
So we are really talking of one in 375 at this time. Does being in "some state of foreclosure" mean that someone is in a long 2-300 day process I have read about here? And do we know what number have already been graduated from this process and already been foreclosed say in the last 12 months?
Any idea of the backlog waiting to be processed for foreclosure?
Finally any idea of short sales
I guess I am asking does anybody really have a handle on the number of people in the process of losing or have lost their homes?
It will be interesting to see how many home owners walk away. I wonder if watching all these CEOs of major financials drive their companies into the ground with assinine and reckless business practices, and then walk away with platinum parachutes; I wonder if all that will influence home owners decisions to walk away.
I think people are actually running away these days.
Now "walk-away" is the new subprime, which was the new black.
ipodius | 04.15.08 - 9:59 am | #
"Subprime" was even better than "black", because the reader was free to plug in whatever ethnic or other social group they particularly hated.
Yalt | 04.15.08 - 10:08 am |
Yalt, if I recall you are not a born/raised American?
The expression "x is the new black" refers to fasion.
black is always in style. so as example, when a new color comes in style (let's pretend it's pastel), fashionistas will say "pastel is the new black"
now people use that for anything that's becoming a new trend or fashionable...
so in this case subprime was the new black, but is replaced by walkaway which is the new black.
on CR: hoocoodanode is the new black.
This article is using "walk away" in the traditional sense of stopping payments and, well, walking away from the house, without any additional restrictions on why the ex-homeowner is giving up. There's been a recent attempt to stigmatize "walking away" as only applying to ruthless defaulters who are well able to pay the mortgage but I see no reason to go along with that. "Walk away" isn't reserved for the the ruthless and irresponsible in other contexts like accidents; why do so with mortgages? "Default abuser" or "reckless defaulter" of maybe even "cheater" would be better for people who are trying to shaft the bank with a loss they themselves could take.
In other news....water is wet, the sun is bright and hot....and math still works...( 1 dollar of income can still only cover 1 dollar of expense).
No wonder Alien lifeforms won't give us the time of day.
Anonymous writes:
Um, Yalt-- when ipodius said subprime was the new black,I think it was a fashion joke, as in 'pink is the season's new black', I.e., it is the new reliable standby - rather than a commentary on race. You may be reading something into that which isn't there.
It may not have been in ipodius's post, but it's out there. More than once I've been in a conversation, whether in person or on the net, where someone's slid from "subslime" to some sort of racist or otherwise bigoted comment amount the borrowers.
"I'm just waiting for the first time I see a bankrupt corporation described as "walking away"."
Don't forget that the we had countries walk away or effectively announce new terms. At least this time around our own people get the benefit.
Imagine the homeowner that put 20% down that's now upside down.
Yalt, if I recall you are not a born/raised American?
Is Ohio still part of America?
But no, I didn't recognize the phrase. Sorry, ipodius.
"Imagine the homeowner that put 20% down that's now upside down."
I know some who moved to CA a couple of years ago and they aren't happy.
Umm, "about the borrowers", not "amount the borrowers".
I've got a serious typing problem going this morning, for some reason....
black is always in style
yes, please excuse my pop-culture references, but it is a rather trite fashion saying. "This season neon blue is the new black" meaning you should burn whatever classy item is hanging in your closet and run out to waste more money on what everyone else is wearing. Sort of like selling that perfectly nice 1950's cape to buy some badly-built, overpriced 4000 sq ft monstrosity. So I think the phrase is very apt here.
And kp, math still works, except those new colloraries that IBs and hedgies were using to make a perpertual money growth machine out of crappy mortgages.
So, let's say "walking away" is the best thing for an individual to do, but ultimately the worst thing for the economy.
What do you say when an acquaintance asks you if they should do what "everbody else" is doing and "just walk away"?
Note that whether it's happening or not, the media is creating the impression that it's a viable option that people are choosing.
More than 234,000 properties were in some stage of foreclosure, or one in every 538 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of default data, said today in a statement.
If that is correct, and assuming that 31% of US homeowners have no mortgage, then the "some stage of foreclosure" rate among mortgage holders would be somewhere around 1 out of 371.
Massive 'wealth' destruction...paper wealth.
Again, I'd compare the idea to the butcher who's rigged his scale so he can sell his customers 1/2 lb of meat for the price of 1 lb.
The customers find out what's happen and call it "massive meat destruction".
No.
What's left up to the imagination, RayOnTheFarm, is the dataset. It is of ALL households, or all households with a mortgage?
Is Ohio still part of America?
oops.. sorry!
I dunno... now that you mention it though, maybe we sould have "core GDP".
we can exclude "volatile" places when determining our GDP.
I'm sure US GDP ex-Ohio/Michigan and all other non-performing areas would be fantastic!
US-ex-Ohio is the new black!
What does walking away mean anyway? If the debtor has any other assets or a good income, won't the bank eventually come after them to pay the difference between what they owe at what the house brings in foreclosure? If I'm right about that, wouldn't it be in everyone's interest for the homedebtor to sell the house for the highest price possible?
Does walking away only apply to people with no networth and no income to garnishee?
Maybe they're using it as in the phrase "There was a major 12-car pileup on the Eisenhower but everybody walked away?". Yes, to date most people in foreclosures haven't killed themselves (or been forcibly evicted at gunpoint). That too may change.
Actually, Charles, it's the exact opposite - they're setting it up as the walkers could pay but just aren't - those ruthless ruthless nasty people! - in other words, behaving exactly as their mas simplified model of homo economicus would have predicted - except that that sort of behavior is only sanctioned in big companies. And, given a few more mass-consumption articles, it will be common knowledge that it's these nasty, nasty walkers that are doing all the damage, just as it's those nasty sub-primes' fault as though no-doc Alt-A's and let's streamline, rightsize and efficientize loan applications to instant-approval behavior had nothing to do with things either.
Welcome to wonderland.
I'm with Yalt--us native Midwesterners have to stick together.
It does no good to use the term "walk away" to mean a foreclosure with voluntary vacating rather than legal eviction. I just do not think that's what the media is trying to get at with that term. It is perfectly "normal" to see borrowers vacate "voluntarily" the day of the FC sale or just before that without requiring the sheriff to show up and throw them out. There is no correlation of that to the original cause of the delinquency.
It not a question of what "the technical definition" is because there isn't one. That is why this meme is in play. Yalt is correct that it's a phrase like "subprime" onto which people can project their beliefs or assumptions about "bad borrowers."
Maybe it's time to stock that pantry - HEAVILY.
I believe most fashion discussions in Ohio include the word camouflage.
I believe most fashion discussions in Ohio include the word camouflage.
My brother who lives there would say, there are no fashionable clothes in Ohio because they don't make ready-to-wear in large enough sizes...
yes, please excuse my pop-culture references,
whatever classy item is hanging in your closet
Sort of like selling that perfectly nice 1950's cape
Holy dominoes Batman! You would sell your cape?
"Maybe it's time to stock that pantry - HEAVILY."
Bought a plastic 40-gal. trash can with locking lid a couple of months ago. It's in the garage, slowly filling up with staple food in bulk, double-wrapped and dated. About half-way there.
Holy dominoes Batman! You would sell your cape?
Only if I sold the matching hat and gloves, sdtfs! The classics stand the test of time
What a waste of time Bob. I'm going to the gym more and buying ammo. But happy that people like you are storing things for me!
AC- In some of your comments yesterday about 1931, what book/reference were you quoting from?
Thanks
Just read someone has honey and locusts for lunch. My mom is looking for you.
"ipodius writes:
What a waste of time Bob. I'm going to the gym more and buying ammo. But happy that people like you are storing things for me!"
Cute. But being actually serious, it also helps to live in a town that has some social cohesion instead of an I-got-mine 'burb. For all that's wrong with Santa Cruz, we all pitch in when things go bad. I was here in '89 for the quake, and I saw.
Your hypothetical urban raider wouldn't have a chance here, nor in most established towns.
Not that I actually expect a breakdown in the food distribution system -- just shortages at worst. And some of what I've got I'd share with the neighbors -- who've got kids -- if need be.
I think "walking away" has become the avatar to excuse their failure to correctly model the unprecedented percentage of NODs proceeding all the way to NOTs and ultimately REO status.
The numbers, not surprisingly are way off.
If we look not at total households, but
households with mortgages (51M) we get about one in 245 are in the process of foreclosure.
"I know some who moved to CA a couple of years ago and they aren't happy."
I know one that left a couple of years ago and I'm extremal happy that I did.
Crocs are the new Moon Rocks.
Yalt, if I recall you are not a born/raised American?
Is Ohio still part of America?
It's Yal who was foreign. Not Yalt. Confusing, these pseudonyms...
Rob Dawg - I agree that walking away is the new excuse for model failure. I'm waiting for the transcript where an analyst says "If you can't quantify it, how come you know the problem is due to walk aways?" It sounds like Wachovia is pluralizing anecdotes.
ipodius - sorry to go way up thread, but I liked your comment about shareholders walking away. When the shares of the MI I own are worth nothing, how can I walk away? If I had paper stock certificates I might mail them to the CEO.
Here's a map of the SF bay area showing the percentage of people with negative equity by zip code.
http://imgs.sfgate.com/c/pictures/2008/04/15/bu_equitygrf.jpg
There's still a small part of the bay area where prices have held up and there are people with a stake in their homes, but in much of the region, fewer than half of the residents have equity in their homes. I'll guess we'll get to see if people really act rationally and walk away very soon.
There's still a small part of the bay area where prices have held up and there are people with a stake in their homes, but in much of the region, fewer than half of the residents have equity in their homes. I'll guess we'll get to see if people really act rationally and walk away very soon.
With the horrible traffic situation in the Bay area, the only rational way out of town is walking...
People are Walking Away...get over it.
One nice outcome, from my point of view, of using the term "walkaway" is that it makes the borrower seem like it is he who is making the decision. This will lessen support for bailouts, since it's hard to feel sorry for people who are making a cold financial decision.
So, if you are against bailouts and if you think that foreclosures help with price discovery and reaching the bottom sooner, then all the "walkaway" talk may get be helpful.
And, given a few more mass-consumption articles, it will be common knowledge that it's these nasty, nasty walkers that are doing all the damage --Scav
I am completely lost about the concept of walkaways. Isn't there a system in place to make who can pay their bills pay them? If someone has money in the bank or a good income, won't the lender sue them and garnishee his wages?
My understanding of banking is there's no way just to walk away from a debt and pretend like you never owed it. People keep talking about making the cold financial decision to walk away, as if that just eliminates the debt. If people owe the bank money and have money or income, won't the bank eventually come after the debtors for what they owe?
If they idea is that people just plan on having such low income and assets that it's not worth the bank's time to sue them, as cold financial calculations go that one is pretty lame. I thought the purpose of a financial calculation was not to be broke. It sort of defeats the purpose if part of your plan is to stay broke or in hiding.
think herds - think overloading the system. Little fish live in schools because it's more likely the predators (hey, a natural shark/lawyer joke snuck in!) will grab the neighbor doing and not you. Govt's and companies are going broke, so what they're counting on the system breaking down. Funny thing about logic, there are lots of logical ways to come to different decisions.
And some people wonder what is going wrong in the U.S., even when expressed tongue in cheek
My tongue was firmly implanted in my cheek. As I've posted, i'm not one of the "food-store keeping while waiting for jesus to come in the clouds" type.
As far as I can tell from historical literature, current civilization has been preaching the apocalypse for a little over 2000 years now, but the world and humanity stubbornly go on leaving these people looking rather silly. And if we had such a social breakdown that this became necessary, you're neighbors wouldn't be so nice to you. They'd be killing you for your store. That's human nature underneath it all, and on the same lines as the PETA folks that think animals are just people too.
Charles,
In "no-recourse" states, the lender gets to repossess the collateral (the house), but no more than that.
Walking away from a mortgage under those conditions results only in a hit to borrowers FICO score for x years (5-7?)
There is debate over how many people are truly walking away - ie, they have income & or assets which could cover the mortgage, but are choosing not to.
Some people are actually walking Spanish, but are calling it "walking away" to save face.
Peterbob writes:
One nice outcome, from my point of view, of using the term "walkaway" is that it makes the borrower seem like it is he who is making the decision. This will lessen support for bailouts, since it's hard to feel sorry for people who are making a cold financial decision.
So, if you are against bailouts and if you think that foreclosures help with price discovery and reaching the bottom sooner, then all the "walkaway" talk may get be helpful.
Well, yes, that's precisely the point behind the talk of walking away--people tend not to feel sorry for someone making a cold financial decision, and if you can convince them that that someone is the borrower and not the bank, you might be able to swing public sentiment in the direction of aid for the banks and investors instead of for the borrowers.
Without a concerted effort on the part of the investor class and their public relations minions, that would be a hard sell.
Charles, "Walk-Away" refers almost exclusively to non-recourse secured lending.
Meaning, you owe the mortgage or the bank gets the house you put up as collateral. (When you took out the mortgage, both you and the bank agreed on a value for the house.)
Simply put, I either pay the mortgage or the bank gets the house.
I can't or won't pay the mortgage, bank; so sorry- I'll just leave these keys right here by the sink. Bye!
The bank is now the proud owner of a house. The really cool people leave the bank a nice fern, like a house-warming gift.
In states where a bank is allowed to pursue what is called a deficiency judgment, this no longer plays out the same way, and yes, people get garnished if they fail to pay their mortgage. In short, they lose their home and owe money on it anyway.
Just because RealtyTrash's data was regurgitated in Bloomberg, doesn't make it any more meaningful.
Once more, in Florida, all loans are recourse, and lenders virtually never, including now, go after borrowers who owe them more money than the house was worth.
Lenders probably have half the number of people they need to truly deal with things as they are set up now.
Lenders would have to figure out which people would worth going after.
Suppose the house was trashed afterwards because the lender didn't take care of it?
Suppose the borrower has only a little extra money? Suppose the money is tied up in such a way as the lender can't get at it--in IRAs and such.
The same lenders who drive a car borrower crazy, where far less is at stake, do nothing to mtg borrowers.
Suppose the borrower answers and says, (assuming honesty here), hey, Mr Bank, you picked out the appraiser, and it was properly appraised, and then after the fact we both found out that real property does NOT always go up. You could have required more down, you could have required a confirming appraisal you are supposed to know about real estate. . .present that to the judge and I'd think you'd get at least a third of them to refuse to grant a deficiency.
And even after that. . . collecting judgments is HARD.
Also, in normal times, borrowers were embarrassed by the whole thing. They'd leave early so as not to be humilated before the neighbors.
Of course, in normal times, people who got foreclosd out of their house had no money. Maybe this "have no money" thing is so deeply engraved on the collective conscious of the banks and since we know banks don'tlike to think about anything, they are just going with the old,old rule.
Anyway, I think that the same reasoning is everywhere at present. Some years from now, maybe this old debt will be bought up, pennies on the dollar from collection agencies. But you have to get the defaut first.
Finally, if you add up all the forecloses that are finished, and all the ones to come, I think you will at least be equal to the ones in some stage of foreclosure right now. And probably 2 or 3 times that. I think, subtracting out the people who own 100%, you are going to see totals of one out of 50 before this is over.
rent-to-own: "Up until now, at least, the forceful eviction stories seem to be in short supply, whereas the stories of homes gutted and vandalized by their departing former mortgage paying 'owners' are legion."
Maybe, but that is another phenomenon I'd like to see actual data on before concluding that it is common. Sure it happens - I saw that U-Tube too. Does it happen a lot?
Re: Note that the "walk away" headline isn't supported by any evidence in the article.
The walk away part is in first paragraph>>
"U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners lost their homes to lenders."
They are not in these homes and have "walked away"
Watched "The Dark Ages" last night on History & was reminded of this: "Man is neither unique nor central nor necessarily here to stay. But he is a product of circumstances special to the point of disbelief. And if man in his current predicament seeks a fair mystique to see him through, then I can only suggest that he consider his genes. For they are marked. They are graven by luck beyond explanation. They are stamped by forces that we shall never know. But even so, in the hieroglyph of the human emergence certain symbols must stand for all to read: Change is the elixir of the human circumstance, and acceptance of challenge the way of our kind. We are bad-weather animals, disaster's fairest children. For the soundest of evolutionary reasons, man appears at his best when times are worst." --Robert Ardrey, "Cain's Children," in African Genesis
"And if we had such a social breakdown that this became necessary, you're neighbors wouldn't be so nice to you. They'd be killing you for your store. That's human nature underneath it all, and on the same lines as the PETA folks that think animals are just people too."
Then I must live in a better town than you do. Or you must never have been through a natural disaster and watched people pull together.
Putting away extra food isn't just done for the apocalypse; it's done for hard times coming. We had those in the '30s. People in the cities starved. Civilization did not break down. But it would have been nice to have a little extra put by.
The same lenders who drive a car borrower crazy, where far less is at stake, do nothing to mtg borrowers.
Thank you LawyerLiz. You explained it better than anything I've seen since the housing bust started.
It seems to me that if it's true that many homedebtors are "walking away" from bills they could afford to pay, mortgage servicers will have to hire some collectors like car lenders and credit cards do.
I suspect, though, that many of the people making this cold financial calculation aren't making what I would consider a calculation. I suspect that most have no money, no assets to speak of, and a modest income. At least half their after tax income probably goes to service debt. That means they can just barely pay their bills, assuming they have no setbacks such as unexpected repairs to their car or home. To say that such people who are broke are "making a cold financial calculation" is glamorizing the situation.
There may be some people with significant net worth who are gaming the system. I suspect the banks will catch on and go after these people (at least in recourse states).
Oh, please, EVERY creature, great and small on this earth is massively improbable.
All creatures are bad weather creatures. The ones who survive, that is. The ones who aren't, don't survive. That includes us. That pseudo-mystic quote is riduculous and designed to make us feel good. People are also at their worst when times are tough. In fact, I'd like to see some proof that people are actually better when times are really tough. Not when we're all pulling together after a catastrophe, but when it looks like some of us will survive only at the expense of others.
My biology professor once remarked that humans were really just a fantastically elaborate system evolved by our gut bacteria as a protective environment and a source of high-quality food.
Massively improbable, maybe, but it's really nothing to feel all that good about....
Walk away? more like crawl. A local mortgage broker with advertorial in paper was pushing how you could devote 65% of income to PITI, "look at how much home you can buy!" Many did just that, and then discovered that they were pushed to the wall. The payments can be made, but it is soul crushing, the cost over twice what rent had been for them. The only justification they had for the pain was the "investment" that the home provided, that they had bought "NOW, before you are locked out forever!"
There may be a decision there, a possibility of making the payments that is discarded, but it is the rational decision of self and family preservation.
Lawyer Liz: Ardrey was not a mystic or a philosopher, but an anthropologist with special interest in man's aggressiveness & social behavior. It seemed appropriate to the discussion of community under times of duress.
The payments can be made, but it is soul crushing,
I beg to differ. 65% of income devoted to PITI is unsustainable.
hey Bobdobbs how's that Y2K scenario working out anyway? Got any Spam with a 2000 or 2001 date stamp I can borrow?
"The really cool people leave the bank a nice fern, like a housewarming gift". L-O-L
Okay, I can be pretty gullible...that's not really true, is it?
Anywho...it strikes me as a nice touch, a custom- in- the -making whose time may have arrived.