As a second lienholder, I'd go for scenario A, every time. Simply because there are externalities associated with scenerio B, even if it was $5000 on something that costs me $2000.
I'd want it to make clear that either I get a respectible payout (at least .10 per 1) or I'm going to make SURE it goes into forclosure.
Why? Because I'd already be F(ed, so I might as well make sure the borrower and the first lienholder gets F(#ed in the process, because that will reduce the likelyhood in the future that borrowers will F@#)up.
Also, as a second, it is far more likely that my loan IS a recourse loan.
Time to start negotiating the discounts to payoffs;-}
This is going to be outstanding!
i can hardly wait to see what kind of risk premia credit is going to cost in about two years for real estate lending.
Starting to look a lot like the Great Depression here, Bush.
Misean,
but all that beautiful heloc mad money that is available on those credit lines will evaporate and the poor consumer will be unable to afford more goodies from Gucci;-}
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
I think that would work for normal markets, but the foreclosure rate is soaring, but the risk premia isn't do very much. Of course, that is if you can somehow manage to qualify after a full court press of financial inquiry. Gonna be a lot of granite countertops unsold over the next decade;-}
Wow. You gotta admire the courage of those third parties willing to buy these things.
The third party is probably an operational specialist in "evaluating the offer and releasing the borrower from the lien" and can therefore spend less than $2,000 doing it.
"You can make a horrible decision by choosing to foreclose," says Steve Bailey, a senior managing director with Countrywide Financial Corp. It "can be a worse decision than doing nothing."
So free rent forever. And if you have to move, sublet! Craigslist here we go! A new industry-- Countrywide subsidized landlording.
How about a move-in special for those houses where the buyer walked without realizing they could stayed for free? Oh wait, they already have squatters starting to move into the new subdivisions. Man, there's gotta be a way for me to make money on this. Maybe a finder's fee for finding Countrywide homes squatters?
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
Let me go at that from another angle.
What is an appropriate gross margin for, say, a home equity lender? Enough to be able to afford to keep a default servicing department un-cannibalized so that, should you need it, it's there? So that it doesn't, actually, cost you $2,000 to process a short sale or DIL (because you have the ops & staff expertise in place to do it for a more reasonable $1,000)?
Quite frankly, we just have too much money going to originator commissions and not enough going to the back room. Until we fix that, it doesn't matter how you price the coupon. You're still going to have loans coming in the front door that you can't afford to work out. "Cannot afford to work out" is corporate-speak for "will be profitable as long as nothing ever goes wrong." Hey! Great plan.
"Man, there's gotta be a way for me to make money on this."
Somebody already pointed out the next growth industry - private "security" aka Goons-R-Us. This is very good for Romney economy folks who want high paying jobs with no educational requirements.
If there is any money to be made from foreclosures, it will probably be in physically removing squatters from the most recoverable properties.
If there is any money to be made from foreclosures, it will probably be in physically removing squatters from the most recoverable properties.
Or extorting money from the squatters? I.e., I'll let you stay in someone else's property and not rat you out for a hundred bucks a month,...and mow your lawn.
But since the value of the second is only in the nuisance factor to clear title, how long to you want to tie up even fifty bucks?
Look, if I were a "combat servicer," that is, a servicer specializing in working out loans, then this is "volume" to me. So I have thin margins--$50 per deal after the dust settles. Well, prime lenders servicing performing loans for the GSEs can end up making $50. That's why they want to have trillion-dollar portfolios.
My point is that it might cost $2,000 a pop for Lender A to deal with short-sale processing, but Lender B can do it for $1,000. If they both get the same settlement offer of $2,000, and Lender B bought the loan for six cents on the dollar, it's not necessarily a bad deal for Lender B.
There is, after all, more than a whiff of "I can't be bothered with a $2,000 recovery 'cause I'm a Big Dog" going on here. Well, somebody who is a little dog (and never fired Euelna in Default Servicing during the boom) and can manage to tight margins might be able to turn a buck.
I wonder how long it will take before the foreclosure folks start blowing out the seconds and reselling the property to the previous borrowers at terms the can make after the lender haircut.
I wonder indeed. Tanta, how about starting up a new combat servicer to pleasantly recover more from those overstuffed pipelines with a nice cushy paycheck for those folks providing a nice service.
In other cases, they are selling these loans at large discounts to third parties,
I think that I predicted just this sort of behavior here about a year ago. The other factor isn't just lower margins, but the outsourcing of dirty work, ala collection agencies. Just like them, these firsm will be specialists in the sort of obnoxious tactics and methods that people who have to seek out voluntary customers don't want to be directly associated with. I suspect that the problem that they'll have is that relativly few of the servicers of FIRST mortgages have the staff to figure out whether a workout or short is worthwhile, much less exactly HOW much it's worth paying the holder of a second to make the deal go through.
I've been telling borrowers for months to not pay their second. Why is anyone surprised that they aren't? No rational business would pay. There is no recourse even where there supposedly exists recourse. No second is going to foreclose and end up spending money to only owe the first more money. They've marked these loans to zero. Make them honest, make them worth zero. Win-win.
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
actually, i believe he's hinting that he would like an UberNerd on the mortgage basis, complete with graphs of swaption vol, 2s10s, rate attractiveness, etc....so much fun!!!
Why? Because I'd already be F(ed, so I might as well make sure the borrower and the first lienholder gets F(#ed in the process, because that will reduce the likelyhood in the future that borrowers will F@#)up.
Besides life is short and what the hell else you got to do with your time? Beats playing golf...
Here's an interesting wrinkle on the second mtg conondrum for defaulting borrowers. I have a friend who wants to sell his house (value approx 500,000) because his business went belly-up and he can't afford the mortgage payment but can't sell because he has a 60/40 first/second with principal balance about equal to market value.
He has not made a mortgage payment for four months and notified the mortgage companies he will make no more.
In trying to assist him (I'm a real estate broker) I was told by the first mortgage company that they have no intention to foreclose as they believe what is owed them is only 60-70% of the value and they will wait, adding interest & penalties, until their share is about 80% of market value, THEN they will foreclose. That should take a couple of years at best, double or triple that at worst.
The second mortgage company, having been informed of the stance of the first mortgage holder refuses to reduce what they will accept as satisfaction or to foreclose.
So, he is living there rent free and intends to continue doing so until one of the outfits forecloses and the new owner asks him to move.
And I will keep it listed with a sign in the yard as a prospect finder.
I think that I predicted just this sort of behavior here about a year ago. The other factor isn't just lower margins, but the outsourcing of dirty work, ala collection agencies. Tactical Flashlights r c helicopter video game
So if I offer $3K, they'll take it?
I suspect there is an accounting rub to keeping expenses down...
As a second lienholder, I'd go for scenario A, every time. Simply because there are externalities associated with scenerio B, even if it was $5000 on something that costs me $2000.
I'd want it to make clear that either I get a respectible payout (at least .10 per 1) or I'm going to make SURE it goes into forclosure.
Why? Because I'd already be F(ed, so I might as well make sure the borrower and the first lienholder gets F(#ed in the process, because that will reduce the likelyhood in the future that borrowers will F@#)up.
Also, as a second, it is far more likely that my loan IS a recourse loan.
--
If you postpone the disaster it relieves the present pain and then at some time in the future all the pain bears down, but is short in duration.
Crooks don't think too well when they are in pain. They juts hope that things will get better somehow.
Jas
Well, that's one way to keep foreclosures down. Reminds me of whistling passed a graveyard.
Although I did read Heimbuck as suggesting expenses were >$2000.
Cheers,
Weaver, that only works in recourse states;-}
Tanta, I win with Zillowed Away©!!!
America and lending will never be the same again.
Time to start negotiating the discounts to payoffs;-}
This is going to be outstanding!
i can hardly wait to see what kind of risk premia credit is going to cost in about two years for real estate lending.
Starting to look a lot like the Great Depression here, Bush.
Someday this war's gonna end...
AllenM,
But housing prices have bottomed. At least I keep hearing that. Or at least are about to bottom.
Tougher lending, no seconds or cash out. And so many people upside down, simply not paying the heloc or 2nd.
Pain's a commin'.
Cheers,
Misean,
but all that beautiful heloc mad money that is available on those credit lines will evaporate and the poor consumer will be unable to afford more goodies from Gucci;-}
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
I think that would work for normal markets, but the foreclosure rate is soaring, but the risk premia isn't do very much. Of course, that is if you can somehow manage to qualify after a full court press of financial inquiry. Gonna be a lot of granite countertops unsold over the next decade;-}
Someday this war's gonna end...
In other cases, they are selling these loans at large discounts to third parties,
Wow. You gotta admire the courage of those third parties willing to buy these things.
Wow. You gotta admire the courage of those third parties willing to buy these things.
The third party is probably an operational specialist in "evaluating the offer and releasing the borrower from the lien" and can therefore spend less than $2,000 doing it.
So is this a problem of disbelief and denial?
"You can make a horrible decision by choosing to foreclose," says Steve Bailey, a senior managing director with Countrywide Financial Corp. It "can be a worse decision than doing nothing."
So free rent forever. And if you have to move, sublet! Craigslist here we go! A new industry-- Countrywide subsidized landlording.
How about a move-in special for those houses where the buyer walked without realizing they could stayed for free? Oh wait, they already have squatters starting to move into the new subdivisions. Man, there's gotta be a way for me to make money on this. Maybe a finder's fee for finding Countrywide homes squatters?
If they accept the $2k then can that then become recourse, whereas the original 2nd wasn't?
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
Let me go at that from another angle.
What is an appropriate gross margin for, say, a home equity lender? Enough to be able to afford to keep a default servicing department un-cannibalized so that, should you need it, it's there? So that it doesn't, actually, cost you $2,000 to process a short sale or DIL (because you have the ops & staff expertise in place to do it for a more reasonable $1,000)?
Quite frankly, we just have too much money going to originator commissions and not enough going to the back room. Until we fix that, it doesn't matter how you price the coupon. You're still going to have loans coming in the front door that you can't afford to work out. "Cannot afford to work out" is corporate-speak for "will be profitable as long as nothing ever goes wrong." Hey! Great plan.
The third party is probably an operational specialist in "evaluating the offer and releasing the borrower from the lien"
But since the value of the second is only in the nuisance factor to clear title, how long to you want to tie up even fifty bucks?
"Man, there's gotta be a way for me to make money on this."
Somebody already pointed out the next growth industry - private "security" aka Goons-R-Us. This is very good for Romney economy folks who want high paying jobs with no educational requirements.
If there is any money to be made from foreclosures, it will probably be in physically removing squatters from the most recoverable properties.
But Tanta, my advisor on business ethics, Producer, indicated that back office people were parasites.
If there is any money to be made from foreclosures, it will probably be in physically removing squatters from the most recoverable properties.
Or extorting money from the squatters? I.e., I'll let you stay in someone else's property and not rat you out for a hundred bucks a month,...and mow your lawn.
But since the value of the second is only in the nuisance factor to clear title, how long to you want to tie up even fifty bucks?
Look, if I were a "combat servicer," that is, a servicer specializing in working out loans, then this is "volume" to me. So I have thin margins--$50 per deal after the dust settles. Well, prime lenders servicing performing loans for the GSEs can end up making $50. That's why they want to have trillion-dollar portfolios.
My point is that it might cost $2,000 a pop for Lender A to deal with short-sale processing, but Lender B can do it for $1,000. If they both get the same settlement offer of $2,000, and Lender B bought the loan for six cents on the dollar, it's not necessarily a bad deal for Lender B.
There is, after all, more than a whiff of "I can't be bothered with a $2,000 recovery 'cause I'm a Big Dog" going on here. Well, somebody who is a little dog (and never fired Euelna in Default Servicing during the boom) and can manage to tight margins might be able to turn a buck.
I will have to used the I win with Zillowed Away©!!! negotiating tactic when Euelna wants another nickel on the dollar.
I wonder how long it will take before the foreclosure folks start blowing out the seconds and reselling the property to the previous borrowers at terms the can make after the lender haircut.
I wonder indeed. Tanta, how about starting up a new combat servicer to pleasantly recover more from those overstuffed pipelines with a nice cushy paycheck for those folks providing a nice service.
Someday this war's gonna end...
dennisdman- Old news. These probably won't fly any more, unless you want to leave them lying around to impress your date (ala Caddyshack).
In other cases, they are selling these loans at large discounts to third parties,
I think that I predicted just this sort of behavior here about a year ago. The other factor isn't just lower margins, but the outsourcing of dirty work, ala collection agencies. Just like them, these firsm will be specialists in the sort of obnoxious tactics and methods that people who have to seek out voluntary customers don't want to be directly associated with. I suspect that the problem that they'll have is that relativly few of the servicers of FIRST mortgages have the staff to figure out whether a workout or short is worthwhile, much less exactly HOW much it's worth paying the holder of a second to make the deal go through.
This article is being promoted on the front page of CNN right now. How to Escape Mortgage Disaster | Home & Real Estate | This Old House - 1
See #6. To paraphrase, "Don't fear foreclosure."
The start of the shift of borrower's thinking?
I've been telling borrowers for months to not pay their second. Why is anyone surprised that they aren't? No rational business would pay. There is no recourse even where there supposedly exists recourse. No second is going to foreclose and end up spending money to only owe the first more money. They've marked these loans to zero. Make them honest, make them worth zero. Win-win.
Tanta, just read your comment on the past thread- what do you think a good risk premia is on a 30 year? 250 basis above 10 year treasury?
actually, i believe he's hinting that he would like an UberNerd on the mortgage basis, complete with graphs of swaption vol, 2s10s, rate attractiveness, etc....so much fun!!!
Why? Because I'd already be F(ed, so I might as well make sure the borrower and the first lienholder gets F(#ed in the process, because that will reduce the likelyhood in the future that borrowers will F@#)up.
Besides life is short and what the hell else you got to do with your time? Beats playing golf...
Here's an interesting wrinkle on the second mtg conondrum for defaulting borrowers. I have a friend who wants to sell his house (value approx 500,000) because his business went belly-up and he can't afford the mortgage payment but can't sell because he has a 60/40 first/second with principal balance about equal to market value.
He has not made a mortgage payment for four months and notified the mortgage companies he will make no more.
In trying to assist him (I'm a real estate broker) I was told by the first mortgage company that they have no intention to foreclose as they believe what is owed them is only 60-70% of the value and they will wait, adding interest & penalties, until their share is about 80% of market value, THEN they will foreclose. That should take a couple of years at best, double or triple that at worst.
The second mortgage company, having been informed of the stance of the first mortgage holder refuses to reduce what they will accept as satisfaction or to foreclose.
So, he is living there rent free and intends to continue doing so until one of the outfits forecloses and the new owner asks him to move.
And I will keep it listed with a sign in the yard as a prospect finder.
tanta, i know you are sick of this; but ; thank you.
I think that I predicted just this sort of behavior here about a year ago. The other factor isn't just lower margins, but the outsourcing of dirty work, ala collection agencies. Tactical Flashlights
r c helicopter
video game