Friday, January 18, 2008

Don't cry over all the foreclosures.

That’s been my take for quite some time. MBA announced a report today on 3rd quarter loan performance. I found some very telling information in the report.
…foreclosure actions were started on approximately 384,000 loans, but of those foreclosures, 63 percent were cases where the borrower did not live in the home, the borrower did not respond to repeated attempts by the lender to contact them, or where the borrower failed to perform on a repayment plan or loan modification that was already in place.

They broke the data down further in the report. Approximately a third of that number is made up of investment properties. The others are empty homes. The report leaves open that it’s possible that these homes were owner occupied, and now abandoned. When is the last time you heard of someone just abandoning their home before closure proceedings were initiated? A few maybe, but my bet is that the bulk of these abandoned homes were never occupied in the first place. They were investor homes secured through occupancy fraud.

The biggest problem with just about any study that tries to quantify our market situation is that it either tries to explain how sub-prime lenders over extended themselves, or how fraud is rampant, but I never found anyone who tries to show how both of these factors work together.

1 comment:

MIke S said...

Good insight. Good blog. Thanks and keep up the great work.