2011 to be record year for foreclosures

[robertsondavies]

I would also add that just because a property is for sale by a bank, doesn't mean the price is set properly. I see a lot of property, particularly lots, listed too high. The banks though tend to be more reasonable, I also see REOs selling for deep discounts off list!

totally agree, some reo's are steals. WHEN THOSE ARE GONE, AND THEY WILL BE IN THE NEXT FEW MONTHS, then stabilization is going to look a bit like a pop. not a pop like 2004, just an across the board, 20% hike, that all of a sudden the sellers stop selling, and buyers start buying type environment.
good luck comrades

hey but what do I know?

 

[TNJed]

US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages - Robert Lenzner - StreetTalk - Forbes

US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages

Jan. 12 2011 - 8:36 am | 16,017 views | 0 recommendations | 45 comments
By ROBERT LENZNER


The giant US banks have been bailed out again from huge potential writeoffs by loosey-goosey accounting accepted by the accounting profession and the regulators.


They are allowed to accrue interest on non-performing mortgages ? until the actual foreclosure takes place, which on average takes about 16 months.


All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.


This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.


Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.


The potential writeoffs could be even larger should home prices continue to weaken, placing more homes in the nomnperforming category on bank balance sheets.


About 6 million homes are still at risk, according to Schnapp, and at least 10% of them are 25% underwater, meaning their market value is 25% less than the mortgage? but the owners are still paying interest to their banks.

 

[robertsondavies]

US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages - Robert Lenzner - StreetTalk - Forbes

US Banks Reporting Phantom Income on $1.4 Trillion Delinquent Mortgages

Jan. 12 2011 - 8:36 am | 16,017 views | 0 recommendations | 45 comments
By ROBERT LENZNER


The giant US banks have been bailed out again from huge potential writeoffs by loosey-goosey accounting accepted by the accounting profession and the regulators.


They are allowed to accrue interest on non-performing mortgages ? until the actual foreclosure takes place, which on average takes about 16 months.


All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.


This means that Bank of America, Citigroup, JP Morgan and Wells Fargo, among hundreds of other smaller institutions, can report interest due them, but not paid, on an estimated $1.4 trillion of face value mortgages on the 7 million homes that are in the process of being foreclosed.


Ultimately, these banks face a potential loss of $1 trillion on nonperforming loans, suggests Madeleine Schnapp, director of macro-economic research at Trim-Tabs, an economic consulting firm 24.5% owned by Goldman Sachs.


The potential writeoffs could be even larger should home prices continue to weaken, placing more homes in the nomnperforming category on bank balance sheets.


About 6 million homes are still at risk, according to Schnapp, and at least 10% of them are 25% underwater, meaning their market value is 25% less than the mortgage? but the owners are still paying interest to their banks.

so 90% of homes are ABOVE water.
and the 10% that are underwater are only underwater 25%. So the performing loans in the UNDER watercategory, will be ABOVE water in four or five more years, and that's without the real estate market going up?

Fear not young man, fear not

 

[scooterbug44]

Nowhere did that article say that 90% of the mortgages were above water.

It said AT LEAST 10% of them were 25% under water.

So all of the many mortgages 1-24% under water were not part of that 10%.

Now back to the real issue - when the hell are these banks and accountants going to get a flipping clue!!!!

It isn't income until you get paid. It's a debt owed you. 2 very different things.

 

[30ashopper]

Pricing may stay low, but what about mortgage interest rates. Aren't they expected to rise? What's the best guess as to how much and how fast? Will rising rates exert more downward pressure on prices?

It's highly unlikely the FED will alter rates this year. Next year they may rise a little smidgen, if that. The only thing that could change that would be a jump in inflation, and there's little evidence of that happening currently.

 

[30ashopper]

totally agree, some reo's are steals. WHEN THOSE ARE GONE, AND THEY WILL BE IN THE NEXT FEW MONTHS, then stabilization is going to look a bit like a pop. not a pop like 2004, just an across the board, 20% hike, that all of a sudden the sellers stop selling, and buyers start buying type environment.
good luck comrades

hey but what do I know?

What are you basing that on? Foreclosure data doesn't indicate this, in fact, it indicates the exact opposite - that we'll be seeing even more foreclosures this year than last.

 

[30ashopper]

Nowhere did that article say that 90% of the mortgages were above water.

It said AT LEAST 10% of them were 25% under water.

So all of the many mortgages 1-24% under water were not part of that 10%.

Now back to the real issue - when the hell are these banks and accountants going to get a flipping clue!!!!

It isn't income until you get paid. It's a debt owed you. 2 very different things.

It's a standard accounting practice -

Accrual Accounting Definition

You assume you have the income until you're sure you don't, then you write the loss off. They'll be writing these investments down for years to spread things out.

 

[Miss Critter]

They are allowed to accrue interest on non-performing mortgages ? until the actual foreclosure takes place, which on average takes about 16 months.


All the phantom interest that is not actually collected is booked as income until the actual act of foreclosure. As a resullt, many bank financial statements actually look much better than they actually are. At foreclosure all the phantom income comes off gthe books of the banks.

So, is this another reason to delay the actual foreclosure?

 

[sisters4]

Question? What is an REO?

 

[DuneAHH]

Question? What is an REO?

Real Estate Owned (by the bank).