Just when you thought it might be safe to go back in the (real estate) water:

These seriously delinquent loans are the 4.3 million loans MBA Chief Economist Jay Brinkmann referred to as the "shadow inventory" on the conference call this morning. Not all are really "shadow inventory" since some of these loans will be modified, some will be cured (probably very few), and some are probably already listed as short sales. But it does suggest a significant number of distressed sales coming…

Thirty four states and the District of Columbia have total delinquency rates over 10%. This is a widespread problem.

h/t to Ed Cone for the link.

5 thoughts on “Gulp

  1. Lex

    I read somewhere last night that based on FDIC takeovers of failing banks and the subsequent sale of their assets, we actually do have a pretty good idea what the general market value of these mortgages is — something like 30% of book value, in the aggregate. Many individual mortgages are worthless, of course.
    And thanks to corporate-whore tinkering with FASB, banks get to carry these nonperforming loans on their books as if they were real money, which is going to have even more widespread, unpleasant effects. This is all far, far from over.
    (“Nonperforming loans” — I remember reading in The New Republic, back in the ’80s when South American debt was going to take Citibank down, that that phrase calls to mind a Thurberian seal that, when you toss it a beach ball, simply looks at you quizzically. I agree. I think Atrios’ phrase “Big Sh*tpile” better captures the essence of the phenomenon.)

  2. Jim Caserta

    There is small percentage of first mortgages worth 30% of face, but there are some. I’ve seen condos in FL selling for 10-20% of prior sale price (20-40k after peak-bubble sales of $200k), so those would be very bad. Most single-family homes are worst case 50% down.
    Now 2nd mortgages…a very large percentage of those are worthless.

  3. Jim Caserta

    What has to be remembered is that NC is not FL. Nowhere in NC have I heard of prices cratering the way they did in FL & other areas.
    One of the big differences is the % of total sales that went to non owner-occupied homes. Also, owner-occupiers were counting on double-digit price appreciation to infinity. I don’t know anyone around here looking to live in a home for a couple years and sell for 33% – 50% more than what they paid for it. Most would be happy to sell for a little more than what they paid.
    I was looking at one listed at $39,900. at 5%, your payment to the bank is $217/mo, but HOA fees are $280/mo. Pre-tax you’re looking at around $500/mo. About what it would rent for, maybe. Lots of units available. Prop tax listed at $2k/yr – doesn’t seem right. Add in another $150/mo for tax and at $650/mo your rent might not cover your costs. FYI, this unit sold for $173k in 2005.


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