Slowing Foreclosures?

Get ready for some more Housing bottom calls!

Thanks to some interesting regulations passed recently by New York, California, and Massachusetts, there is now additional notice requirements that must be complied with prior to initiating foreclosure procedures.

Hence, we should expect to see the defaults and repossessions procedures that would have begun in August and September 2008 not show up in the data until wont show up until October and November 2008.

Here is a an excerpt from the WSJ:

"When the research firm RealtyTrac Inc. releases its latest foreclosure report Thursday, don’t be surprised if the number of filings declines again.

Last month, RealtyTrac reported that foreclosure filings totaled 252,363 in June, down 3% from the previous month. Some analysts are expecting the July data to show another decline or very little change.

If that happens, could the improvement be a sign that the foreclosure problem is ebbing? Probably not. The data may reflect several developments aimed at reducing foreclosures, including new state and municipal laws that put a temporary moratorium on foreclosures. Such laws are designed to give homeowners more time to work with their lenders and modify troubled loans.

Some cynics say the laws are designed to give the appearance that the housing crisis is easing ahead of the November elections."

Cynical, us? No, never!

What are the new legislative rules for foreclosure notices ?

California requires lenders to wait an additional 30 days after a homeowner misses the first payment before filing a default notice;

Massachusetts now gives homeowners a three-months grace period after they default on their mortgage before the lender can file to foreclose. (The law is credited with an 84% drop in foreclosure petitions);

New York passed a bill last week that requires lenders to send a preforeclosure notice to certain borrowers at least 90 days before foreclosure proceedings may be initiated;

Of course, these notice requirements only delay the inevitable for the vast majority of foreclosures.

Expect more false bottom calls in the housing market of the next 90 days.


Bank Lending Practices Tighten as Loan Demand Falls  (August 2008)

Slowing Foreclosures May Mask Breadth of Woes
Michael Corkery
Mortgage Lending
WSJ, August 11, 2008; Page A2

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What's been said:

Discussions found on the web:
  1. Steve Barry commented on Aug 12

    Since we agree housing is not near a bottom, I further believe the July 15 stock low will not hold. They have been able to rally it off that in weak summer volume…once again QQQQ volume not breaking its 100 day MA, like the last rally which failed. If 1200 on the S&P fails, it will activate a head and shoulder with a target below 900.

  2. sailorman commented on Aug 12

    Does velocity signal a bottom? In other words, when an asking price is matched to a bid very quickly, (in housing terms a few weeks)does that establish a market price and is that price the bottom – at least temporarily?

    I have been looking at houses in Florida for a few years now. When I first started looking, there was no market. Houses just sat with no offers at all. Now, there is a price point where a house will sell in three weeks. I know – I just bought one that had multiple offers.

    I paid a 2002 price for the house and when any house in the neighborhood reaches that level, it sells quickly. More and more sellers are starting to see the price that will sell and asking prices are dropping.

    So is the bottom is sight, or is this just a local or temporary phenomenon?

    The price I paid will not show up in any mean or average. Not enough sellers have dropped the price to that level to have any significant impact on a mean or average calculation, although it will have more impact on the mean.

  3. Jeff commented on Aug 12

    Death by a thousand cuts……..

    Our economy has a Japan ’90’s feel to it, does it not? Nobody wants to face the music now, especially in an election year. The slow death will continue…

  4. mike commented on Aug 12

    So the banks can’t foreclose as fast while home prices are falling so they’ll have bigger losses. So what do they do? Cut off credit as Freddie is doing to NY state (as reported in the WSJ) – “Freddie Mac will stop buying New York Subprime mortgages.

    Another stake in the heart of home affordability!

  5. Renting in Mass commented on Aug 12

    The three-months grace period in Mass ended on August 1st. The backlog is estimated at 10,000 foreclosures. That should lead to some interesting numbers…

  6. Rening in Mass commented on Aug 12

    How would banks selling property for 50 cents on the dollar put a stop to falling prices?

  7. TheGuru commented on Aug 12

    Response from Sen. Dodd:

    “Thank you for contacting me with regard to the foreclosure crisis. I appreciate hearing from you on this important issue.

    Over the past few years, lax regulation and predatory lending practices have contributed to the most substantial collapse of the American housing market since the Great Depression. Each day approximately 8,000 of our fellow citizens find themselves entering the foreclosure process. This historically high number of foreclosures, has helped push down house prices all over the nation, , and shaken financial markets.
    I have co-authored H.R. 3221, the Housing and Economic Recovery Act of 2008, which passed the Senate on July 26, 2008 and became law on July 30, 2008. This bi-partisan legislation is the most substantial housing overhaul in over a generation. It contains provisions to help homeowners avoid foreclosure; tighten regulation of the Government Sponsored Enterprises (GSEs); and provide $3.9 billion to help state and local governments buy-up foreclosed properties at a discount and rehabilitate them, thereby helping communities reduce blighted neighborhoods. A more detailed summary of key provisions of this law is enclosed.

    Thank you again for contacting me. If you would like to stay up to date on this and other issues of interest to you, please log onto my website and sign up for my e-mail issue alerts. Also, if you would like more information on my work as Chairman of the Senate Banking, Housing and Urban Affairs Committee, or more information on issues before the Committee, please visit

    United States Senator

  8. AGG commented on Aug 12

    I respectfully suggest that housing prices are a function of MEDIAN, not average, wages. Multiply the median wage by 2.5 and that is the bottom. If median wage is $70,000 a year, then the housing bottom is $175,000.
    Why median and not average? Average is distorted up by the greed income of the super rich.
    Housing gluts are temporary downward effects on housing prices but the key is employment unless it’s a vacation or second home area; Then it may weather the downturn depending on the local property tax structure. Don’t expect property taxes to go down any time soon. Towns are strapped and the “haves” have to live somewhere.

  9. wally commented on Aug 12

    Politicians always think they are bigger than reality. Then one day it just sweeps over them and they are gone and a new crop of them begins to grow.

  10. dafox commented on Aug 12

    I dont think foreclosures are the cause of price drops. I think the loans returning to normal are whats causing prices to come back down.
    I do believe the foreclosures are the gas pedal to the price drops. more FC = faster return to normalcy.

  11. that they die like sheeple commented on Aug 12

    also, don’t be fooled by calls of a price bottom when sales totals begin to rebound. during the california RE bust of the early 90’s, sales bottomed a full 5 years before price did.

  12. Noodles commented on Aug 12

    Long time listener…First time caller :P

    I come to sites like this and marvel at all the numbers, pie charts being thrown around…Stats and theories by obviously educated people in the “Market.”

    In the end it all comes down to common sense…Fundamentals…All I know is by a lil luck and proxy I went in made some cash got out…All these people now trying to over-analyze and over expalin even if they’re right seem so wrong.

    So many super-educated people just as stupid or even in worse shape than us “Lay people.”

    So to all on here I say “Slow down on the fifty cent words” and just condense your thoughts…Overthinking money schemes/Underestimating risks and overstating profits is actually what got us in this mess.

    As for now while the world burns…Tommorow I’ll be going down to Pebble Beach to see if I can get in 9 holes…And play some golf too.

  13. Katyk commented on Aug 12

    This is just completely ILLEGAL somehow, isnt it?? I mean, how in the world can banks and our govt. just keep moving the goal post??!!

    If I were Obama or McCain, I would be screaming from the rooftops about this, because it is just obvious they are trying to off-load 95% of the damage so that it doesn’t occur on their watch before elections!!

    Where are the standards? What happened to fair value accounting??!! Oh yeah, The Fair Value Accounting Board got bought off to keep quiet too! This abdicating of responsibility is CRIMINAL!!!!!!

  14. TheGuru commented on Aug 12


    We now live in the Abdication Society — the Ownership Society is dead.

  15. wally commented on Aug 12

    When the last dog is hung, dog hangings will bottom.

  16. Captain Petrov commented on Aug 12

    Noodles is right! Abdication of responsibility IS criminal. The regulators who were supposed to prevent this type of situation from occurring have definately not earned their paychecks on this one. Those who caused this crisis and knowingly broke the law in the process might never answer for their crimes, but hopefully they are feeling some pain of their own.

  17. GaryK commented on Aug 12

    It has taken me awhile but I no longer get irritated with the bottom callers. Nowadays, I embrace them. After all, without them, there would be no rallies. Every time there is a rally, I buy some SKF, hold it for a couple of days, sell, let them talk the market back up and repeat.

  18. Matthew G. Saroff commented on Aug 14

    The financial analysts call out more false bottoms than you would find at a Beverly Hills plastic surgeon’s.

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