'Shadow' Supply Of Foreclosures May Delay Housing's Recovery

dave_donhoffMarch 25, 2009

'Shadow' Supply Of Foreclosures May Delay Housing's Recovery

'Shadow' Supply Of Foreclosures May Delay Housing's Recovery

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20090324

<_snip>
Even as a few rays of hope peek out for housing, a dark cloud of unlisted and unsold foreclosed homes threatens to further delay a recovery and undermine lenders' financials.

The government is riding in with new programs almost every week, including Monday, that may rescue lenders. But they also cause paralysis in the short term.

Lenders are holding "between 600,000 and 700,000 residential properties that are not on the multiple listing service (MLS)," said Rick Sharga, senior vice president at RealtyTrac, a foreclosure listing firm in Irvine, Calif.

<_>

'Shadow' Supply Of Foreclosures May Delay Housing's Recovery

http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20090324

The medicine is poisoning the patient.... but we knew that, didn't we?

Dave

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chrisdoc

Can't the CEOs of these companies be proscecuted under SOX for not reasonably writing down the value of these houses? Put a couple CEOs in jail and that will get things moving!

It is interesting that they used the phrase "shadow inventory" because I heard that phrase used for something else about a month ago. Apparently the majority of buyers of the forclosures that are actually selling are "investors" that think they are getting a good deal. So they plan on selling those houses "when the market turns around". I don't have the numbers but there is an additional group of houses in the "shadow inventory".

The way to determine the value of something is to put it on an auction block and see what it sells for. Just because you don't like the price or agree with it doesn't mean that it isn't the correct price.

    Bookmark   March 27, 2009 at 8:01AM
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dave_donhoff

Chris,
I agree, agree, and agree!
Dave Donhoff
Leverage Planner

    Bookmark   March 27, 2009 at 2:10PM
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triciae

"...not reasonably writing down the value of these houses?"

I have no idea what Citi or BAC are doing but I know at DH's bank they order appraisals just before the foreclosure sale. That appraisal is good for one year. Then, based on the appraisal, charge-off is determined.

If there's a BK or some other situation where they're sure some kind of loss will be incurred they charge-off sooner but the norm to receive an appraisal is about 6 weeks before the foreclosure sale. The appraisal has to be as current as possible at the time of the sale or a Court could deem the sale not "commercially reasonable".

During the last housing bust the Feds tried to get us to appraise every six months...it didn't work. We just couldn't keep up. We'd no sooner receive the appraisal & it was time to order a new one.

/tricia

    Bookmark   March 27, 2009 at 2:19PM
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