StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

12 Million Homes Yet To Go Through Foreclosure

22 Apr 2010
Posted by Pete Davis

That's what Laurie Goodman told the National Economists Club today in D.C. 7.2 million are already in the delinquency pipeline, and 250,000 are going delinquent each month bringing the total to 12 million. "Once you're 60 days delinquent, a foreclosure is highly probable," she said. Goodman is a Senior Managing Director of Amherst Securities and is widely recognized as the best housing finance economist on Wall Street.

She emphasized that negative equity is the main problem, and that any program which doesn't significantly reduce principal won't work. She estimated that under the most optimistic assumptions, President Obama's HAMP program would avert 1.1 million foreclosures. Goodman added that banks aren't renegotiating underwater mortgages in which they hold a second lien, "a huge conflict of interest problem."
She noted that FHA loans are still the whole market and suggested that the homebuyer tax credit, due to expire at the end of this month, and other housing incentives have borrowed so much demand forward that the only way left to stimulate the market would be for FHA to ease its requirements and allow investors to participate.
Here is Goodman's testimony before the House Financial Services Committee on December 8, 2009.

12,000,000 Homes Yet To Go Through Foreclosure...

Doesn't this assume that all foreclosure prevention efforts will fail? I thought the outlook was better for more recent modifications than for those made a while back.

Also, it would be interesting to see what the level of geographic concentration is in these foreclosures. In other words, is it concentrated mostly in Arizona, Florida, California, and Nevada? That's what I suspect.

HAMP is not exactly working.

Wil, you're right about the location of the crisis -- it is indeed the "Sand States" that are bearing the brunt of the foreclosures, and home to a majority of the shadow inventory. Economists and bloggers alike talk about the problem in national terms, but it's very localized when you look at the state-by-state numbers.

HAMP's batting average has improved, but it's improved from an almost total failure rate. The tally so far is 230,000 modifications, but already some of these are going delinquent again...I've seen estimates ranging between 1% to 10%, so I'm looking forward to clearer numbers. Goldman Sachs claims 68,000 modified mortgages re-defaulted in MArch. Wells Fargo announced last week that 50% of the delinquent candidate loans they've audited so far turned out to be ineligible for HAMP.

It would make sense that shadow inventory would continue to increase, because now long-term unemployment is forcing a new round of delinquencies.

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