Drop in foreclosures called ‘very scary’
Lenders’ actions show they think properties are not worth pursuing.
By Ken McCall, Staff Writer
9:00 PM Saturday, October 17, 2009
Nobody is sure exactly how many bank walkaways are occurring. For various reasons, they can’t be identified in searches of public real estate and court data without individually pulling case files, experts say.
But nobody questions that they are on the increase.
David Rothstein, a researcher with Policy Matters Ohio, summarized the way they occur like this:
- The lender files a foreclosure, gets the foreclosure judgment in court, takes the property to sheriff’s auction but doesn’t bid on it if no one else does.
- The lender files as above, gets the judgment, sets the sheriff’s auction, then cancels the sale at the last minute.
- The lender files as above but then never requests a sheriff’s auction.
- The lender doesn’t even bother to file foreclosure.
All of these actions leave the foreclosed property in the hands of the original owner who, in many cases, has moved out and is unaware the lender hasn’t taken it.
One indicator of the trend in walkaways is the gap between the number of foreclosure filings by lenders and the number of properties actually sold at sheriff’s auction.
The likely reason the banks do not want to foreclose is, they hold these assets on their books at full pre-bubble values. Locking the homes up (foreclosure) would expose the true value depreciated of these buildings.
If banks are forced to adjust their loan portfolios to reflect the values RE today, the whole system would collapse. Even with all CDOs and Derivitives. It’s just a matter of time.
Bankers are forced to foreclose in order to collect their CDO and CDS. Once they have collected on these they have their money and the property becomes simply a burden of cash and a liability nightmare. Leave it in the hands of the sucker who walked in thinking it and dump all these things about them. Ultimately, the taxpayer will be bilked to save these monstrosities.
A Dayton Daily News analysis of Montgomery County records found that, through September, foreclosure filings are on a pace this year to decrease by 8 percent. Meanwhile, foreclosed properties sold at sheriff’s sale will be down more than 21 percent. Over the three years an average of 2,500 foreclosure filings have not made it to sale at auction.
A foreclosure filing may not make it to auction for a number of reasons, including owners coming up with the money or lenders working out deals with them. But, Rothstein said, the growing difference between filings and sales suggests walkaways are playing an increasing role.
“When we look at the numbers, it’s not like thousands of people are getting loan modifications that would lift them out of the foreclosure process,” he said. “So what’s happening to those other properties?”
Another indicator is the falling number of properties that banks are repossessing, said Daren Blomquist, a spokesman for RealtyTrac, Inc. Data from RealtyTrac shows that bank repossessions, called REOs, have been steadily declining in Montgomery County over the last three years. The 2009 monthly average for repossessions is only 43 percent of what it was in 2007, a newspaper analysis of the data show.
“There’s something happening once the properties enter foreclosure that is at the very least slowing down the process,” Blomquist said. “Maybe not to that (Montgomery County’s) extreme, but we’re seeing a similar pattern nationwide.”
Another indicator is the number of canceled sheriff’s sales, said Chuck Rodersheimer, a Dayton attorney who specializes in bankruptcy and foreclosure cases. ZIP codes like 45405 and 45406 northwest of downtown Dayton illustrate the problem, he said.
Original article appears in Dayton Daily News