In light of the market moving preannouncement by WFC, which as David Faber points out may have used some "leeway" with the marks on the company's mortgage related assets, it makes sense to present some California foreclosure data to show just how hot the refi market really is. We grab the following data and charts from the excellent Field Check Group blog:
The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium — this wave is so big I would not put it past them trying it.
CA foreclosure background - in mid-2008 the foreclosure wave was artificially held back as a result of the CA law SB1137 enacted in Sept 2008. This also kept NOD’s and NTS’s at much lower levels than the actual defaults that were occurring. Other bubble states and several banks/servicers also went on random moratoria and the foreclosure wave was held back for the past six months. But just like so many other intervention and moratoria in the past, the problem just comes out the other side even more violent than if they would have done nothing. Adding insult to injury, the GSE’s announced this week that they were coming off moratorium, which could increase foreclosures by 20-25% alone.
The headlines in the near future will read:
Circa April 12th - “March Foreclosures Drop Sharply but Foreclosure Starts at Record Highs”
Circa May 12th- “April Foreclosures Surge 200% and Foreclosure Starts Remain at Record Highs”
Two months from now, the foreclosure crisis will be top of the news once again catching everyone off guard because of the past six months ‘intervention’. Thanks Washington.
The chart below highlights the top servicers in the nation and their monthly NOD, NTS and REO counts. As you can see, they all have gone through various foreclosure moratoria in one or more foreclosure stages in the past year but since the Obama plan was made known, volume has soared.
Note - the NOD phase is 5-7 months away from foreclosure and the NTS phase 21-45 days away. The REO column will grow significantly in near-term months due to the surge in NTS in March and coming in April.
For those of you that are curious as to total counts of new loan defaults bearing down on the state, the following is a 2-year chart of new NOD’s. March brought the first 50k+ count ever. From here the banks and servicers will try anything they can to get borrowers into mortgage mods before the Notice-of-Trustee Sale in filed 4-5 months down the road but ultimately most will make it to foreclosure sooner or later.
But this time around the mix has changed. Mid-to-upper end loans — and homes attached to them — are going into the foreclosure process at the greatest rate ever. The following chart shows defaults on loans over $750k. This is trouble because the demand in the segment of the market is outpaced by foreclosure supply alone - where does that leave Ma and Pa Homeowner?
