Downey Financial: REO Pipeline Watch

In an April post about troubled Downey Financial Corp. (DSL) markets, I wrote, "Modesto, Stockton, Vallejo, etc. - that's Downey Financial."

Recently, a commenter asked, "How did you determine DSL is in these three markets specifically? None are mentioned as a top 5 market in the Q. Thanks."

It's true that the Q only tells us that Downey's loans are 89% in SoCal. So, first check the list of Downey branches. Then check the list of Downey foreclosures for sale.

Downey has two REOs ( Real Estate Owned - a property that goes back to the mortgage company after an unsuccessful foreclosure auction) in Modesto: 2512 Riverdale Avenue and 1209 Tenaya (wishing prices $240,000 and $210,000). It has one REO in Stockton: 3804 Wind Cave Circle ($479,000). It has two REOs in Vallejo: 130 Cottonwood Drive ($439,000) and 205 Haven Court ($357,000).

In Nassau County, NY, Downey has this house listed as a REO, asking $950,000.

The most recent sale was in December 2004 for $995,000. Prior to that sale, it had sold in January 2003 for $583,000.

In San Diego county, Downey added four REOs during Q1 2007. I predict they will add 14 more in Q2 since they have taken in 10 since Mar 31.

In Contra Costa county, Downey had no REOs until May 2007, when they took in two.

In San Joaquin county, Downey added 2 REOs during Q1. They have taken 4 so far in Q2.

In these three counties, Downey will go from 6 to 20 REOs in one quarter.

This chart of the DSL Real Estate Owned pipeline is based on a sample of Alameda, Contra Costa, Kern, San Diego, San Joaquin, Solano, and Orange counties conducted on June 6, 2007.

Those seven counties are only a fraction of the counties where DSL makes loans - DSL has at least one REO in over 40 different counties. However, the seven counties do account for 40% of the REOs listed on DSL's website.

Not all counties make this data easily available online (especially in California). Los Angeles does not provide online access, and many of the counties that do have extremely cumbersome interfaces.

A key rule is that it takes at least 90 days to go from a default notice to a notice of sale.

So, the April spike in sale notices and trustee's deeds probably came from borrowers that received notices of default prior to 2007. Judging by the graph, that would suggest that virtually all of the defaults from Q4 2006 went to trustee's sales.

I encourage everyone to help monitor this pipeline. Go to the county recorder or county clerk websites (1,2,3,etc.) and search for "Downey," as they have a number of different entity names.