Downey Financial: Foreclosures Surge in Second Quarter

Yesterday, I updated my Downey (DSL) Real Estate Owned survey for Q2 2007. It's based on a sample of Alameda, Contra Costa, Kern, San Diego, San Joaquin, Solano, and Orange counties [last update: June 6, 2007]. See the footnote for more on how this data is collected.

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 did account for 40% of the REOs listed on DSL's website on June 6, 2007.

Downey REOs exploded in the second quarter, while NODs were down from the Q1 pace but still up substantially year over year.

Based on the historical contribution of 40% of REOs by these 7 counties, we can guess that Downey total REOs will increase by approximately 29/.4 = 72 for Q2 2007. That should be a dollar amount somewhere in the low eight figures.

From the Q:

Of the total non-performing assets, real estate acquired in settlement of loans represented $17 million at March 31, 2007, up from $9 million at December 31, 2006 and less than $1 million at March 31, 2006.

An eight figure increase in Q2 2007 would more than double the dollar amount of REOs.

Grove Nichols, Communications Director at Indymac Bank, wrote an interesting response to the negative coverage they have been getting. I know that people from Downey, Corus (CJR), Standard Pacific (SPF), and BankUnited Financial (BKUNA) read this blog. If any of them wants to write a rebuttal, I would be glad to debate it here.

The inventory and foreclosure data in the Downey/SPF California markets is terrible. Downey's borrowers seem to be treading water, but for how long?

Footnote: 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. My surveying method is to count all of the default notices and all of the notices of trustee's sale/trustee deeds during the time period. I do not make any adjustments for notices of rescission of default. Also, several of the counties do not show NODs on the county recorder website.

Comments

[Daniel Jones:]

Thanks Colin. Great article. I'll be a subscriber.

2007 Jul 03 10:05 AM