Tom Lindmark's  Instablog

 One of the reasons it's so easy to walk away from the debt you owe on a home is that the lenders in many states are precluded from coming after you for any loss that they suffer when they foreclose and resell the home. It's called anti-deficiency protection and to a lot of peoples' surprise the Arizona legislature revoked the protection for certain buyers.

The new law stipulates that anyone that doesn't occupy a property for a continuous period of six months will not be eligible for protection under the anti-deficiency statute. The lender will have the right to pursue the borrower for any shortfall between the price it receives when it sells the foreclosed property and the amount owed on the mortgage. The law affects foreclosures started after September 30, 2009.

The purpose is to curb speculators who buy properties in the hope of flipping them at a higher sales price. In the past, if the market didn't cooperate and bring a higher price these flippers had a propensity to just mail in the keys and move on. The reality is that while it might curb some of this type of speculation, it also puts owners at jeopardy. Specifically, second home owners would fall under the statute since almost by definition they wouldn't live in the house for the required period of time.

The law took a lot of people by surprise even though it was advertised and debated. The realtor community is trying desperately to either amend or repeal the law but that might probe difficult. The legislature is currently meeting but in a special session which limits its permissible activities to only those that were cited for calling the special session. Additionally, there doesn't appear to be among the legislators any particular concern about the bill nor has any one of them stepped forward to carry the banner for repeal.

The banking lobby, particularly the community banking lobby, is the group that pushed hardest for the legislation. Given their clout and a general antipathy towards single family home investors, it might be difficult to rally much support for repeal. Eventually, I suspect there would be some modification to more precisely limit the laws application to investors but that might take some time.

It's hard for me to argue that an investor should receive protection under the anti-deficiency statutes. They were designed long ago to prevent owners from being completely ruined by the event of foreclosure and have certainly been taken advantage of over the past few years by unscrupulous investors. It seems, though, that the statute might be poorly drafted and could use some tweaking.

more: here

 The grand total this week is seven. After a brief stop in New York, the Grim Reaper went back to its favorite state -- Georgia -- and took out six more banks. Actually it took out a family of banks in Georgia. Everyone seems to be counting each bank as a failure so we won't rock the boat.

Here are the links:

Waterford Village Bank, Williamsville, New York

Security Bank of Jones County, Gray, Georgia

Security Bank of Houston County, Perry, Georgia

Security Bank of Bibb County, Macon, Georgia

Security Bank of North Metro, Woodstock, Georgia

Security Bank of North Fulton, Alpharetta, Georgia

Security Bank of Gwinnett County, Suwanee, Georgia

All of the Georgia Banks were owned by Security Bank Corporation, Macon, Georgia. I think this puts Georgia far ahead in the state race for the most seized banks. Once we whittle down the number of banks in Georgia maybe we should consider a ban of say fifty years or so on any new charters for that state. What do you think?

Notices of Default in California for the second quarter were up about 2.4% over the comparable period in 2008. Housing Wire had the story and it's a pretty small little data point but I thought the comment they included in their article from the President of Data Quick was worth noting.

Here is what he had to say:

“There is a perception that the housing market is dragging along bottom, that it probably won’t get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure,” said DataQuick president John Walsh.

And servicers are getting serious, according to Walsh, hiring additional staff to handle the pipeline of delinquency cases. But he warned that a push in the servicing space to move these mortgages through either workout or foreclosure will likely lead to a higher volume of foreclosure filings in the third quarter.

You may not be familiar with his firm, Data Quick. They're located in San Diego and produce some of the most complete sets of information on real estate markets in various state markets. I've used their products before and was always impressed with how complete and timely their data tended to be.

Throughout the bubble and its aftermath they've consistently called the situation as they have seen it based on their data. Never have I felt they were industry cheerleaders and by the same token I never found them to be the types that bought trouble. Just a firm with a lot of data that seems to draw pretty supportable conclusions in an unbiased manner.

Therefore, I buy their contention that we're probably around the bottom. That doesn't mean that were over the pain or that there won't be a lot more foreclosures to come down the pike, just that we've taken the biggest hit we will likely see and now have to suffer some bumps and bruises on the way back up. And, by the way, I don't know how far back up we go but I suspect any housing recovery is going to be pretty muted.

I doubt that residential real estate is going to contribute much to the recovery of the overall economy for some time to come. That's a pretty important consideration as normally it is one of the drivers of recovery. At the same time, I think that we are probably past the point at which it subtracts from growth.