patrick.net

What do you think the banks are going to do? Start to foreclose on non-paying mortgage or letting squatters live free?

They will increase staff signifcantly and accelerate the process to reduce squat time. Once you missed a couple of payments and they know the home is underwater, they'll never see another payment again.

They won't reduce principal because the number of owners who can pay, who are paying and who are only moderately under water and paying far out numbers the number who are doing this. As soon as they give in to a few people, they will open up the flood gates to *everyone*. Save a few dollars on these homes and lose on EVERY mortgage, or lose more on these, and not lose on the rest of their portfolio.

I agree with SF ace. They will start picking off the homes that stand the best chance to make them money. They will increase their efforts, but also don't want to flood the market either.

Hard to say.

Depends on the state and whether or not legislation is pending to delay foreclosure activity by lenders.

Lenders drank the kool-aid like so many others in the FIRE industries, and imo, they may be wishfully waiting for the RE market to recover, which they think will be sooner than later. They will foreclose then at that time (or so they think).

imo, the RE market isn't going to go back to bubble levels.

~Misstrial

They will do what they done in the recent past - Lobby for legislation to "dissuade" borrowers from gaining the upper hand. Just read yesterday of efforts in this direction and there will be more. Better default while the defaulting's good.

They took the loans, they funded them. The borrowers should pay for their mistake by losing their downpayment (if any) and the banks should eat the property for funding it in the first place. There is no free lunch. These damn borrowers were all high and mighty thinking they were rich just a few years ago now they are crying like little girls. Get them the hell out of the property and let the funders worry about what to do with it. The borrowers in this mess have to learn the bitter lessons they had coming to them for their arrogance and greed. I don't want to look at another man crying like a little girl over his foreclosure, man up pay the piper and move aside. Don't look for a free ride on my back or out of my pocket.

I suspect that many banks will just let an increasing number of squatters stay put, and continue to delay foreclosure indefinitely. It's not an issue of incompetence or lack of staffing. The simple fact is that a great many lenders simply can't afford to foreclose.

If all banks recognized the true value of the mortgages they hold on delinquent mortgages on their financial statements a great many of them may find themselves insolvent. Thus, it is preferable to let the squatters stay indefinitely rather than have to admit reality on the balance sheet.

I am sick to death of all these losers who are squatting for years in homes that they should have long ago been kicked out of. They are not "homeowners", they are home "debtors". They never owned the home. You do not own a house until it is paid off - and even then, you do not own the house because you have to pay taxes on it every year.

I have 2 friends who have been living for free in their former homes for 2 years now. It really makes me see red, because I have always been responsible and had to take a $100,00 haircut to sale on of my homes. These 2 "friends" also took out HELOCs for $100,000 and spent it all during the boom years.

As usual, the crooks and immoral people are doing well cheating and not going to prison, and those of us who have always played by the rules (how stupid) are being screwed.

I've seen this before. Businesses that are essentially bankrupt but not in court yet (the banks in this case) string things out as long as possible while the people at the top loot what's left and hope for just a few more of those wildly out of touch with reality paychecks. Everyone else around them gets screwed. Then they close the doors.

After foreclosure, banks are stuck with the taxes, insurance, HOA fees, maintenance and utilities. Apparently, tax wise for the lenders, it must be less costly to write off by allowing people to remain in homes. In many instances foreclosed homes are ransacked after foreclosure by the home debtors. I found a previous post interesting. I watch people swell with pride over owning one or more homes. It doesn't matter that they are hundreds of thousands upside down. What a mentality!!

I've been waiting for years to buy my first home and finally the market starts to fall a bit from 2007, in Los Angeles area. But the price is still way to high to purchase. For about $500,000 I can only get an older house built in 1950 or earlier, around 1500 sf. These houses sold for around $2000 in 2001. This cannot be right. If one can put down payment of $40,000, wait 10 years or less and make $300,000 in profit then, what the hell, everyone can be a millionaire in about 15 years if they invest $40,000 every 2 years. House price cannot keep going up like this or stay at this price when the median income in the area is just around $50,000.
I am so sick and tired of banks not foreclosing and kicking these squatters. They're living free with my tax money and propping up the house price so I still can't buy the house that I want! This is not an American dream. This is the American nightmare!
I recently attended a Realtor's free seminar on buying shortsale or foreclose properties. The agent said not to expect to buy these type of property for less than 5% or 10% below FMV. WTF, something is very wrong here. How can banks afford to let squatters live free for years but would not budge on the sales price of the foreclose properties?
I am not going to buy until the price comes down to in line with the historical value!

Case Shiller is a seriously lagging indicator. The March 2010 report probably reflects an amount that was negotiated 3-6 months prior. If you are negotiating to buy a house right now, it'll take 60-120 days to close and recorded and then lag a few more months to be shown on the index. Anyone with some brains doesn't need an index to tell me whether the prices are going up or down all they have to do is put in a few non-contigent offers and see what kind of response you get. (FWIW, in six months for the Sep2010 CS index, the C-S will show that it is slightly down based on market conditions right now, but the index will not help you six months later as conditions by then may change and it is relfecting what is happening now). All the Case shiller index does is summarized what happened six months ago in the negotiating trenches not what is happening now!

Case Shiller is just an index. An index is a component of its highs and lows. In an area as diverse as San Francisco bay area where prices range anywhere from 100K to 5M, an index is a heck of a lot less useful than a place that 80% of homes are 100K to 200K. In the stats world, deviation creates unrealibility.

The idea of comparing home A with home A is a great idea, but I have no idea how the data's are adjusted. when a graph shows essentially no appreciation relative to inflation when that obviously does not agree with real life, I suspect the model has some decay that is not accounted for correctly. (It's like creating a financial model, looks great in theory but plug in data points and the answer is way off - something is wrong)

Case Shiller does not account for any social factors such as population growth, income growth, tax policies, interest rates, values, etc. making any historical correlation without accounting for these things practically meaningless.

"squatters even demand that the bank reduce principal or take the house. They refuse to pay the mortgage if the bank does not reduce the principal to the current market value of the house"

It is immoral to demand and expect the bankers to reduce the principle or refuse to pay. It is theft - "Thou shalt not steal." Didn't they agreed to the loan contract in the first place? Buyer beware. Tough luck they went broke. This is not to say they can't gently ask for some debt forgiveness. A Proverb in the Bible comes to mind - "The borrower is a slave to the lender. " Long term debt should be illegal. Mortgage interest deductions should be scrapped.

SF ace says

Case Shiller is a seriously lagging indicator.

better to use a 15 -20 year trend chart compared to just a 10 year trend.
we started this bubble by 1997-98. Last 20 years shows a different picture.

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

As I said earlier, I don't think that the arguments about the banks being overwhelmed with the volume of defaults explains the reluctance to proceed with foreclosures in many cases.

Many lenders just can't afford the hit to their books that the clearing of seriously under-water properties would require. I suspect that the properties where the foreclosure actions are speediest are those where the losses to the bank are minimal, and which the lender figures they could re-sell for only a small loss.

This would explain the problems people talk about with short sales too. Perhaps the lenders only approve short sales where they would only have to take a small haircut. The more seriously under-water homes might just be ignored, allowing indefinite squatter residence.