Bank Repossessions Up 55 Percent From December, 23 Percent From Year Ago;
Bank Repossessions Hit 24-Month High In California, 55-Month High in New York;
21 States Post Year-Over-Year Increases in Scheduled Foreclosure Auctions (ReatlyTrac)
This is just in time for Government to make things even worse by reducing lending standards on ALL Government sponsored mortgages. When I say “Government sponsored,” that means TAXPAYER guranteed.
The latest brainchild from the Obama Government has the FHA reducing its mortgage insurance premiums in an attempt to stimulate home sales. These premiums go into the “reserve fund” used to cover defaulted mortgages. The problem is that fund is woefully underfunded and now less money will be going into it. It’s the equivalent of using a tent to seek shelter from a hurricane.
In addition, as has been well-publicized, Fannie Mae and Freddie Mac have reduced their down payment requirements to 3%. That razor-thin slice of equity, by the way, is more than used up once all of the closing expenses are accounted for. That means that anyone buying a house right now is underwater by the time escrow closes and title transfers.
Just in time for the next blood-bath in the housing market:
The graph above from DQNews.com shows the decline in the median home price over the last six weeks. This data is based on actual closings – NOT seasonally adjusted, annualized vomit from the National Association of Realtors. What that chart shows is that anyone who bought a home using a Fannie Mae/Freddic Mac 3%, FHA 3.5% or USDA 0% down payment mortgage is now in a negative equity position – aka underwater.
As for RealtyTrac’s foreclosure report (linked at the top): Florida, Nevada and Maryland had the highest foreclosure rates; the foreclosure rate in 9 out of 20 of the largest metro areas increased year over year for January; 27 States posted a year over year increase in bank repossessions. January hit a 15-month high in bank repossessions. Foreclosures jumped 100% in Phoenix – (Phoenix Business Journal).
This comes at a time when mortgage rates are near all-time historical lows. Perhaps even more troubling is that according to RealtyTrac mortgage industry insiders are seeing more defaults related to second mortgages that have been interest-only but are now resetting with larger principal payments.
I warned over a year go that a huge wave of interest-only home equity loans that were underwritten during the housing bubble years would begin to re-set in 2014. The biggest wave of resets is yet to come and we’re already seeing a jump in defaults. This is going to get UGLY.
The homebuilder stocks are set up for an epic crash. Every single one of them uses highly misleading accounting to overstate earnings and hide interest expense. They all now have inventory levels that are equal to or greater than their inventory at the peak of the last bubble – only sales volume is less than 40% of peak sales volume. My homebuilder reports explain in detail why most of these companies will go belly-up over the next few years, starting with the company in my most recent report. You can access these reports here: MAKE MONEY SHORTING HOMEBUILDERS.