ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Thursday, July 12, 2007


here come the foreclosures

bloomberg reports:

Foreclosures are soaring amid a glut of properties and as interest rates close to an 11-month high make it more difficult for borrowers to refinance. Defaults may rise further as owners with adjustable rates see their payments soar. The share of people taking out all types of adjustable-rate home loans averaged 29 percent during the past three years, compared with the 17 percent average of the prior three years, according to Freddie Mac data.

An estimated 58 percent of properties in the foreclosure process are linked to borrowers with subprime loans, and RealtyTrac expects U.S. foreclosures to reach 1.8 million by year's end, Rick Sharga, a spokesman for the company, said in an interview.

``We're running much further ahead of what we had anticipated in terms of year-over-year,'' Sharga said. ``Historically, 40 percent of properties entering default make it as far as auction, with half of those going back to banks and the other half to investors.''

i clearly overstated the case when i said here that "adjustable rate loans constituted a majority of the loans made in the peak bubble years". but i unfortunately didn't overstate in saying, "this means millions of american homes are going to be forced onto the market in the next year or two."

it should be noted (as it is extremely important to note) as it is in the comments at calculated risk that losses implied by 1.8mm foreclosures, at perhaps an average loan value of $250,000 with loss severity of 45%, would be in the neighborhood of $162bn. that is a figure comparable to the profits of the entire american commercial banking sector in 2006.

the current picture for cook county through realtytrac is of 30,300 properties in preforeclosure, 8100 at auction, 16800 reo.


This page is powered by Blogger. Isn't yours?