Keith Jurow, a real estate analyst and author of the Capital Preservation Real Estate Report, pinged me a few days ago with his analysis that suggests long-term mortgage delinquencies are seriously under-reported.
Hi Mish,
I thought you might be interested in the important clarification I just received from my contact at the NY State Dept. of Financial Services.
A few weeks ago, I sent you the latest update (attached again) of pre-foreclosure notices sent to delinquent homeowners in NYC and LI. I had noticed that 80% were listed as delinquent for less than 60 days. I asked my contact why that percentage was so high when he had been telling me for several years that over 40% of these notices were repeat notices – sent to long-term delinquents.
His response was that for repeat notices, the mortgage servicers often provided the same information as on the original notice. For example, if a repeat notice was sent two years after the initial one, the length of delinquency was not changed from that first one. That was why a second notice where the borrower might be three years delinquent could show a delinquency of 60 days.
This clarification confirmed my belief that many – if not most – of the borrowers were now delinquent for several years.
Keith Jurow
New York Loan Delinquencies
Out of 65,523 loans, a whopping 52,218 supposedly fall into the 60-days or less delinquent bucket.
90-Day Pre-foreclosure Notices Filed with the NY Department of Financial Services
100% of those 65,523 delinquencies generated a 90-day pre-foreclosure notice.
Case closed.
Mike “Mish” Shedlock
And would NY have the capacity to evict, take possession of and thence sell some 65,000 properties? And what would it do with all the evictees, many of whom may not be obliging enough to remove themselves from NY?
LikeLiked by 1 person
There is a socialist in Albany and another socialist in Gracie Mansion (NYC mayor’s residence).
They will keep delaying and kicking the can down the road, forcing honest taxpayers to carry the freeloaders, for as long as they can get away with it.
The relevant question is how many rich Russians / Chinese with multi-million apartments are there? Will those people find a new place to launder their money? How many wealthy US citizens have taken primary residence in some other state?
The problem with socialism is that sooner or later they will run out of other people’s money, and then the *(#$ will hit the fan. Honest citizens that have been carrying the delinquent interest costs will suddenly get hit with the write off costs.
LikeLike
My house is almost paid for, 4 more months, maybe I should sell and move to New York. My housing sells are on fire here. What is going to happen to Bravo’s Selling New York series.?
LikeLiked by 1 person
Local rental markets are stressed. They offer 6 weeks free for a move in. It’s a price war. On principle they have yet to lower rents. Sticky on the way down. Deflation is coming.
LikeLike
Rubbish.
Economists (aka people with little connection to reality) have been saying that “deflation is coming” now for over 10 years. Instead, cost of living keeps going up up up up up.
Whatever money is allegedly saved from defaulting on mortgages will be sucked up by tax increases and Obamacare costs (and food and energy and college and… and… and…)
Deflation did not come. Deflation is not coming. The Fed manipulating interest rates downward is not evidence of deflation, it is evidence of Fed manipulating interest rates.
Cost of living is climbing at least 5-6% yoy, and if NY state gets 65K freeloaders, it just means higher costs for everyone else that has to carry them.
LikeLiked by 1 person
“Deflation is coming.”
…
Absolutely.
After that? Hoo knows? Will depend on policy decisions not yet made.
LikeLike
Deflation has been “just around the corner” for more than 10 years.
The median income level continues to fall behind the median cost of living — which is INFLATION.
Forecasts keep calling for deflation (which doesn’t come), while actual results have shown decades of inflation (loss of purchasing power).
LikeLike
When the asset bubbles (finally) burst deflation will be here.
Central bank monetary policy of ZIRP/NIRP/QE is disinflationary … hence the low inflation (as reported by CPI) we’ve experienced the past 10 years.
LikeLike
I think deflation has been inflated and inflation has been deflated, so really that will deflate deflation and inflate inflation, unless the inflated inflation doesn’t deflate the deflated deflation first, at which point we might see a little stagnation.
I just say this to help avoid confusion.
LikeLiked by 2 people
Any idea how wide spread these new reporting methods are? Chances sre this creative repoting is pretty widely used.
LikeLike
Sounds like New York State only?
LikeLike
NY and NJ offer a lot of homeowner protection and foreclosures are notoriously long and slow.
Very often these “mistakes” are intentional, banks might have to write down/off collection of these long unpaid loans, if they show them only 60 days they can carry them at full value.
Still kicking cans after nearly 10 years.
LikeLike
People need to understand for the most part life is perception and not factual. What people believe is the important thing, not what is actually happening. Reality is when people believe a fact, until then it is unimportant. Unfortunately facts often but not always has a way of pushing itself into our beliefs. So it benefits people, corporations and governments to lie until the lies no longer work.
LikeLiked by 1 person
The lies work until new lies must be invented. My dad (born in 1919) swore it would never last as he watched one lie compounded by another starting with FDR.
Never underestimate the power of denial. People believe the lies because they WANT TO, and believe that the lies benefit them.
We elected Trump because we wanted to believe.
Believe that Obamacare would end
Believe taxes would be reformed
Believe that borders would finally come under control
Believe that our leaders would be held to account
HA!
We, who say we support truth and the end of delusion, are as deluded as any other to believe it could change.
LikeLike
“We, who say we support truth and the end of delusion, are as deluded as any other to believe it could change.”
Actually, change is a constant. No two consecutive decades are the same.
Ben Franklin said it’s a republic- if you can keep it. As everything moves in cycles, and every cycle has a trough, eventually everything fails.
All empires fail. No exceptions. The U.S. is now an empire. Rome had its days of bread and circuses. We are now going through the same. What comes next?
A cycle cannot be moved back. It moves forward and eventually repeats that phase of the cycle again. The 1920’s repeated in the 1990’s, at the same phase of the next cycle.
LikeLike
Thanks. Now I have a better understanding of Americans, and their beliefs. Just ignore the facts. Got it.
LikeLike
Ugh!
LikeLike
Verify them. For real. Yourself. Properly. From first principles.
Otherwise, they are not facts.
And all you’re doing is regurgitating lies told by some Man on TV.
LikeLike
“Verify them. For real. Yourself. Properly. From first principles.
Otherwise, they are not facts.
And all you’re doing is regurgitating lies told by some Man on TV.”
You forgot to mention how exactly you do that. As far as I can see, most Americans can’t tell a fact from a lie.
In fact, it’s becoming clearer to me that Americans simply ignore the facts, and go with their beliefs instead.
LikeLike
You don’t.
Hence ought not to be deluding yourself you can.
As long as your process for determining what is a fact and what is not, does not extend past uncritically regurgitating whatever opinion your favorite Man on TV happens to be spewing, it’s all just belief anyway.
LikeLike
consciousness always lags developments but at some point it catches up.
LikeLike
How long is the process to evict a homeowner if they are not paying on the mortgage. I understand that some people can live for free a number of years before they are finally evicted. I can understand not evicting someone who is behind a bit on the payments because the loss is minimal at that point. I am wondering if these homeowners are just behind a bit or have just stopped paying.
LikeLike
hmk – I’ve read this guy’s reports for a long time. These homeowners have stopped paying for four, five, six years.
LikeLike
In your first table, there are two separate group of numbers, each of which totals to exactly the same count, 65,523. This seems to be a surprising coincidence.
LikeLike
It’s just two different breakdowns of the same number. One breakdown shows the values of the mortgages. The other shows the length of delinquency.
LikeLike
If banks write the loans down, the loss hits the bank’s P&L.
If banks delay until the ^&*( hits the fan, FNMA will take the loss (or FHLMC or GNMA).
And other mortagees pay the interest cost of floating the deadbeats until FNMA assumes the loss.
Separately, the municipalities get to rack up their pension promises — which will not be paid, but that default will happen on someone else’s watch. Deblasio (NYC) and Coumo (NY state) get to play “friend of government unions” by making empty promises.
Banks win. Politicians win. Dim-wit media outlets tell the taxpayers they are getting a “free lunch” — even though they get the bill.
LikeLike
As I asked in the prior thread, how can they possibly allow actually defaults to be declared with 1.2 quadrillion dollars in derivatives, all lined up like Dominoes, tied directly to the definition of default. Recall that Greece has been absolutely in default for ten years and still I don’t think any substantial triggering of derivatives.
There will be no default because there CAN’T BE. It would be the end of the world….and as long as they have the power to do all those wonderful things they do, it will not be allowed.
LikeLike
“There will be no default because there CAN’T BE.”
A default by any other name is…
Math is an absolute. Add 1+1 a trillion times. The sum is always 2.
As seen on Zero Hedge: CalPERS Slashes Pension Payments To Retirees In Two More California Towns By Up To 90%
LikeLike
But do they CALL it a default, and does it trigger derivatives to be paid?
Of the quadrillion dollars in derivatives,after all the crap we have seen, what percentage have been paid?
They have created a Mutually Assured Destruction in financial instruments such that no one dare officially default. Debts remain unpaid, YES, but cleared from the books, I don’t think so.
LikeLiked by 1 person
“This clarification confirmed my belief that many – if not most – of the borrowers were now delinquent for several years.”
…
Game has been going on for years.
Check the monthly Black Knight mortgage report. Go to the appendix. On July 31st, the average number of days of delinquency to foreclosure was 1001. That is not a misprint.
http://www.bkfs.com/Data/DataReports/BKFS_MM_Jul2017_Report.pdf
LikeLike
His response was that for repeat notices, the mortgage servicers often provided the same information as on the original notice. For example, if a repeat notice was sent two years after the initial one, the length of delinquency was not changed from that first one. That was why a second notice where the borrower might be three years delinquent could show a delinquency of 60 days.
Hold the phone here a second. Am I getting this correct? In the example, a 60 day notice is first sent, then perhaps TWO YEARS later, another 60 day notice is sent; meaning NO mortgage payment was made for TWO FREAKING YEARS but the homeowner is told that he is only 60 days delinquent on the second notice? REALLY?
Also, is it possible that the 60 day or less homeowners got a notice, paid their mortgages on time from then on for two years then went 60 days or less delinquent again?
If it’s true that such a huge number of people have not been paying their mortgages for two or three years in this area of the country, where the hell else is this happening?
LikeLike
The way the data are reported makes you think some massive wave of delinquencies just hit in the most recent quarter, rather than persistent, long-term delinquencies. Not sure which is worse in the macro sense, but a sudden surge of 10s of thousands of delinquencies in a quarter like the erroneous way it’s reported gets my attention more.
LikeLike
Reblogged this on World4Justice : NOW! Lobby Forum..
LikeLike
Hello Mish: How can we get the same data for California?? Thanks. Best regards,
Gary
LikeLike
I will see what I can find out
LikeLike
So much misinformation and misunderstanding…
I am not in the RE business, but almost everything I know about it I learned during the last crash, and those were some hard lessons. So…
All states have different foreclosure laws. New York is a “judicial” foreclosure state. New York also requires the 90-day pre-foreclosure notice as part of the long (judicial foreclosures generally take longer to much longer than non-judicial foreclosures) process. But people seem to be confusing delinquency and delinquency days with foreclosure/pre-foreclosure days. The two have little to do with each other, except that your property cannot be foreclosed upon unless *some* expense is delinquent. In theory, it could be something as minor as HOA fees.
Mortgage servicers usually have to keep advancing interest to the investor on delinquent loans until they are declared non-accruing, and even then has to pay insurance and property taxes until the property is sold. Now, they do get paid “first” out of foreclosure proceedings…but in a state like NY that can take awhile.
30-day delinquencies
Not discussed, but something to keep in mind, is that the servicer charges fees, in addition to P&I, for delinquent mortgages. And interest on these fees. This can quickly grow to be a larger amount than several mortgage payments
So there are (or were, 10 years ago) incentives for servicers to keep delinquency loan reporting current and up to date. Assuming these incentives still exist (and there have to be incentives for both the RE servicer and investor), then, if the table is accurate, NY is foreclosing on a lot of (presumably) “rolling” 30’s. Again, presumably, they have accrued a lot of fees and/or other reasons to think that the loans will never get current.
In my experience, this is unusual (to foreclose on a lot of 30 day delinquent loans). But nothing is being “under-reported”, because the 90 days in the 90-day pre-foreclosure notice has nothing to do with the days a loan is delinquent.
If anything, given the almost 2.5 – 3 years it takes to actually foreclose in NY, 65.5K foreclosures doesn’t actually seem like a yuge number (<25K per year) for NY. But that's an opinion–II have no direct experience with NY foreclosues.
LikeLike