Wednesday, February 15, 2006

Default Inventory 'Balloons' In January

Reuters reports the inventory of foreclosed properties is growing. "According to data released today, 95,073 foreclosed residential properties were available for sale in the United States during January, an increase of 3.5 percent from December."

"The January foreclosure inventory represents a noticeable slowdown in the purchase of foreclosed homes. Since November 2005, the total inventory of foreclosures available for sale increased by 9,968 properties, while new foreclosure listings only increased by 2,585 during the same time period. 'The ballooning inventory of available foreclosure properties should be an area of concern among lending institutions. It puts pressure on REO departments to reduce this expanding inventory,' said Brad Geisen. 'This situation is good news, however, for those who track and invest in the foreclosure market.'"

"The number of new foreclosed residential properties in Georgia jumped 17 percent to 2,049 in January. At the end of January, Georgia had a total of 6,457 foreclosed residential properties, compared with 5,930 at the end of December."

From Inman News. "Defaults on ARMs could result in $110 billion in losses nationwide over the next five years, an enormous-sounding number that still comprises less than 1 percent of the home loans sold since 2004, according to Christopher Cagan."

"'It's unpleasant, but it will not break the economy or the real estate market,' said Cagan, who studied valuations and mortgage debt for more than 26 million residences in a valuation database across 558 counties in 36 states and the District of Columbia, representing more than 60 percent of the nation's population. This is because loan losses will be spread out over the next four to six years, as not all distressed borrowers will find themselves in trouble at the same time, Cagan, an analyst with First American, said."

"Cagan agrees that loan delinquencies will go up. 'There will be four times more foreclosures than now. That we know,' the analyst said. But, because the delinquencies will be a 'time release' over the next four to five years, the economy will be able to weather the problems, Cagan said."

"Cagan noted that the market is already starting to impose limits in this area, with some Wall Street investors tightening up standards and refusing to pay as much for bundles of loans that are risky. 'Throughout human history there has always been a war going on somewhere. It doesn't affect most people. But if, say, you're an individual who bought with one of those teaser loans, or a broker who specializes in those loans, or an investor who bought them, you're in the war zone,' Cagan said."

"'You don't want to be the person who gets hit with it, but it's not going to break the country,' Cagan said."


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