ron writes:
interesting graph:

89-90 housing peak- took 6 years for the NOD to peak.
ron | Homepage | 01.24.07 - 12:34 pm | #

dryfly writes:
From the LAT link...

Defaults and foreclosures fell steadily starting in the late 1990s as housing prices took off. In those heady days, practically anyone needing money to pay bills could refinance, cashing out equity from what seemed to be an endlessly refilling piggy bank.

In a stagnant or falling market, that option isn't available to recent buyers or those who have visited the pig once too often. Instead, many of those who are unable to make their payments must either sell the property or let the bank take it over.

Visit the pig. That's a line thats likely to stick with me for awhile.

dryfly | 01.24.07 - 12:42 pm | #

JBR writes:
That was a pretty good, non sugar coated article. They did trot out the old "defense job loss/ earthquake/riot sparked the the property bust" saw though. I'm pretty sure (and I don't have a good source... I'll try to dig one up) property values were already declining when those events occurred, and property values actually began to rise after the Northridge earthquake. All in all though... nice to read a realistic article about S Cal housing issues.
JBR | 01.24.07 - 1:11 pm | #

Tanta writes:
"I really don't see any distress out there," said Chris Comer, a mortgage broker at Pacific Capital in San Marcos, Calif. "Most people getting notices of default are figuring out ways to get those mortgages current by any means possible so they're not kicked out in the street."

Yeah, I'm not worried about what those necessary means are. Visiting the shark after the pig gave out? No problemo.
Tanta | 01.24.07 - 1:19 pm | #

JBR writes:
FWIW, and specific to san diego... here's a link RE 90's job losses and housing prices...

http://piggington.com/node?page=2
JBR | 01.24.07 - 1:23 pm | #

Tanta writes:
http://www.foreclosurelaw.org/ Ca...closure_Law.htm
Tanta | 01.24.07 - 1:24 pm | #

ReadingNLearning writes:
Here is the typical SoCal scenario from first hand experience. Someone I know -- 2 income family, no children, option ARM on horribly overpriced condo "purchased" in summer 2005, minimum payments, no down, no equity, no doc -- hell, he can't even get a credit card, they are in his wife's name, etc -- have recently fallen behind in mortgage payments several times, latest 3 months behind, got a NOD, then found the cash from family, cutting down expenses to the bone bone bone, etc, to get caught back up. His reaction: "Hey, we know it's gonna happen again and if we can't refi and can't make the payments anymore, like when the interest rate resets, we'll just walk away, who cares, THINGS WILL GET BETTER AND WE'LL HAVE ANOTHER SHOT AT IT." ( translation: we'll walk on the bank and wait till the econ comes back to being a big bubble again and they will give us another no doc loan and hopefully this time we'll have it timed better).

How many in my area ate very similar to this -- a whole hell of a lot that I know.
ReadingNLearning | 01.24.07 - 1:35 pm | #

dc1000 writes:
CR: any idea where to get DC NOD data?
dc1000 | 01.24.07 - 1:39 pm | #

ac writes:
That's the steamroller at the end of the carry trade you keep hearing about.

ac | 01.24.07 - 1:39 pm | #

dryfly writes:
CR: any idea where to get DC NOD data?

NODs aren't allowed in DC... didn't you get the memo?

dryfly | 01.24.07 - 1:50 pm | #

sa writes:
In four years from 1992 to 96, NOD increased by 60%.

In one year from 2005 to 06, NOD increased by more than 100%.

This shows that initial momentum of disaster is pretty strong.
sa | 01.24.07 - 1:51 pm | #

dryfly writes:
More on this 'visit the pig' thing... that really is an outstanding turn of a phrase... something I would think one of my rugby buddies from college would say... but in a different context of course.

If I were the kind of person that leaned toward mischief... I might have chosen that as my handle and spent a few idle hours trolling on one of those mortgage broker websites... brokeruniverse.com or something like that...

Good think I'm not that kind of person.

But if I did, I would only use my powers for good... not evil.

;)

dryfly | 01.24.07 - 2:01 pm | #

vader writes:
ReadingNLearning

Thats the new capitalism. Money does not mean anything to the creditor or to the debtor anymore.

So you trash one debt, someone will lend you more because there is nothing better to do with the money. Structure the new debt right with default derivatives and interest rate derivatives and it will be all right.
vader | 01.24.07 - 2:08 pm | #

Robert Coté writes:
Dryfly,
Take this advice from a former scrum-half and #8; we'd never do anything as crude as visit the pig. Even in our most drunken stupor we knew better than to borrow points with interest so that we could "win" the first half. It is the score at the end that maters. Say; You put on the flying pig costume and I'll wear my Bird Suit and we can patrol the MBS skies as a team.
Robert Coté | Homepage | 01.24.07 - 2:30 pm | #

Turbo writes:
Anyone care to go out on a limb and forecast tomorrow's existing homesales number? Bloomberg consensus is 6.25 mio (-0.5% MoM) and a number of economists are looking for a strong number due to the generally warm weather in December.
Turbo | 01.24.07 - 2:33 pm | #

Calculated Risk writes:
dc1000, DataQuick is just for California. RealtyTrac has some data for all states and D.C., but I don't have any historical data. Notice that D.C. had only one NOD in December - that tracks your input for your market - D.C. is in better shape than most places.

Best Wishes.
Calculated Risk | Homepage | 01.24.07 - 2:47 pm | #

Robert Coté writes:
Limb going out on: 6.18m with a small negative adjustment of the previous month.
Robert Coté | Homepage | 01.24.07 - 2:55 pm | #

dryfly writes:
Take this advice from a former scrum-half and #8; we'd never do anything as crude as visit the pig.

LOL - good one Rob't. I played wing-forward (loose) and some 'eight' too... even 'hooked' if the team was really hurting (my line outs suck big time).

I'm ready to don the pig suit at your call and becon... or is that bacon?

dryfly | 01.24.07 - 2:56 pm | #

Nigel Swaby writes:
"Hey, we know it's gonna happen again and if we can't refi and can't make the payments anymore, like when the interest rate resets, we'll just walk away, who cares, THINGS WILL GET BETTER AND WE'LL HAVE ANOTHER SHOT AT IT."

This is the same attitude a lot of people in Denver who got down payment assistance FHA loans have. It's not good. I think some people either weren't ready or simply shouldn't own homes.

On another note: Why things will be different this time...
Nigel Swaby | Homepage | 01.24.07 - 3:12 pm | #

frank writes:
There is an interesting article in Section D of todays WSJ on how lenders are helping out borrowers that are facing defaults.

The discussion is about loan "modifications". It discusses resetting the loans at lower rates and "short sales".

Many of these modifications do not show up in the NOD and foreclosure statistics.

Here is a great example of a short sale by CFC.
http://iamfacingforeclosure.com/...to-makeup-the- d

I would bet that CFC does not book this as a loss and carries the note as performing asset given their is no interest payment due.
frank | 01.24.07 - 3:13 pm | #

ac writes:
Notice that D.C. had only one NOD in December - that tracks your input for your market - D.C. is in better shape than most places.

Well, DC is surrounded by suburbs in Virginia and Maryland where most people live, so I don't know that DC proper is a good indicator for the "DC housing market".

ac | 01.24.07 - 3:25 pm | #

Robert Coté writes:
The CFC "modifications" and all that are just a way to ultimately spread risk to other lenders. I'm getting real peeved at being asked to pay more than my creditworthiness justifies so that these n'eer do wells can get a break. The risk compression has pushed up as well as pressed down. It will be interesting how places like CFC book neg-am loan defaults. Will they go back to the first quarter they booked the balnce increase as income and back it out or will they "sell" at current value and book the loss at the end? What if these restatements put past loan loss reserves into question? For all our supposed sophistication this all just boils down to Aesop's tale of the Milkmaid and Her Pail.
http://www.bartleby.com/17/1/76.html
Robert Coté | Homepage | 01.24.07 - 3:28 pm | #

winjr writes:
CR, could you please show us how the 4th quarter broke down, Oct., Nov. & Dec.?
winjr | 01.24.07 - 3:28 pm | #

vader writes:
Robert you forget:

In the modern fable, the milkmaid has already bought the fowl with milk futures and farmer brown has derivatives to insure against the loss of the milk.


Or more simply the execs and Account Officers that have approved all of this have their bonuses already in hand and the upcoming losses will only affect the stockholders.
vader | 01.24.07 - 3:45 pm | #

Robert Coté writes:
Robert you forget: In the modern fable, the milkmaid has already bought the fowl with milk futures and farmer brown has derivatives to insure against the loss of the milk.

Sadly, this is exactly what I was thinking. I'm generally sanguine about cross indemnifaction but the housing market looks more and more like trading 2 $5,000 cats for a $10,000 dog. The "risk" is so attenuated and as you note multiplied by transactional loses that undoubtably some of the insurance is invested in the very assets that are insured.
Robert Coté | Homepage | 01.24.07 - 3:58 pm | #

Joel writes:
One other interesting note . . .

The NODs on this chart were rising without any recession. I'm starting to think it may happen again.
Joel | 01.24.07 - 4:11 pm | #

Elaine Supkis writes:
Dear Calculated Risk:

One reason I have stopped coming here except on rarely is because you no longer give much original content.

One of your readers came by my blog which links to many diverse stories but all in the context of writing a long and involved piece with my own explorations of how things work, all because I linked to this site. He attacked me for not 'giving you credit'. Which was silly since it was merely a 'go check out this blog' link. I didn't even quote you.


I don't come here much anymore because you have virtually no original content. Most of the postings here are like at so many other blogs I don't visit anymore: taking three or four paragraphs of stuff published by hard working writers who take the time and energy to make real stories just as I do.

So never fear: I won't refer to this blog again. Nor much of any blog. There is so little original material out there despite the army of bloggers posting 'stuff'.
Elaine Supkis | Homepage | 01.24.07 - 4:13 pm | #

Tanta writes:
Elaine, I guess I'd have to agree that not much of CR's stuff is as "original" as yours.

Kirk, care to follow up with a definition of "original" (colloq.)?

I'll leave all the New World Order/debasing of the currency/von Mises Pieces (if you leave a trail of them, ET will follow you home) to everyone else. I've decided to re-read The Clan of the Cave Bear. I might root for the Cro-Magnons this time.

'Ta.
Tanta | 01.24.07 - 4:39 pm | #

Kirk Spencer writes:
ummm, that Elaine Supkis (or so it claimed) post had to be a troll, right? I mean, she moved to another site (different from the link) over a year ago. And a quick search of her site gives zero hits for "calculated risk" or "calculatedrisk".

So, someone's trying to make trouble in two directions, right?

Wonder who?
Kirk Spencer | 01.24.07 - 4:40 pm | #

Lama writes:
Elaine,
We're so sorry to disappoint you. You might be surprised to hear that the individual posters here are the source of inside information I have not found anywhere else.
Judging by the vocabulary used here, I'd say we have; 1-2 physicists turned RE investors (think long and hard before you dismiss them), lawyers, small business owners (including one career RE developer), CPA's, mortgage brokers, RE brokers, a former high-level executive as our host and another former high level banking executive. All of whom have an amazing array of ideas regarding the current state of RE.
The real reason you posted was to insult all of us, correct? If you wanted to communicate with CR, you could have emailed him directly. Well, mission accomplished. I for one will lie awake tonight fretting about my own failure.
Lama | 01.24.07 - 4:46 pm | #

Kirk Spencer writes:
whoops, found it. It is, indeed, EMS. Which means she is still using the link to her old page when she signs stuff.

here is the link to the actual article, comment from "Rouser", and her response that brought her slumming.

And having read her last half-dozen posts (that she spent so much time crafting - sic) I am reminded why I don't read her regularly - same reason I don't read Wonkette.

A troll is a troll, famous or not.
Kirk Spencer | 01.24.07 - 4:47 pm | #

Calculated Risk writes:
winjr, I only have the data by quarter. NODs in California by quarter, 2006:

Q1: 18,668
Q2: 20,812
Q3: 26,705
Q4: 37,273

Elaine, nice to see you. I'm not sure what your point is - sometimes I have the time and inspiration to do some orginal posts, other times I link to what I believe are relevant stories with a few excerpts.

I'm having fun. It's just a hobby.

Best to all.
Calculated Risk | Homepage | 01.24.07 - 5:19 pm | #

Tanta writes:
Thanks for updating with the DQ link, CR. I hate to get off the cryptozoology, but this here data got my attention:

"Most of the loans that went into default last quarter were originated between January 2005 and February 2006. The median age was 15 months.

On primary mortgages, homeowners were a median five months behind on their payments when the lender started the default process. The borrowers owed a median $10,555 on a median $324,000 mortgage.

On lines of credit, homeowners were a median six months behind on their payments. Borrowers owed a median $3,582 on a median $60,000 credit line. However the amount of the credit line that was actually in use cannot be determined from public records."

The median borrower was 150 days down when the NOD went out? Californians, is that what that means? (There are other states, like GA, where the NOD goes flying out on day 31. I'm not sure what "started the default process" means in this context.)
Tanta | 01.24.07 - 5:20 pm | #

Robert Coté writes:
I'd say we have; 1-2 physicists turned RE investors ....

Physicists are just Engineers that couldn't find subject specific practical applications. Engineers are just Physicists with uncertainty due to narrow perspective.

My real point is that scientific types don't cast aside older titles.
Robert Coté | Homepage | 01.24.07 - 5:20 pm | #

nostradamnus writes:
sup wivya elainesupkis?
luv de name bird, jesluvvit.
but wotinpeeps is youse tryin ter say, cheeps? ah greez wi' tantypants - u shure are de original birdie. now don' go gettin 'xtincted on us like dat dodobird, ok, cheeps?
luvya,
nos

o yea...luv the coutoure cheeps, ah had undies like dat once, but kinasorta gottem burned way back...
nostradamnus | 01.24.07 - 5:24 pm | #

Lama writes:
Robert,
CPA's lose their titles when they ascend to top finance positions. My cards still say "CPA" after my name.
;)
Lama | 01.24.07 - 5:39 pm | #

Broker writes:
Notice that D.C. had only one NOD in December...Let`s hope the address doesn`t start with 1600....
Broker | 01.24.07 - 7:27 pm | #

Robert Coté writes:
Robert, CPA's lose their titles when they ascend to top finance positions.

I said; "scientific types don't cast aside older titles."
See the difference? [ducks]
Seriously, The very best engineers and hard science types I know have disproportionately gone finance. Many of the rest have gone "dark." What does that tell us? Well, gee, the financial stability of the US economy is a national security issue? There exist massive gaps in the existing structure?
Robert Coté | Homepage | 01.24.07 - 7:37 pm | #

dc1000 writes:
interesting point. perhaps its a symptom or cause of the unrelenting faith in models and statistics that fail to remember the lessons from ltcm, ie. fat tails.

the mortgage bubble is related directly to this phenomenon. risk disintermediation / securitization is what lead to the reduction in credit standards.

damn right you needed 20% down when the local bank and the bankers job depended on you not foreclosing. now the models tell us that if you aggregate you can predict with enough accuracy to lower standards. credit card debt, auto debt, hell even financing receivables is all based on the same thing - predictability due to the laws of large numbers.
dc1000 | Homepage | 01.24.07 - 7:57 pm | #

s0mebody writes:
"perhaps its a symptom or cause of the unrelenting faith in models and statistics that fail to remember the lessons from ltcm, ie. fat tails." --dc1000

No, it just pays way better.
s0mebody | 01.24.07 - 8:29 pm | #

Lynn Gray writes:
Q1: 18,668
Q2: 20,812
Q3: 26,705
Q4: 37,273

Unless there is sometype of seasonal pattern here this looks bad.
Lynn Gray | 01.24.07 - 8:35 pm | #

Calculated Risk writes:
Lynn Gray, I don't have all the quarterly data, but I don't believe this is a seasonal problem. The DataQuick article mentions that the all time worst quarter was not a Q4, but a Q1 in 1996: "Defaults peaked in first quarter 1996 at 61,541."

We will probably see some fluctuations in the quarterly data, but I expect 2007 to be close to the 1996 annual total of 162,597 NODs.

Best Wishes.
Calculated Risk | Homepage | 01.24.07 - 8:52 pm | #

Sippn writes:
Seasonal problem - heck no. Its a "its not 2003 interest rates anymore" problem. I know that would fix my monthly payment a little.

Thank the Feds.
Sippn | 01.24.07 - 9:31 pm | #

Lynn Gray writes:
CR,

I suspect you are right about 2007 besting 1996. A quick look shows that not only were the numbers getting worse each Qt in 06 but the rate of increase was increasing each quarter as well.

On the construction employment impact of all this I have some doubts that the official BLS data will show the true picture as this plays out. I imagine there are many workers in that industry who work in the underground economy and never showed up in the CES data anyway.

Lynn
Lynn Gray | 01.24.07 - 9:57 pm | #

FredW writes:
"While the majority of California homeowners come out of the foreclosure process by refinancing or selling their houses, nearly a third lost their homes to foreclosure last year compared to just eight percent the year before."

http://abclocal.go.com/kgo/story...ocal& id=4967665

A bad trend...
FredW | 01.25.07 - 1:26 am | #