Thursday, November 29, 2007

Foreclosures Level Off, Reposessions Up

A least one tracker of home mortgage foreclosures says that the rate is not increasing, but leveling off. At the same time, banks are taking up the property (a.k.a. "collateral") at significant rates to re-sell it.

Foreclosure filings for October rose 2% from September and 94% from a year earlier, but foreclosure activity in general appears to have "leveled off" since peaking in August, a foreclosure-listing service said.

According to RealtyTrac Inc., default notices for October dropped nearly 9% from a year ago. "Some of the efforts on the part of homeowners, lenders and advocacy groups to find alternatives to foreclosure may be starting to have an impact," said RealtyTrac Chief Executive James J. Saccacio. He added, however, that bank repossessions during the month jumped nearly 35% -- "evidence that more homeowners who enter foreclosure are losing their homes."

RealtyTrac, Irvine, Calif., said 224,451 foreclosure filings were reported in October, compared with 219,850 in September and 115,568 a year ago. Nationally, there was one filing for every 555 households [0.18%] during the latest month as credit pressures and tumbling home values continued to hurt homeowners. By contrast, there was one filing for every 566 households in September and one for every 1,001 households in October 2006 [0.10%].

It's probably too hard to translate these default rates into specific portfolio default rates, but at least it gives a sense that it is not one in four mortgages that are in default, or something! The rising repo rate will give politicians a run.

Meanwhile, the next thing to find out is the so-called "severity" or what the banks are getting in liquidation for their collateral. That's the MOST important figure, economically, although it is not intuitive. Severities greater than 30% are ... approaching the wall, so to speak, versus where some conservative folks ration their risk.

Separately, dealJournal noted yesterday that subprime debt ticked up and is trading at 20-cents on the dollar, for ABX indexes (run by, which, from what I gather based on other reporting, are mostly the 2006 vintage debt (some say that may be the most 'vulnerable' year of mortgage originations). It's sounds crazy, but 20-cents is a lot better than zero. Something tells me that to be a vulture for this debt is going to be quite profitable ...

The original Brady debt traded that low, didn't it (I honestly don't remember), and most of those bonds turned out to be good risks to take, difficult as it always is to stomach it.

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