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Bonus Question: Fannie Mae Foreclosed 62,615 Single-Family Residences in 2009. Guess How Many Are Leased?
October 14, 2009 by Neil · Leave a Comment
A) 42%
B) 22%
C) 2%
D) .2%
E) .02%
This, dear reader, is a trick question.
The correct answer is none of the above, a whopping .0022%.
142 out of 62,615 homes are actively leased.
A prudent move might be to modify the loans so that the new monthly mortgage payment is about the same as market rent. If the loans are modified to a rate of 1 to 3 percent, then it is doable. Every foreclosure brings all home values in the immediate area down by about .075%. Banks admittedly make lousy property managers. The government isn’t much better. Such a move is better than doing nothing, and watching each foreclosure take the precious remnants of equity from homeowners that are current on their mortgages.
Since big banks generate significant fees from servicing first residential mortgages, they will fight tooth and nail any government attempt to mass refinance residential mortgages, even if it is for the greater good of the economy.
To add to the growing bad news, the majority — 60% — of remaining performing borrowers within ‘06- and ‘07-vintage residential mortgage-backed securities (RMBS) bear negative home equity. This is not to be confused with the fact that half of all residential homes will have negative equity by the end of next year.
Until bold, decisive action is taken at the highest reaches of power, our big banks will focus on self-preservation before facilitating the free flow of credit. The housing market will continue its steadying descent. Seven million foreclosed properties in shadow housing inventory aren’t even factored into the Case-Shiller numbers. The commercial real estate market, which lags behind the residential market by about 18 to 24 months, will remain in the doldrums for more years to come.
In other words, all whammies.
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