New RealtyTrac zombie foreclosure data
This post is way too long (like 2000 words) but it’s an attempt to capture much of the zombie foreclosure noise from yesterday’s new release from RealtyTrac , available at YahooFinance: ““Zombie” Foreclosures a Lingering Legacy of the Housing Crisis“:
RealtyTrac Analysis for Q2 2014 Finds That Owner Vacated Properties Account for 21 Percent of All Active Foreclosures
Zombie foreclosures are a byproduct of lengthy foreclosure timelines and changing state foreclosure statutes. Many of these properties are likely to be the eyesores of a given neighborhood, driving down the values of surrounding homes and eroding local government tax revenue. Distressed homeowners, who have vacated the property, may not realize they are still responsible for and owe property taxes on the zombie foreclosure — and that means unpaid property tax revenue for the local government taxing entity. RealtyTrac estimates that more than $400 million in property tax revenue nationwide is likely delinquent because of these zombie foreclosures.
There’s plenty more data in this release and many media outlets are covering it. But before we go on to see what they’ve said, we should really ask a few more questions about RealtyTrac’s methods.
Now, there are plenty of reasons why a foreclosure might drag on, or why there might be a dispute about paying property taxes. RealtyTrac has focused the zombie metaphor onto the supposedly vacant properties. That idea is the same as AG Schneiderman’s “zombie” rhetoric, that these homes are empty, rotting, neighborhood blights. The homeowner is mysteriously gone, seemingly with no way to reach them and so the state wants the banks to take responsibility, but the banks blame the speed of the legal foreclosure mechanisms. No one seems to care about the originating homeowners.
In RealtyTrac’s description of their research methodology they explain that they determine a vacant foreclosure based on
data collected from the United States Postal Service for addresses that the agency has deemed vacant or where the owner has requested a change of address.
OK but is it really any surprise that Florida has a lot of “change of address” in the summer?
See also from Time.com: “The Cities Where Zombies (Foreclosures, That Is) Are Still Lurking” by Lisa Gibbs:
Vacant foreclosures were a downright plague during the worst of the housing crisis
the last batch of zombies are going to be the hardest to kill
with this quote:
“The banks are hoping the market will keep turning around, or they’re looking for alternatives that lessen the red ink on their portfolio,” says John Taylor, CEO of the National Community Reinvestment Coalition. “There was a time the banks were just giving away these properties trying to get them off the books. Now, they don’t want to add to that.”
Except, maybe they can’t? Maybe the notes are such robo-signed-muck that they can’t foreclose? Maybe the banks are hoping to changes laws or that enough good faith transactions of the notes can somehow salvage the bad debt for the future? At least keep it on their books and pass it around as phantom debt assets to sell off later at pennies on the (continuously inflating) dollar.
DSNews: “Zombie Properties Continue to Linger Nationwide” by Colin Robins:
Zombie properties serve as a lingering reminder of a housing market still in the midst of self-correction. They serve as a legacy of the recent housing crisis, a byproduct of lengthy foreclosure timelines and mercurial state foreclosure statutes.
Why are they blaming the foreclosure process? Are there any concrete suggestions to change that? AG Schneiderman’s plan is about putting pressure on the banks and creating lists and fines for maintaining the property, not to speed the foreclosure process, right? Or am I missing something? And is a year long foreclosure process really so long? A year legal delay can’t explain why properties are still in limbo from 2008??! The long foreclosure timelines is clearly not the real issue, it’s a red herring to shift responsibility away from the bank fraud.
See also interesting legislative actions in Nevada:
“Foreclosure indicator improves in Nevada — but experts wary of future” by Jennifer Robinson, Las Vegas Review-Journal:
the only reason zombie foreclosures look better is because the state’s Homeowners Bill of Rights dramatically slowed defaults when it took effect in October and put new restrictions on banks looking to foreclose.
“I have to be more cynical about the drop in Nevada than the drops in other markets, because it coincides with recent changes in the law,” Blomquist said. “The immediate impact was a sharp drop-off in new foreclosure activity.”
Given that decline in defaults, zombie foreclosures could actually be worse than the numbers reflect.
Eli Segall at VegasInc, further explains the legal changes in Nevada in “Nevadans headed for foreclosure not as quick to abandon home, report says“:
After the housing bubble burst, foreclosures soared in Nevada, with lenders seizing about 2,500 homes a month in 2011. But state lawmakers drastically slowed that with the “robosigning” law, which took effect in fall 2011 and forced banks to provide more paperwork before they foreclosed.
Two more laws that could affect foreclosures also were approved last year, but they seem to work against each other.
Senate Bill 321, dubbed the Homeowner’s Bill of Rights, sought to make it easier for residents to avoid foreclosure. It bars bankers from trying to seize a person’s home while also pursuing a short sale at the same time, and it forces lenders to give homeowners more foreclosure prevention options and other information before seizing a house.
Assembly Bill 300, however, relaxed the robosigning law to make it easier for banks to foreclose. Under the robosigning law, bank employees were forced to sign an affidavit saying they have personal knowledge of a property’s financial-document history before they seized the house. Under AB300, a bank’s affidavit can be based simply on a review of internal lending records and either title paperwork or filings with the local county recorder.
Segall’s article has received some great comments from someone calling themselves KillerB:
Our Supreme Court has firmly said unless a forecloser can prove its interest in the note, it cannot foreclose. That’s its Giorgii decision from 1969. In its Edelstein decision from September 2012 it set the standard for pre-qualifying foreclosers. Its Leyva decision from July 2011 made it clear foreclosers are bound by Nevada’s Law of Notes. That’s only been the law here since 1965, it’s the real rules of engagement, and it’s mostly self-help remedies. Yet you and the rest of the suits ignore it. Sadly, so do all the rest of the posters so far and Nevada’s homeowners.
“If you’re going to take my house away from me, you better own the note.” — Joe Lents (who hasn’t made a payment on his $1.5 million mortgage since 2002) in Bloomberg’s 2/22/08 “Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish“
You didn’t sign a contract, you signed a mortgage note. Big difference.
“The obligor on the note has the right to know the identity of the entity that is “entitled to enforce” the mortgage note under Article 3, see NRS 104.3301, “[o]therwise, the [homeowner] may pay funds to a stranger in the case.” — Leyva v. National Default Servicing Corp, 255 P.3d 1275 (Nev. 07/07/2011)
Mortgage notes are special. And that’s why some may be so eager to push “zombie” language. Label those homeowners as “deadbeats” and blame the courts too. The banks don’t want to admit that they messed up and the economic collapse was built on a robo-signed debt obligation pyramid that may not have complied with securities law. The system bought and sold mortgages faster than the humans could ever check them. The market for mortgage backed securities blew into a bubble because unscrupulous lenders fed a machine database that then marketed these notes in untraceable pieces.
The banks caused this mess, the entire economy collapsed, people lost their jobs and their whole livelihoods and shit is just starting to come back. But let’s not forget that it was the robo-signing exuberance that built the bubbled system. They skirted securities laws in order to sell more mortgages. This did wonders for the economy, built new houses, pumped the whole economy, until it burst. It’s a lot of people’s fault but we shouldn’t blame the homeowners. In many cases the banks induced homeowners to default with false promises of loan assistance. Give the homeowners free homes. Let them sell them at market value unencumbered by the notes and spend the profits. That would be a bottom-up funding of the economy but instead the banks get bailed out and the homeowners are left to die wherever they may be.
In New Jersey, NJ1015: “Do your have a zombie next door?“:
Here in New Jersey, the court system is a big part of the problem. The state has one of the longest foreclosure processes in the country, averaging 378 days per case.
But again, is this year long delay the problem or just a diversion from the real problem of banks trying to shift blame?
See Batavia Daily News: “Warsaw sees no easy fixes for ‘zombie’ properties” By Matt Surtel quotes Code Enforcement Officer Daniel Hurlburt:
“The biggest problem I’ve got is these banks have resold the mortgages to different banks,” he says. “What’s happened is they’ve sold them to other banks out of state. I was on the phone with HSBC for an hour and 15 minutes and I couldn’t talk to anybody in person … I just couldn’t talk to an operator or somebody.”
“Lee area ranks 15th for ‘zombie foreclosures’” by Dick Hogan
“Florida leads in undead foreclosures ” By Kim Miller
“Tampa Bay ranks high in zombie foreclosures” by Eric Snider
“Orlando No. 6 nationwide in zombie foreclosures” by Cindy Barth
KTAR: Fear not: ‘Zombie’ foreclosure numbers drop in metro Phoenix by Jeremy Foster
“‘Zombie’ foreclosures fall 32% in Charlotte” by Deon Roberts
But in the North Carolina a noteworthy variation, at WFMYnews2: “Dealing With Debt Collectors: What You Need To Know“:
We talked to Attorney General Roy Cooper via Skype, and he said we should all be aware of something called Zombie debt. “There are a lot of debt buyers out there who make a living simply buying debt at a discounted rate and then they will try and collect it. Sometimes debt is bought over and over again and when that happens, sometimes that information becomes less and less accurate to the point where the figures might be wrong and even the people might be wrong.”
Now see, that’s a different kind of “zombie” debt but still very much related. Recall there are at least three kinds of zombie debt. RealtyTrac’s “zombie” is an attempt to label the houses as “eyesores”. But as explained above, it’s also the debt itself that is potentially faulty. If it’s bad paper that was improperly robo-signed (part of what was once called “toxic debt”) then maybe these banks are eventually going to sell to bottom basement servicers who will forever try to collect on what is questionably unenforceable. With banks hoping for legislative changes to repair their position, this could go on for decades.
Finally, to conclude with a more individual story, see this letter to TimesUnion: “Real story behind a ‘zombie home’” which tries to set the record straight about one home that has been repeatedly cited as an example of New York’s abandoned home problem. Apparently the parents died, the kids couldn’t sell the house, the bank claimed it, the government supposedly took it? It’s a sad sob story and another example of how each of these houses has a different story of how the recession hurt their family. TARP-like government money should have fueled short-sales to the owners. Too late. Now the stories are twisted by the media to push rhetoric that may provide even more help for banks.
Don’t speed the foreclosures, give people their homes. They aren’t all deadbeats, a lot of them were bad beats in a world economy game that was rigged against them.