{"id":48862,"date":"2013-07-09T08:39:41","date_gmt":"2013-07-09T07:39:41","guid":{"rendered":"http:\/\/rinf.com\/alt-news\/breaking-news\/the-sneaky-game-banking-giants-are-playing-to-suck-more-money-from-the-foreclosure-crisis\/48862\/"},"modified":"2013-07-09T13:49:45","modified_gmt":"2013-07-09T12:49:45","slug":"the-sneaky-game-banking-giants-are-playing-to-suck-more-money-from-the-foreclosure-crisis","status":"publish","type":"post","link":"http:\/\/rinf.com\/alt-news\/latest-news\/the-sneaky-game-banking-giants-are-playing-to-suck-more-money-from-the-foreclosure-crisis\/","title":{"rendered":"The Sneaky Game Banking Giants Are Playing to Suck More Money From the Foreclosure Crisis"},"content":{"rendered":"
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It\u2019s conventional to deem local journalism to be dead, but Josh Salman at the Sarasota Herald-Tribune has written well-researched investigative story on bank bidding at foreclosures in his neck of the woods, Big lenders bidding to keep homes<\/a>, that has national implications.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

Here\u2019s the overview:<\/p>\n

Banking giants from Wells Fargo to Fannie Mae are routinely paying top dollar on the auction steps to hold onto their own distressed properties, outbidding cash offers and paying well above assessed value, according to a review of thousands of Southwest Florida auction purchases.<\/p>\n

They are speculating that the properties will appreciate even more in the next couple of years.<\/p><\/blockquote>\n

The article does not indicate whether the \u201cbanking giants\u201d like Wells Fargo are only bidding on properties where the bank owns the loan or serviced loan for private label (non-Fannie and Freddie investors). We\u2019ll assume only the former.<\/p>\n

The degree of outbidding is not modest, at least in Southwest Florida (emphasis ours):<\/p>\n

In some cases, lenders this year have bid up to 600 percent more than a property\u2019s worth to retain foreclosures \u2013 one of the primary<\/strong><\/em> reasons the acquisition costs for competing real estate investors also has spiked in recent months.<\/p>\n

In the 12 months ending June 1, 4,865 foreclosures were auctioned in Sarasota and Manatee counties. Lenders outbid third-parties to keep 3,754, or 77 percent<\/strong><\/em>.<\/p>\n

Banks paid $259.2 million for the properties, an increase of 34 percent from the amount they spent in the same 12-month period a year ago\u2026<\/p>\n

\u201cThe banks seem to be offering more than they usually would \u2013 going for market value and above,\u201d said Shannon Moore, broker and owner of Green Lion Realty in North Port. \u201cI don\u2019t quite understand the logic. It\u2019s a vast shift from the last few years when would take any reasonable amount just to get rid of them.\u201d<\/p><\/blockquote>\n

Now it\u2019s worth keeping in mind that in the good old fashioned days, when homeowners had equity in the home at the time of purchase and prevailing home prices went down only at most on a regional basis, and then usually not too much, the bank would put in a bid for the home at the courthouse for the value of the mortgage so it would take it into \u201creal estate owned\u201d inventory and dispose of it later if no one was willing to snap it up on the courthouse steps for a high enough price. But analysts would probe banks about their REO inventories, particularly in a weak economy.<\/p>\n

But the \u201cpaid\u201d is a misnomer unless the bank bid above the mortgage balance to win at the auction, which the article says doesn\u2019t happen that often. So from an accounting standpoint if the mortgage was $160,000 and the highest third party bid was $90,000, the bank could take the offer at $90,000 and recognize a loss of $70,000 plus foreclosure costs. Or it can bid $110,000 and move the property into REO. If I read the OCC guidance<\/a> correctly, the bank has to value the REO at the lower of the \u201crecorded investment in the loan satisfied\u201d which I assume is the mortgage balance PLUS the foreclosure costs OR fair market value as determined by an appraiser. Gee, we know how independent those appraisers are!<\/p>\n

And with appraisers relying on recent sales for valuations\u2026.you can see the logic of the bank overbidding on such a grand scale. They can bid up to the mortgage balance and not increase their loss exposure. Overbidding systematically increases the comparable sale prices appraisers will look at to prepare their valuations. And with the banks accounting for 77% of purchases out of foreclosure sales (and foreclosure sales representing 20% to 30% of all sales in these counties<\/a>), the bank activity can influence appraisals, particularly since one might expect foreclosure sales to be concentrated in certain neighborhoods. And it\u2019s even great enough at 15% to 23% of all sales to move overall price averages and trends.<\/p>\n

Republished with permission from: AlterNet<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

It\u00e2\u20ac\u2122s conventional to deem local journalism to be dead, but Josh Salman at the Sarasota Herald-Tribune has written well-researched investigative story on bank bidding at foreclosures in his neck of the woods, Big lenders bidding to keep homes, that has national implications.<\/p>\n","protected":false},"author":1,"featured_media":31266,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[487,52,18],"tags":[],"class_list":{"0":"post-48862","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-breaking-news","8":"category-money","9":"category-latest-news"},"_links":{"self":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/48862","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/comments?post=48862"}],"version-history":[{"count":0,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/posts\/48862\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media\/31266"}],"wp:attachment":[{"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/media?parent=48862"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/categories?post=48862"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/rinf.com\/alt-news\/wp-json\/wp\/v2\/tags?post=48862"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}