Friday, October 8, 2010

Real Estate Trend Expert Tom Ruff's Take on the Bank of America October Surprise


...an unexpected, but popular, political act made just prior to a November election, in an attempt to win votes… Wiktionary Definition of October Surprise

“Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for our past foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus.” Reporters May Contact: Bank of America Home Loans 1.800.796.8448 pressroom@bankofamerica.com

Bank of America

I must admit that I never saw this coming. Don’t quite understand how a company responds to the laws of a deed-of-trust state and the laws of a mortgage state in the same manner, but hey—it must be October, and to a voter, a foreclosure is a foreclosure.

In a New York Times article which quickly followed Bank of America’s press release, Representative Edolphus Towns, the New York Democrat who is chairman of the House Committee on Oversight and Government Reform, applauded Bank of America’s move and said, “I expect to see every other responsible banking institution follow their lead.”

Senator Harry Reid, the Nevada Democrat who is the Senate majority leader, thanked Bank of America “for doing the right thing” and urged other lenders to follow suit. I don’t know whether or not Bank of America’s actions fit the definition of an October surprise, mainly because I’m just not certain how popular this decision is going to be. People who have managed to stay in their homes for months without making a payment are applauding this decision; the 85% making their mortgage payments, maybe not so much.

As for the over 100,000 in Maricopa County who have left their homes due to foreclosure in the last 30 months, they are probably indifferent and happy that they no longer face a mortgage that’s underwater. Personally, I’m tired of politics, and I find today’s news a tad bit depressing. I’m not a political pundit; I’m a guy that tracks housing numbers, and a foreclosure moratorium, as we’ve learned from previous moratoriums, simply delays the problem. Let’s look at the numbers.

Bank of America by the Numbers

We define a Bank of America notice of trustee’s sale as any notice filed in Maricopa County that lists the beneficiary’s address as 400 Countrywide Way, Simi Valley, CA, and ReconTrust Company as the trustee. ReconTrust Company, N.A., is a wholly-owned subsidiary of Bank of America. In Maricopa County there are currently 39,042 single family residences or condos with an active notice of trustee’s sale, and 12,198 of them, or 31.2%, show Bank of America offices as the beneficiary as well as ReconTrust as the trustee.

When reviewing last month’s numbers, we saw 7,116 homes with notices filed in Maricopa County, 1,997 of which coming from Bank of America offices. When reviewing the 4,877 single family residences and condos that went to auction, we saw 1,104 from the Countrywide address.

So, what does today’s press release mean? Quite simply, foreclosure activity in Arizona should decline 25% to 30% in October and remain there until some time after an “assessment has been satisfactorily completed”—I’m guessing sometime after the first Tuesday in November. That’s what we know today, and if Edolphus Towns gets his wish, we’ll see an even more dramatic drop in October’s foreclosure numbers.

Final Thoughts

Without even knowing it, Representative Towns may have uttered the greatest oxymoron to come out of the entire housing crisis: “responsible banking institutions.” If we apply the same analysis to our REO file, of the 20,850 bank- and government-owned homes currently in our database, 4,551 homes were 400 Countrywide Way foreclosures, of which 2,684 are now owned by Fannie Mae, 240 by Freddie Mac, 91 by HUD and 9 by VA. Sorry, foreclosing on a home and delaying handing the majority of your losses off to a “government” agency does not fit my definition of responsible.

Finally, for those of you following the much publicized chess match of Valley Realtor Darrell Blomberg and his 32 months without making a mortgage payment, we’re predicting that his October payment gets postponed and that his streak is extended to 33 and 34 months. Yes, you guessed it; his mortgage is with Bank of America. In the case of Mr. Blomberg, DiMaggio’s record is in play.

Contact Tom Ruff at The Information Market.

Tom is a graduate of the University of Nebraska. He founded "The Information Store" in 1982 and quickly became known as “The Source” of publicly recorded real estate data in Maricopa County. In August 2005 he formed "The Information Market" specializing in foreclosure data and housing studies.

Mr. Ruff is an expert on publicly recorded data and is known for his monthly housing opinion which shares an inside and sometimes irreverent look at the Phoenix Housing Market. He is often quoted in local and national publications.

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