What Recovery? 937,840 Foreclosures Q3

What recovery? There were 937,840 foreclosures in Q3 in the US, according to RealtyTrac, the highest quarterly level since they starting issuing reports in 2005. Let’s take a closer look via giant sexy graphic visualization, inside.

(Click to embiggen)

Sure home sales have picked up the past few months, but is it sustainable, or mainly people trying to get in before the new homebuyer tax credit expires in November?

One disturbing indicator of how the mortgage market is still messed up: The 7-month program to refinance underwater homes has only reached 3% of eligible borrowers.

And even after refinancing, some of these homeowners still owe more than their house is worth, as banks refuse to refi at the real market price for fear of realizing the loss on their books. Some of those who re-fied are already in foreclosure.

Consumers are more stressed than ever to make their mortgage payments. With hundreds of thousands of Option-ARM mortgages resetting this month, high unemployment, strapped bank accounts and cut credit lines, the housing crisis is far from over.

US foreclosures’ flurry of activity [USFST]
(Big Graphic: GDS Digital)
PREVIOUSLY: Newsflash: The Next Tsunami Of Aggressively Irresponsible Loans Didn’t Magically Disappear
Monthly Mortgage Rate Resets, 2007-2016

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  1. floraposte says:

    There seems to be, ironically, some protections in poverty–some of the poorest states (Mississippi, West Virginia) have some of the lowest foreclosure rates.

    • pecan 3.14159265 says:

      @floraposte: I’m being totally serious here when I ask this: Do trailer homes have mortgages? I’m not talking about campers and RVs, I’m talking about the ones that kind of actually look like real homes but have no foundations so they have to be raised off the ground. Mississippi and West Virginia are two areas in which a signifiant population of residents live in trailer homes. I figure those are cheaper than regular homes in that area anyway, so maybe residents don’t have as hard of a time paying for them? Or they don’t have mortgages?

      • TheHans says:

        @pecan 3.14159265: When we purchased our house five years ago (in Missouri), we looked at some “modular homes” and trailers as a possible way to get a larger piece of land with a place to live while we built a house. My hopes were dashed when I found out that banks generally did not lend for trailers or modular homes that were not on a slab/basement foundation. In some cases, you can get owner financing, but it is my understanding that banks won’t ante up for anything not permanently attached to the ground.
        That said, this was just my experience, and may not be the case everywhere. Anecdotal evidence FTW!

      • samurailynn says:

        @pecan 3.14159265: Do you mean the ones that are semi-permanent? As in, you usually have to hire a contractor to secure them to a location, and hire a truck to move them for you if you do decide to move? Those ones do typically have a mortgage, and sometimes the person will purchase the land that they are on as well and include that in the mortgage. (I have a few family members that own them, some of them can be nicer than regular homes but cost much less even including the land.)

      • princesspineisempowered says:

        @pecan 3.14159265: I dont know any lender that would finance a mobile home not affixed to a permanent foundation. These types of homes would be encumbered by UCC filings, rather than a mortgage. Certainly not fannie, freddie, fha or va. They would have to be privately financed or paid with cash

    • Hoss says:

      @floraposte: The figures are third quarter 2009. I’m thinking the least wealthly homeowners were gone last year

    • Snarkysnake says:

      @floraposte:

      “There seems to be, ironically, some protections in poverty-“

      Great point. The people that were never part of the boom are a much smaller part of the bust. I live in an area that never experienced a runaway housing market and the people here are astonished at what happened in other parts of the country where housing prices lost all touch with reality. Lenders treated these people with contempt while the good times were rolling and now the shoe is on the other foot.( That is ,the banks are broke and the depositors are solvent)

  2. hi says:

    Are you saying we are being lied to by someone? Please do tell.

    • hi says:

      @hi: I’m being serious. The article says: “What recovery?”, who stated their was a recovery?

      • hi says:

        @hi: there*

      • chuloallen says:

        @hi: The White House says the recession is over

        • thezone says:

          @chuloallen: The White House has also said that while the recession is over there is still a lot of work to be done. That’s because unemployment is a trailing indicator of recessions. So yes technically the GDP is growing but tough times still lay ahead. Please don’t try to make it seem like the President is painting a rosy picture of the economy. He hasn’t.

          • Xerloq says:

            @thezone: GDP is not growing, it’s just shrinking more slowly than at the beginning of the recession.

            Currently GDP is “growing” at about -0.7%
            [useconomy.about.com]

            There won’t be a recovery until that number turns positive.

            • hi says:

              The Whitehouse says the recession is over (and so did Bernanke) and looking at the real facts paints a different picture.

              I’d like to call your attention to the Gramm-Leach- Bliley Act. This Act was the cause of the housing crisis we are seeing today (even Obama himself has stated this). Lawrence “Larry” Summers was Secretary of the Treasury for the last year and a half of the Clinton Administration and worked on the Gramm-Leach- Bliley Act. Lawrence “Larry” Summers is now Director of the White House’s National Economic Council for President Barack Obama.

              Now I ask… Who in their right mind, knowing that they helped cause the economic crisis we see today, would hire him (Lawrence “Larry” Summers)as the Director of the White House’s National Economic Council?

              “Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come.” — Larry Summers, Then-Clinton Treasury Secretary And Current Obama Adviser, On Gramm-Leach-Bliley (1999)

              • hi says:

                @hi: See who voted FOR the Gramm-Leach-Bliley Act:

                [www.govtrack.us]

              • thezone says:

                @hi: I agree that the GLBA was the catalyst of the entire financial meltdown. I also know Larry Summers had a big role helping to draft that legislation. I won’t even argue that I don’t think his appointment was a good pick. However, I have to disagree on your outtake on the Whitehouse and the recession. Technically on Thursday when the GDP numbers for the third quarter are released the recession will be over. That is because GDP will have increased and that is the technical definition. Those are the only real facts to whether there is a recession going on.

                The issue you are having is GDP is not the only measuring stick for the economy. That’s why the Whitehouse has not been jumping up and down about the numbers. Unemployment will continue to struggle for some time after the recession is officially over. The president has acknowledged that fact. The economy is still not healthy and it probably won’t be for years. It took a long time to get to this point and it will take a long time to recover.

                • hi says:

                  @thezone: The real numbers should be taken from “The National Bureau of Economic Research” and not from the talking heads on TV. If NBER say it’s over on Thursday then I will believe it, but please compare what the TV says to what NBER says.

                  It’s blocked at work for some odd reason so the alternate url is below:

                  [wwwdev.nber.org]
                  [en.wikipedia.org]

            • thezone says:

              @Xerloq says Can I has Friday?: [www.google.com]

              The vast majority of economists are saying the GDP is (right now) growing. But like I said positive GDP doesn’t mean we are out of the woods.

          • chuloallen says:

            @thezone: [www.marketwatch.com]

            Oh for sure the President isnt painting a rosy picture, a bleak future is what is driving his administration and powering his support.
            Yet as unemployment rises, they choose to finagle the numbers and talk about “jobs saved” to pat themselves on the back and yet ignore the real unemployment numbers.

            • thezone says:

              @chuloallen: The administration is talking about saved jobs. Those types of numbers are always iffy. But I don’t see them patting themselves on the back. At every turn I’ve seen the president say the unemployment numbers aren’t good. If the administration was ignoring the “real unemployment numbers” why did Bernanke say the that there was a risk of the job markets staying weak through 2010? Using the word anemic when describing the economy is not patting yourself on the back.

              • chuloallen says:

                @thezone: “always iffy” this new statistic of “jobs created/saved” is more than iffy. Even though some people commenting in this thread seem to be unable to call news organizations by their real names instead of using stereotypical partisan phrases, even the WSJ and CNBC is wary of the rhetoric that is being fed to the public.
                The Media Fall for Phony ‘Jobs’ Claims
                [online.wsj.com]

                Tony Fratto: The White House “Jobs-Saved” Deception
                [www.cnbc.com]

            • ARP says:

              @chuloallen: I don’t think that’s the case. Presidents during recessions don’t have a good track record of being re-elected (See Carter and Bush I).

              Also, compared to Faux News and the Republicans, I’d say Obama is being much more upfront about the state of the economy. When things were collapsing, Faux News and the Republicans kept saying there was no recession and accused Obama/Dems of fearmongering, by completely relying on GDP and ignoring all other economic data. Now that Obama is saying we’re out of the recession, we have a long way to go, jobs are still lacking, things will be soft for a while, etc. you’re suddenly sensitive to spin? Interesting.

  3. Oranges w/ Cheese says:

    Oh, that second graphic is predicting another wave of really nasty shit, isn’t it?

  4. Oranges w/ Cheese says:

    Though, on a different note, Realtytrac only started recording since 2005. It isn’t like its going back 50 years and saying THIS IS THE WORST EVAR. I love it when they report on the stock market and they say “It’s the lowest its been in 6 MONTHS OMG ITS THE END OF THE WORLD”. Srsly. 6 months is nothing. Come back to me when its been a decade or more.

    • vladthepaler says:

      @Oranges w/ Cheese wants it to be winter already:

      2005 was more than six months ago. Srsly. OMG it’s like four years! Like you must be totally old if you rmembr that!!1!!111!

      Given that this is the worst it’s been in four years, and the market in general is the worst it’s been since the Great Depression, it seems likely that this is the most foreclosures we’ve seen in any one quarter in a long time. But maybe there were a million foreclosures in Q1 2004 and we’ve all just forgotten about it.

    • Eyebrows McGee (now with double the baby!) says:

      @Oranges w/ Cheese wants it to be winter already: The Bank of England had to set its rates to their lowest rates since the Bank was founded in 1694. Is that enough “WORST EVAR” for ya? ;)

      (January 09: [www.nytimes.com] and I believe they’ve dropped them since as the article predicts.)

    • oneandone says:

      @Oranges w/ Cheese wants it to be winter already: I feel the same way, especially when they talk about the stock market. I’m not that old, and I remember when the Dow broke 8000 and people wondered if it was possible it could go even higher. Crazy! Hearing people (usually on the news) talk about things being ‘the worst since 2002′ makes me feel like there’s a severe lack of perspecctive on certain things. That, and the stock market is a terrible, terrible indicator of anything and they should just be quiet about it.

      @Eyebrows McGee (now with more baby!): That is a very useful fact. I like my financial stats well-aged.

  5. doctor_cos wants you to remain calm says:

    While I would like to only leave a witty comment (i.e, I didn’t know there were 1,554 houses in Rhode Island altogether), this is serious stuff. And I worry it’s not going to get better anytime soon, as…
    Industries that created jobs that helped us out of previous recessions are either gone altogether or greatly reduced from before (e.g., construction & manufacturing).
    Banks have graciously accepted my tax dollars to bail themselves out and are thanking me by raising fees and rates.
    I’ve also looked into buying a house, but there is still too much uncertainty in the economy for me.

  6. Tim says:

    Let’s hear it for Vermont!

  7. floraposte says:

    Here’s an interesting article from Business Week 2006 warning about Option ARM loans: [www.businessweek.com]

    I’m not clear on the difference, though, between vanilla “subprime” and the option-ARMs. Were the subprimes not ARMs?

    • FatLynn says:

      @floraposte: Subprimes are mortgages given to lenders who would not normally qualify, and therefore pay a higher interest rates. There are agencies and credit unions that have been writing subprime mortgages for YEARS that are not in trouble because they were not reckless with their lending. They required down payments and/or PMI, set fixed rates, verified employment, etc. Subprime simply means you are part of a riskier pool of borrowers, and the lender increases the rates to account for the likelihood there will be more foreclosures than in the pool of “prime” borrowers.

      So, that’s a long answer, but subprimes are not necessarily ARM’s, and ARM’s are not necessarily subprimes.

      • floraposte says:

        @FatLynn: So how are they deciding which category you’re in if your mortgage was both? Or is the key the “Option” part of “Option-ARM”?

        • floraposte says:

          @floraposte: Oh, and thanks for the info as well.

          • FatLynn says:

            @floraposte: I would assume they put you in the riskier category for the sake of the graphic, but I don’t really know.

            BTW, I think it is very important for people to understand that subprime loaning is not inherently bad, because it will affect the ability of underserviced groups to get loans in the future.

            • ARP says:

              @FatLynn: Agreed, but a politicians with a certain political leaning have demonized them as the cause of the problem, rather than a small piece of a much larger puzzle. Of course its easier to have a bumper sticker answer to all causes and solutions to complex problems (cut taxes, bomb them, limit mal-practice awards, etc.)

    • rekoil says:

      @floraposte: An Option ARM loan allowed the home buyer the “option” of making a minimum payment each month which was *lower* than the monthly interest charge, in which case the unpaid interest would be added to the principal due.

      In other words, pure evil.

    • qwickone says:

      @floraposte: Option ARMs are ARMs with a payment option. You can pay principal and interest, interest only, or less than interest only, which increases your principal. Guess what most people chose.

  8. FatLynn says:

    What is Vermont doing that makes it such an anomaly?

    • floraposte says:

      @FatLynn: Good question, I thought, so I searched and found an answer: [online.wsj.com]

      In short, state lending laws.

      • oneandone says:

        @floraposte: Interesting. What about North Dakota? Not as impressive as Vermont, but not bad (and better than neighboring states). State lending laws or no bubble to begin with, or both?

    • Oranges w/ Cheese says:

      @FatLynn: It isn’t such a high growth area. If you look at some of the states with the highest numbers, California, Florida, and Arizona – they were in boom boom boom time. As a resident of Florida, I can’t tell you how many apartment complexes I saw bought up and turned into “condos to own” that have since crapped out and gone back to renting. And how many additional “townhome” communities were started that now lay half built.
      Seriously, it was really stupid stuff they were doing.
      There was a piece on NPR yesterday about Phoenix having over 500 new building permits each month in the boom time but now they’re lucky to get 50.

    • wgrune says:

      @FatLynn:

      Low population and a high median income (read: people have more money) and less than 6000 houses were sold there in 2008.

      Interestingly enough, Vermont also has the lowest credit card deliquency rate in the nation.

      • floraposte says:

        @wgrune: The reason fewer than 6000 houses were sold is that Vermont is really tight on their lending laws, so that people who could afford houses in other states couldn’t there. It hurt its growth, in fact. But now they’re seeing an advantage.

        I wonder if neighboring states have higher foreclosure rates near the Vermont boundary from people who couldn’t buy a house in Vermont but work there.

        • wgrune says:

          @floraposte:

          So you’re saying if all states had tighter lending laws and didn’t give out mortgages to anyone we might not be in this mess? :-)

          • floraposte says:

            @wgrune: Crazy, but it just might have worked!

            The article’s got some really interesting details–Vermont, for instance, established that lenders have a responsibility to their borrowers, so a default meant a lender failure as well. And there’s stuff about bright colors required for the paper in certain warning notices.

            • ARP says:

              @floraposte: So you’re saying Vermont is a commu-facsist state? I mean think about it:

              1) MUTUAL responsibility of the lender and the borrower? Do you really want an company to be responsible for its actions as well as individuals?
              2) GOVERNMENT regulations- to restrict lending to those who qualify and and verify their financial condition? Do you want the government to tell you who can and can’t buy a house?
              3) Civil Unions that show that they don’t care about family values, only the cost of their precious mortgage.
              4) Also, wasn’t there a communist who lived in Vermont and Vermont was an Obama state, so Vertmont is communist.

              /channeling Beck

    • pot_roast says:

      @FatLynn: Fewer baby boomers cashing in, using their houses as ATMS, and buying up “investment properties.” (Yes, I know they weren’t entirely responsible, but there were a LOT of boomers that bought into the ‘easy real estate money for your nest egg’ crap and did exactly this.)

  9. Urgleglurk says:

    “There seems to be, ironically, some protections in poverty–some of the poorest states (Mississippi, West Virginia) have some of the lowest foreclosure rates.”

    I can’t say about Mississippi, but WV had very little exposure to the housing boom because most of it is so dirt poor. What foreclosures we’ve had are in the far eastern panhandle and around Charleston and Wheeling.

    • floraposte says:

      @Urgleglurk: That’s what I was wondering, and it seems to have been what helped Vermont. So the less boom you had, the less fall you’re suffering. Makes sense, I suppose.

    • webweazel says:

      @Urgleglurk: I’m in Mississippi, in the coastal counties. Since we have the casinos, the coastal counties revenues “feed” the rest of the stste north. The employment situation has not been too bad here. Insulated, almost. We own a house, and we have not seen the house values lower, nor raise. They seem to have stayed mostly stable, on average, over the past 3 years. In fact, there are two properties nearby that looked to be abandoned for a few years that have now been bought, fixed up nicely, and are now for sale. That seems like a good sign.

  10. TJ says:

    Everything looks better in Helvetica.

  11. nnj says:

    We may be hearing this every quarter until sometime in 2012, with some minor variations of course. We are in the eye of the hurricane with toxic mortgage resets.

    See chart: [www.thetruthaboutmortgage.com]

    The next round of alt-a and option arms look to be much worse than the subprime we just went through.

    That garbage about home sales up nine something percent is NAR spin. Most of those sales were for houses under $200k. With the govt. $8000 tax credit and 3.5% down FHA loan means people still bought with no money down (using the $8000 credit). I can only imagine many of these will get notice of defaults too.

  12. Mr.Duke says:

    I have a good friend that works at a major bank in the foreclosure dept. He said they are overwhelmed by the amount of foreclosures on the bank books. Estimates are it will only get worse in the next 3 years. Many more pay option ARM and other adjustable exotica will be adjusting rates upward in 2010 and 2011. All those that screamed discrimination because they couldn’t qualify for a normal 30 year fixed rate with 20% down payment and thus demanded the ability to buy a home, well, how do you like those phony teaser rates mortgage loans now?

    • thezone says:

      @Mr.Duke: The majority of sub prime loans were not made under the programs that helped low income people get loans. Most of the loans in the subprime market were made by independent mortgage companies that then sold the mortgages off to banks when the times were good.

      • floraposte says:

        @thezone: Not to mention the fact that there has been some strong evidence of discrimination, with people who could have qualified for conventional loans being steered into riskier, more seemingly profitable products.

    • ARP says:

      @Mr.Duke: And nothing in the CRA says that they MUST to lend to poor people or minorities. The laws said that you can’t discriminate based on where they live. Banks would “redline” areas of the map where they wouldn’t loan. They just happended redline where minorities lived. So the law says the bank must treat White person making $50k a year buying a $100k house and Black Person (or any person) making 50k a year buying a $100k house, the same regardless of where they live.

      The FHA and some other programs encouraged home ownership buy guaranteed mortgages that met a certain criteria. These programs were established and maintained by both parties (with some noticable failings by both in the years before the housing collapse).

  13. TruthHog says:

    Re: mondo graphic: “fillings?”

  14. Firethorn says:

    Looking at the chart, I wonder if the Option-Arms were the loan of choice for the speculators; those most betting on home prices increasing faster than the interest rate, allowing them to ‘flip’ the home a couple years down the road(or even just six months) for substantial profit?

    Of course, that smacks of borrowing to make an investment, which is a bad, bad idea as people learned back when we entered the great depression.

    Both my grandfather and brother are getting homes in Florida cheap due to people who invested this way and are now just trying to cut their losses.

  15. memphis9 says:

    What are the numbers for homes that banks/lenders/mortgage service cos aren’t yet officially foreclosing, but are many, many months in default? I have several times now read stories about the market in California, citing homedebtors who are well more than a year in arrears on payments. The paper holders are dragging their feet on the whole Notice-of-Default through Foreclosure Sale process, big time, for the obvious reason that if it were 1 of every 10 or 5 homes – in some markets – defaulting, that would incentivize a lot of folks not even in risk of default to take a look and see if makes sense to keep throwing money at a depreciating asset. (Obligatory comment about how irresponsible and immoral borrowers are to buy too much and then walk away from their obligations, here.) (Obligatory response about consumers needing to be as cold-blooded “nothing personal but I’m doing what is in *my* best business interest, here.)

    I really suspect even those picking up distressed “steals” today, will still get burned.

  16. pot_roast says:

    Don’t forget lovely websites like “you walk away . com” in California that are basically encouraging people to just toss the keys and walk away from their mortgage, leaving taxpayers holding the bag.

    And ACORN with the “we have the right to keep these houses” attitude.

    Ugh. What a mess.

    • memphis9 says:

      @pot_roast:

      Leaving taxpayers holding the bag FOR THE LENDERS and the holders of this paper. I realize that the bad mortgage paper is in mortgages and 401Ks now, but would argue strenuously that if you are going to assign a villain in this tale, it’s the loose lenders, the appraisers who caved to overvaluation demands from the banks — all the “sophisticated players” who weren’t just trying to benefit from the boom but were in fact engineering the bubble by lobbying for decades, with ultimately success, to rollback the protections and restrictions on lenders enacted in the wake of the great depression. But if it makes you feel better to blame ACORN (don’t love ACORN, but c’mon!), be my guest.

  17. Steven Francis says:

    Well I think that many people are unaware about these facts. We all are thinking that the economy is recovering very fast and we will be back to our past position (may be even better than that). So I thank Ben for bringing this hard fact to us.

  18. Snarkysnake says:

    That second graph is scary , no shit.

  19. Biggbrother says:

    Geez.. thanks for pissing in my Wheaties this morning!