Foreclosure Stuffing

Back in November 2010, the robosigning scandal hit in which it was made clear that when it comes to keeping track of mortgage titles, nobody really knows what belongs to whom, except maybe for Linda Green. The immediate result of this was a complete collapse in the foreclosure process as banks no longer had leverage to evict those who don't pay their monthly mortgage bills, since the banks couldn't confirm they actually had rights to the underlying mortgage, and the total monthly foreclosure total dropped from a ~330,000 average houses/month to roughly 250,000. Then in February, to much administration fanfare, the banks, and the attorneys general, signed what we dubbed the Robo-settlement: an event which was supposed to be the "resolution" to the robosigning scandal, and which should once again unclog the foreclosure pipeline. This did not happen. Instead, as RealtyTrac has been diligently reporting month after month, the monthly foreclosure total has continued to decline, and in August hit a level of 193,508 total foreclosures. The immediately spin is that this was a 1% improvement from July's 191,925. The reality is that it was a drop of 15.1% from a year earlier. As the chart below shows, ever since the advent of fraudclosure, the average monthly foreclosure total has dropped from a 330K/month average to just 219K. And declining.

So why did the robosettlement not undo the robosigning foreclosure crunch? Simple - foreclosure stuffing.
What happened is that since the properties not entering the foreclosure pipeline are effectively kept out of inventory, even shadow inventory, and thus the distressed end market, the monthly drop in foreclosures has acted as a form of subsidy to the housing market, as month after month less inventory than otherwise should, enters the market.
As the chart above shows, there is now a 2.5 million "backlog" of properties that should be foreclosed upon based on historical trendlines, but which are being completely ignored by banks. A stuffed foreclosure channel, if you will.

http://www.zerohedge.com/news/foreclosure-stuffing

Follow up story...

Charting The 'Housing Recovery' Subsidy: Foreclosures Slide To Five Year Lows

A month ago, when RealtyTrac posted their latest US foreclosure numbers for the month of August, we presented what we called was the "Foreclosure Stuffing" thesis, explaining the explicit subsidy by the banks for the housing market, whereby the entire foreclosure process has now ground to a halt, and in doing so removing millions in inventory flow from the distressed end market, forcing limited buyers to chase what supply there is, and in the process boosting prices of existing inventory higher. In other words a traditional inventory removal-based subsidy. It is therefore not surprising that today RealtyTrac reported the latest foreclosure data, and lo and behold, just as we expected, the great foreclosure collapse has taken another leg lower, with the total number of foreclosures for the month of September sliding to 180.4K, a decrease of 7 percent from the previous month and down 16 percent from September 2011, and the lowest in five years!

http://www.zerohedge.com/news/2012-10-11/charting-housing-recovery-subsidy-foreclosures-slide-five-year-lows


Twinsdad comment:  Banks are MF's!