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Updated over 12 years ago on . Most recent reply

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20
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Will E.
  • Cupertino, CA
6
Votes |
20
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Who Owns Defaulted Mortgages?

Will E.
  • Cupertino, CA
Posted

I have been told by real estate brokers in different geographies of the Western US that the local banks control more than three years of supply of homes that are in default but that they refuse to foreclose on. The robo-signing scandal aside, it appears that the banks are simply allowing the homeowners to continue to live in these properties rent-and-mortgage-free. The banks only foreclose on small numbers of properties at a time, thus artificially limiting the supply of homes on the local market, and sending home prices higher.

My question is does someone have a percentage breakdown of who actually owns these defaulted mortgages that remain unforeclosed? Specifically:

- What percentage are owned by banks outright?

- What percentage are owned by agencies (Freddie, Fannie, etc)?

- What percentage are wrapped up in securitizations which are then in turn owned by corporate and bank owners across the world?

- What percentage are owned by other types of owners?

I'm hoping that understanding how the ownership divides up might reveal insights into why so many of these "shadow inventory" homes remain unforeclosed.

Any and all insights to this interesting situation are appreciated.

Most Popular Reply

User Stats

20
Posts
6
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Will E.
  • Cupertino, CA
6
Votes |
20
Posts
Will E.
  • Cupertino, CA
Replied
Originally posted by Wayne Brooks:
The "holding on" conspiracy theory is just that. It's more a matter of efficiency, and trying to do work outs/ short sales. Fannie and Freddie account for 40% of US mtg.s.

What is more efficient about sitting on an asset that pays no income for three years and allowing someone to live in the property for free for another three years more?

It seems to me that the real truth is that if enough of these properties were sold at sizeable losses all at once it would overwhelm the bank's reserves for loss allowance, and would require that many banks either recapitalize or fold.

You can call it conspiracy - or practical reality - but the US regulators are allowing the banks to hold onto these properties in a limbo state in order for their losses to be slowly absorbed over time against other income. They are simply trying to earn their way out of a very large hole.

For those properties owned by Freddie and Fannie directly, do Fannie and Freddie foreclose the property directly, through a servicer? What percentage of the defaulted properties are Fannie and Freddie foreclosing on each year, based on last two years of activity?

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