Bits Bucket for January 19, 2012

Michael Olenick: Is Shadow Housing Inventory Vastly Larger Than Widely Believed?

Monday, January 2, 2012

Let’s repeat that. In the spring or summer of 2010, before the robosigning scandal caused a massive slowdown in the number of foreclosures filed, Fannie Mae apparently had 600,000 loans they expected to foreclose upon. Not Fannie Mae, Freddie Mac, FHA, VHA, and private label mortgages, Fannie Mae alone.

FHFA reports that Fannie Mae’s share of total US mortgage debt, at the end of 2010, is 27.7%. If Fannie Mae really does have 600,000 homes they expect to foreclose upon we’d expect to see about 2,165,000 shadow inventory homes total .. in Florida.

It’s impossible to believe this figure is accurate. Let’s look at some data. First, the Census Bureau reports there are just under nine million housing units in the entire state at the end of 2010, 8,989,580, to be exact. According to court records between July, 2010 through December, 2011, inclusive, there were 1,044 foreclosure filings per month in Stern’s home county, Broward County, FL; 22,144 filings total. However, from January, 2009, through June, 2010, inclusive, there 2,544 monthly filings in the same county; 48,144 filings total.

If the number Stern relayed is accurate, that would put a theoretical backlog of filings, for that one county, at 26,000. If we extrapolate to the rest of this high foreclosure state it’s safe to say shadow inventory estimates for the US have been dramatically underestimated, in much the same way that existing home sales were overestimated, albeit to a much more severe degree.

One thing is certain. Either a) Stern lied during his deposition, or b) Fannie Mae lied to Stern, or c) government and non-government organizations that project shadow volume have massively blown it. On Wednesday, Dec. 21st, 2011, HousingWire reports that CoreLogic projected shadow inventory to be 1.6 million homes throughout the entire United States. If Stern relayed the information correctly, and Fannie relayed it to him correctly, that figure looks more like it could be the shadow inventory of South Florida alone. Except that would mean they expect to foreclose on about half the houses in this state, which seems … impossible.

All this calls for far more disclosure on the part of the GSE’s, regulators, and courthouses. There is no legitimate reason to keep these figures locked away behind password-protected websites. Everything from the MERS database, to the Fannie/Freddie loan-level information, to the pile of mortgages the Federal Reserve has purchased should be open. This issue rivals a pressing matter of national security: there is no reason to force investors, home buyers, and others to speculate; to search for information.

View the original article here