Meanwhile In The Real World

I recently spoke to a lawyer who practices real estate law in Brooklyn. A foreclosure judgment currently takes two years to obtain. Once a judgment is obtained it takes another three years to complete the actual foreclosure. This is a result of the judges receiving orders to slow down foreclosures. The Brooklyn courts do not distinguish between commercial and residential properties.

What is a mortgage on a delinquent loan worth if it will take five years to foreclose?  Are the banks marking their delinquent loans to reflect the lengthy foreclosure process in much of the country, as many counties have slowed the foreclosure process? Why would someone give out a mortgage loan if it will take five years to foreclose? Why pay your mortgage if you have no equity when you can live for free for five years?

6 comments:

PJ said...

Funnily enough the banks have colluded in these foreclosure-delay tactics because they can keep the mortgages marked at par up to foreclosure. But cashflow issues must be becoming significant because BofA is planning a 6-fold increase in foreclosures in 2010 over 2009, and other banks will probably also increase foreclosures as well.

Other places aren't as bad as Brooklyn, but 2 years is pretty common for rent-free living in a strategic default.

Onlooker said...

Extend and Pretend, baby! What a joke.

By the way, there was the dip you should have bought. LOL

Tsachy Mishal said...

More like pretend to extend where they borrow courtesy of the government at 0% under the false pretense they are extending loans. Instead they lend it out to the government by buying agency backed securities or longer duration treasuries.

Anonymous said...

Where are you getting your intraday put call ratios?

Tsachy Mishal said...

http://cboe.com/data/IntraDayVol.aspx

PJ said...

Tsachy, I think they're buying 2-3 year treasuries, not too much out at the end of the yield curve. So their net interest margin is only 1-1.5% on Treasury purchases. Right now they're more concerned about foisting losses off on the taxpayers, i.e. by selling MBS to the Fed or getting delinquent borrowers to "refinance" in a modification that takes them into a federally guaranteed new loan and gets the bank out with only a 10% haircut. Profits come from the new accounting rules.