Increase in foreclosure rate could mean banks knew they were seizing properties they didn’t actually own

In the 3rd quarter of this year banks repossessed a total of 288,345 properties – by far the largest quarterly total since the meltdown began. The 4th quarter of this year is likely to have the fewest repossessions of the meltdown because of “the decision by several of the largest lenders to halt filings after it was discovered that paperwork for many loans is missing or incorrect.” The increase is a sharp spike in the total number of repossessions. The 4th quarter numbers were a 7% increase over the previous quarter and a 22% increase over the same period of 2009. According to RealtyTrac: “A record total of 102,134 bank repossessions were reported in September, the first time bank repossessions have surpassed the 100,000 mark in a single month.

So, did the banks know what was coming and try to get as many properties safely in to their possession as they could before the hammer came down? If this is not the case then why the increase?

Now I am not a real estate lawyer – to put it mildly – so I don’t know the answer to the following: Is it legal for banks to foreclose if they know that they cannot substantiate ownership? My guess is no. I hope the 50 state attorneys general now looking into this hunt around for any signs of foreknowledge by the banks. If the banks were doing something they knew to be illegal – as opposed to just making more mistakes – then it raises the question of whether or not there was a conspiracy to commit fraud. Were any of this to be true it would worsen the already dubious condition of many banks’ balance sheets.

What makes this even more interesting that it was just yesterday that analysts were cooing over the better-than-expected earnings J.P. Morgan. This was one of the reasons the press gave for explaining the very odd fact that the Dow closed at or over 11,000 for a fourth straight day. It is worth noting that the Dow has risen more than 1,300 points since July 2, presumably on the basis of all the good economic news of late. Could someone please remind what that news was? Anyone? Bueller?

As long-time readers know I view the stock market as much more of a leading psychological indicator than an economic one. I am still hoping for evidence that will convince me otherwise.

THEN AGAIN IT COULD JUST BE A COINCIDENCE: Bill McBride, who writes Calculated Risk, says: The banks are still catching up on the earlier foreclosure moratoriums – and extended periods for trial modifications.  This surge in repossessions was expected and I think unrelated to “foreclosure-gate”


The stock market is an idiot

Yesterday the NYSE broke 9,000 and huzzahs and hosannas rang through the land. Redemption was at hand and all was right with the world. This was a sure sign the economy was recovering.

"What I like about the rally that we’ve seen so far is the breadth of it. It’s not really confined to a single sector. It’s broadly spread. That gives me confidence," said John Coyne, president of Philadelphia-based Brinker Capital, with $8 billion under management. "It’s been a wonderful run-up here. It’s certainly helping to restore investor confidence, given the trauma that people went through."

This all came about because of better earnings by Goldman Sachs, Ford and and the great good news that sales of previously owned homes rose 3.6 percent in June, the third consecutive monthly improvement! Never mind that Goldman’s money is based on accounting tricks and a fixed game or that the sale of homes is up because the price of homes is falling faster than Alan Greenspan’s reputation. It’s all good.

(Also never mind that UPS reported disappointing second-quarter earnings and doesn’t expect business to pick up over the next few months. Now that, ladies and gentlemen, is a reliable economic indicator.)



There is a continuing and unfounded belief that stock markets somehow reflect reality. They don’t. They reflect the psychology of investors – whether individual or institutional. It is not a picture of what is but of what investors think will be. The Dow at 13,000 reflected nothing but the fact that too many people believed US housing prices could only move in one direction. Conversely, The Dow at 6,450 reflected people’s belief that our banking system was dead in the water.

I believe the current market numbers reflect mass denial. Denial that the US is populated by zombie banks, denial that unemployment is in double digits, denial that these profits have come because of slashed expenses – which is hardly sustainable. The rise in the Dow and other markets is more a reflection of wishful thinking and short-term profit-grabbing than it is anything else.

It could be that the above paragraph is wrong. Maybe recovery is upon us and the billions of dollars lost by banks and people in the meltdown do not need to be accounted for. Even if I am wrong about my assumptions and outlook I am right about this: The markets are no better at augury than the Romans were who relied on the flight of birds or examining the livers of sheep. If they were then we would never have crashes.

How high the moon? How low the Dow?

Has anyone started a betting pool on where the Dow will settle at? CollateralDamage Sr. and I were discussing this today. He said 7000. I said 6000.



More happy news: Welcome to the wonderful world of deflation A new post by me over at BlownMortgage:

Like everyone else I’m relieved gas prices are dropping. As gas prices drop so do those of a lot of other things, like food and shipping and clothes. That’s all good, right? Yeah, unless they don’t stop dropping. When that happens you have deflation and it is very bad.

Simple definition:  “A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy.”

Click above if you have the stomach for it.