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April 21, 2010

Just how big a haircut are the banks taking with these foreclosures?

Its looking pretty fracking big. This 3/2 joint is pretty representative of thousands of houses in the Palm Beach area that are in mortgage trouble.

That place sold in 1999 for $82,000 (which is approx what it would have sold for when built in 1985), then resold in 2005 for $140,000, now some bank is trying to unload it today 25 years later for $80,000. Given the ~100% inflation since 1985, the bank only wants $40,000 in 1985 dollars for it.

Between 2005 and now, there wouldn't have been much principle worked down, maybe a few thousand dollars at best on a 30 year loan, maybe nothing on a no-money-down IO "creative financing" loan. Let's say (very optimistically), they paid down $5K.

That means the bank is getting clipped to the tune of $55,000 on a joint that is admittedly trashed and needs a lot of work being advertised as a "handyman special".

The next few quarters are going to hammer the crap out of bank balance sheets with write downs as the hammer drops on the ~million foreclosures they got cued up falls...

Its going to get ugly, real ugly.


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posted by Purp at 04:23 PM

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