Back in the boom, MERS was a cornerstone of the real estate market offering a way to offload mortgages to investors allowing banks to continue to originate loans and make bundles o’ money. Apparently, my strategy of waiting at the end of the rainbow for my pot of gold wasn’t a good one: should have been a lender. Lots of green, just not in the form of little people with funny hats. Now, lenders wouldn’t have been able to meet the demand of the American consumer for housing loans without sending loans off into the netherworld to be split up and chopped up into bite sized fare for investors. This MERS legacy is the gift that is contributing to the ongoing hell that is real estate these days.
Getting real on Salem Oregon Foreclosures
I almost didn’t write my quarterly foreclosure post because the data, or lack thereof, isn’t an accurate reflection of things to come. So, I pulled a NAR this quarter and extrapolated my data a bit for you. I wrote last quarter about the impact of MERS in Oregon, and in particular Salem. I doubt most of you care what is happening in real estate in Topanga so we’ll just chat about Salem. What you need to know but don’t really care about is that in the second quarter of this year, not one MERS held foreclosure notice was filed in Salem. This is significant because last year 48% of foreclosure notices were MERS held.
Why aren’t they filing? Well that has to do with the 5 lawsuits that have occurred in Oregon this year, with the latest one the judge rescinded the foreclosure as the note transfer wasn’t properly recorded per Oregon laws. As these loans were fractured and sold, Oregon law requires the transfer be recorded at the county level. Due to the massive costs associated with doing this, the banks decided “eh…what the heck with Oregon laws. Those people are up hugging trees anyway. They won’t notice.” This cavalier attitude works as long as the seller doesn’t default. It isn’t so pretty when foreclosures happen oh say such as circa real estate 2007 and beyond.
I might need a cocktail
What does it matter? Well, if you are a home seller right now, what you are seeing is a reduction in inventory. Huge price drops on homes happened in the first quarters this year so buyers are out. The reduction in inventory is a sign of stabilization, for now. This is the gift of MERS present. Incompetence on the part of the big 8 in following those pesky state laws has caused a temporary stop in those properties hitting the foreclosure market. So potentially 48% of homes that should be hitting the foreclosure market aren’t. That is causing a nice drop in inventory.
But you know that old adage, all good things must end up in annihilation. Or something like that. Anyway, what is building is of concern for our local market. See my pretty picture? I worked really hard on it so say it is pretty or my feelings might be crushed and I’ll have to go drown my sorrows in one of @RobDrinkenstien’s amazing cocktails at La Capitale.
Notice of Defaults in Salem
We had a dip at the end of last year and it looks like there is a dip this year, but this is where I pulled a NAR. MERS notices aren’t getting filed, while those cases work their way through the Oregon legal system. What this means is that we really should have 48% more foreclosures each quarter than we really do (assuming that the percentage stayed the same as last year). So I created a special bar for the ghost of MERS. These are the potential notices that should be out there but aren’t. Why is this a concern? Because they are building up, and at some point in the future when the MERS situation gets resolved there will be a tsunami that hits Salem as the notices hit the county. Right now we have a regular flow of foreclosures hitting the market so we can, in theory, have some sort of stabilization. If this buildup continues and those homes get dumped on the market in a short period of time…do I need to tell you that would be bad?
What we are looking at is the ghost of MERS future, and it sure doesn’t look like Casper.