Leading Mortgage Analyst Forecast Indicates that 11 Million Homes will be Lost to Default

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According to Amherst Securities Group LP, one of the most respected and leading mortgage analyst, an alarming 11 million homes will be lost to default if things continue to move the way they are moving now.

According to Amherst Securities Group LP, one of the most respected and leading mortgage analyst, an alarming 11 million homes will be lost to default if things continue to move the way they are moving now.

In an interview with Javier Zelaya, CEO of Corporate Asset Management, LLC (http://www.CAMREO.COM) a privately owned company, he pointed to the fact that something needs to be done in order to alleviate the problems caused by this mortgage crisis. He believes that this forecast by Amherst definitely serves as a cry for help issued towards the government and any other entity with the power to fix or attempt to improve the housing market situation.

The forecast, which was released in October 1 says that “the death spiral of lower home prices, more borrowers underwater, higher transition rates (to default), more distressed sales and lower home prices must be arrested.”

The report also explains that although there have been recent talk about improvement in mortgage performance, “this ‘improvement’ simply reflects large scale modification activity having served to artificially lower the delinquency rate,” the report said.

The graph on the right was provided by Amherst Mortgage Insight, and it serves to show the point just mentioned. You can observe an increase in mortgage balances of delinquencies, and also its “artificial” reduction.

As far as the fate for defaulting properties, Javier Zelaya explains that the numbers provided by the report are not promising at all, especially for severe negative equity properties.

According to the report, nineteen percent of properties with a loan-to-value of 120% or greater are defaulting every year.

The table displayed on the right was put together by HousingStory.net using the data provided by Amherst Securities group. It gives the breakdown for Home defaults forecasted to add up to an alarming 11 million homes to be lost to default.

Amherst report also says that possible solutions to this imminent problem could include mandatory principal reductions, looser underwriting of new mortgage loans, leveraged capital pools for investors, and penalties for defaulting homeowners. According to Amherst, a family who defaults can live rent-free for 20 months on average. Therefore, Amherst proposes that missed mortgage payments, including property taxes and insurance, be counted as W2 income.

Javier Zelaya agrees with Amherst statement that there are also other factors that need to be taken into consideration when studying the market situation. There have been recent signs of distress in the market which include two recent record-low readings of existing home sales and the increased measures for underwriting standards at Fannie and Freddie. Back in 2006, bad-credit borrowers represented about 20% of borrowers, today only 2% of Freddie purchases are bad-credit borrowers.

To fix this problem, one of the more desperate measures suggested by the authors of Amherst report is to create a new mortgage for those homeowners who are now behind in their payments. “This (default) can be fixed by re-qualifying borrowers who are in a home they can’t afford into one they can afford,” the report explains.

Although many attempts can and have been made to alleviate the mortgage crisis, “If government policy does not change, over 11.5 million borrowers will be in danger of losing their home,” the report said.

About Corporate Asset Management, LLC:

Corporate Asset Management, LLC is an REO service Management Company that offers real estate lenders and investors a complete solution to REO Management and Disposition nationwide. It specializes in the liquidation of single- and multi-family residences, land, and commercial properties. With their technology and proven management expertise they are able to reduce losses in decrease recovery time. Its clients include commercial banks, savings and loans, investment bankers, pension funds, mortgage companies, as well as consumer finance companies and investors seeking a better way to facilitate the foreclosure process.

By Elizabeth Martinez

Corporate Asset Management, LLC
Executive Tower
11400 West Olympic Boulevard, Suite 200
Los Angeles, CA 90064
Tel. (213) 596-7682

Mortgage Lending News, LLC
http://www.mortgagelendingnews.com
11601 Biscayne Blvd. Suite 201
Miami, FL 33181
Tel. (305) 280-7400

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