Where are all the houses which people default on their subprime loans?

Question

With all those subprime lenders filing for bankruptcy, it seems that there should be many houses which people couldn't pay their mortgage.
It would only make sense that these houses would be on the foreclosures market, am I missing something?

Answer 1

They are spread out nationwide and are such a low percentage of the total that they are just a few in each area as opposed to many of them everywhere you look. Foreclosures are not just occuring in subprime. In last months issue of mortgage servicing news the biggest growth area in defaults was in jumbo loans. No subprime borrower can qualify for one of those. Subprime borrowers make for easy targets as they are credit challenged people that have life issues affecting them daily. The real risk category is the high credit score crowd that can buy anything on stated no doc loans and when a life issue hits them they are hit hard. The several year tally of subprime loans gone bad has caused many subprime lenders to lose their rating and the lenders are the ones going bankrupt. The loans will move to a new servicing company and payments will still have to be made. Regarding pre foreclosures of any type there are still growing numbers across the board and finding a deal isnt hard. Finding a home with equity remaining is just becomming a bit more difficult.

Answer 2

When a lender files bankrupcy that doesn't mean that a home owner gets foreclosed upon. The loans would be considered assets in the BK, and would likely be sold to other banks. The loans and their terms DO NOT change.

The only way the homes would end up on the foreclosure market is if the buyers default. And then yes, those homes DO end up on the market.

However look at it this way-- in California, the state which has one of the HIIGHEST subprime markets, only 1 in 5 loans were subprime. If even 1/4 of those homes defaulted, that means that 5% of the homes would be foreclosures. That's not that many homes-- and Cali makes up a HUGE chunk of the subprime market. In my area, Seattle, only 7% of the loans are Subprime, and as of the newspaper article last sunday, only about 8% of those loans were currently 60 or more days late. That means less than one half of one percent (.5%) are foreclosures from subprime lenders.

It's not as dreary as peopel make it out to be.

Answer 3

It takes a while for a property to go through foreclosure. Additionally, when a lender files for bankruptcy, the trustee takes over the portfolio and that delays foreclosure by as much as a year. They will be there but don't expect too many incredible bargains. Foreclosures typically do not sell for much less than traditional properties as the lenders maintain insurance and will not sell them for less than their insured amount. Sooner or later they will end up on the market, but unless there is a burst in the bubble they will not be great bargains.

Answer 4

Lots of hype in the media. The homes ARE on the market, but typically look just like any other home. You couldn't tell by looking at it if it was a foreclosure or not. Some banks sell at special auctions, some list with RE agents.

Answer 5

In Detroit! Houses on the market for $ 450 k were auctioned of for $135k. Most houses went on the market for less then the price of a new car. There are opportunities all over Michigan, but Detroit is the best for cheap homes.

Answer 6

All these foreclosed home are being held by the lenders so not to flood the market even more. If they flood the market prices will drop even more and then people will be even more upside down and walk away.

These are the games that caused the bubble to began with.

http://www.breakingbubble.com/

IT is going to be bad very bad.