BofA Donates Then Demolishes Houses to Cut Glut
, On Wednesday July 27, 2011, 10:43 am EDT
Bank of America Corp. (BAC), faced with a glut of foreclosed and abandoned houses it can’t sell, has a new tool to get rid of the most decrepit ones: a bulldozer. end 1st quote.This is something none of us thought we would ever see, where it would be more cost effective for a bank to bulldoze some of its houses than any other solution. Though the homeless would be horrified by this, this still is what Bank of America is doing to some of its foreclosed homes that it can't find buyers for.
begin next quote from same article:
The biggest U.S. mortgage servicer will donate 100 foreclosed houses in the Cleveland area and in some cases contribute to their demolition in partnership with a local agency that manages blighted property. The bank has similar plans in Detroit and Chicago, with more cities to come, and Wells Fargo & Co. (WFC), Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Fannie Mae are conducting or considering their own programs.
Disposing of repossessed homes is one of the biggest headaches for lenders in the U.S., where 1,679,125 houses, or one in every 77, were in some stage of foreclosure as of June, according to research firm RealtyTrac Inc. of Irvine, California. The prospect of those properties flooding the market has depressed prices and driven off buyers concerned that housing values will keep dropping.
“There is way too much supply,” said Gus Frangos, president of the Cleveland-based Cuyahoga County Land Reutilization Corp., which works with lenders, government officials and homeowners to salvage vacant homes. “The best thing we can do to stabilize the market is to get the garbage off.”
BofA’s 40,000
Bank of America had 40,000 foreclosures in the first quarter, saddling the Charlotte, North Carolina-based lender with taxes and maintenance costs. The bank announced the Cleveland program last month, has committed as many as 100 properties in Detroit and 150 in Chicago, and may add as many as nine cities by the end of the year, said Rick Simon, a company spokesman.
The lender will pay as much as $7,500 for demolition or $3,500 in areas eligible to receive funds through the federal Neighborhood Stabilization Program. Uses for the land include development, open space and urban farming, according to the statement. Simon declined to say how many foreclosed properties Bank of America holds. end quote.
The highest foreclosure rates I believe in U.S. History was during 2008 of 2.8% foreclosure rate. Our present forclosure rate in the U.S. is 1 house in 77 which is approximately 1.3%. However, the glut of foreclosed houses is clogging the market now which is leading Bank of America and potentially other banks to donate and demolish their presently unsalable properties.
begin quote from:
October 3, 2008
Home foreclosure rates past and present.
There is a LOT of talk right now about high home foreclosure rates. From how bad some people make it sound, it seems as if every other home owner in the country right now must be currently in foreclosure. Currently the foreclosure rate is around 2.8%. That is a historical high. How high is that really compared to previous decades?
This FDIC report from 1998 has data on foreclosure rates from previous decades. That document has foreclosure rates listed for 1950 to 1997 in the appendix.
Foreclosure rates for 1950 to 1997:
If you look at the period from 1970 to 1998 you can see that the foreclosure rates had gradually increased over those 3 decades. The FDIC article also has some interesting discussion on the why foreclosure rates have increased gradually over the years. Interestingly they don't find a strong correlation between unemployment rates or interest rates and the foreclosure rate. So in other words the foreclosure rate didn't seem to go up directly in relation to high unemployment or high interest.
Another document from the Federal Reserve in St. Louis looks back at the foreclosure rates around the great depression.
They give foreclosure rates for the years 1926 to 1941 :
You might look at this data and conclude that the problem right now is worse than the great depression. But the report points out that the delinquency rate on mortgages in the 1930's was much much higher than it is now: "Thus, at the beginning of 1934, approximately one-half of urban houses with an outstanding mortgage were in default (Bridewell, 1938, p. 172). For comparison, in the fourth quarter of 2007, 3.6 percent of all U.S. residential mortgages and 20.4 percent of adjustable-rate subprime mortgages had been delinquent for at least 90 days."
So back in the great depression nearly half the people were behind on their mortgage. Today only around 4% of people are delinquent.
Another interesting report on recent foreclosure rates is from the Clevelend Fed. They show the foreclosure and delinquency rates for both prime mortgages and subprime mortgages. Their data is very revealing about how the current problem is almost entirely with the subprime mortgages.
Here's a chart from that report showing foreclosure starts for prime mortgages in blue versus subprime in red:
Looking at that chart we can see that prime mortgage rates foreclosure rates have been pretty flat for the past decade. Its really the subprime mortgages foreclosure rates that have been high.
This FDIC report from 1998 has data on foreclosure rates from previous decades. That document has foreclosure rates listed for 1950 to 1997 in the appendix.
Foreclosure rates for 1950 to 1997:
If you look at the period from 1970 to 1998 you can see that the foreclosure rates had gradually increased over those 3 decades. The FDIC article also has some interesting discussion on the why foreclosure rates have increased gradually over the years. Interestingly they don't find a strong correlation between unemployment rates or interest rates and the foreclosure rate. So in other words the foreclosure rate didn't seem to go up directly in relation to high unemployment or high interest.
Another document from the Federal Reserve in St. Louis looks back at the foreclosure rates around the great depression.
They give foreclosure rates for the years 1926 to 1941 :
You might look at this data and conclude that the problem right now is worse than the great depression. But the report points out that the delinquency rate on mortgages in the 1930's was much much higher than it is now: "Thus, at the beginning of 1934, approximately one-half of urban houses with an outstanding mortgage were in default (Bridewell, 1938, p. 172). For comparison, in the fourth quarter of 2007, 3.6 percent of all U.S. residential mortgages and 20.4 percent of adjustable-rate subprime mortgages had been delinquent for at least 90 days."
So back in the great depression nearly half the people were behind on their mortgage. Today only around 4% of people are delinquent.
Another interesting report on recent foreclosure rates is from the Clevelend Fed. They show the foreclosure and delinquency rates for both prime mortgages and subprime mortgages. Their data is very revealing about how the current problem is almost entirely with the subprime mortgages.
Here's a chart from that report showing foreclosure starts for prime mortgages in blue versus subprime in red:
Looking at that chart we can see that prime mortgage rates foreclosure rates have been pretty flat for the past decade. Its really the subprime mortgages foreclosure rates that have been high.
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