As investigations and multi-month delays in the foreclosure process begin, those who will suffer most are JP Morgan Chase, Bank of America and Wells Fargo, according to a new survey of foreclosure exposure, and foreclosure suspensions are coming at a bad time, just as sales are down and REO inventories are rising.
Leading the list of banks holding the bag is JP Morgan Chase. One out of every 13 1- to 4-family home loans it holds are in foreclosure today, worth some $19.5 billion, Bank of America is next $18.7 billion, or 4.39 of its 1- to 4-family home loans, and Wells Fargo has $17.5 billion, or 4.74 percent, according to a survey by SNL Financial.
As far as exposure goes, SNL ranked Barclays, New York Private Bank & Trust Corp. and Ally (GMAC) as the lenders with the highest percentage of their 1- to 4-family home loans in foreclosure. According to its data, Barclays has $495 million, or 17.7 percent of its 1- to 4-family loans in foreclosure proceedings, New York Private Bank has $378 million, or 12.05 percent, and Ally has $2.1 billion, or 10.16 percent.
Chase and BofA, along with GMAC and the Goldman Sachs Group, have announced they will halt foreclosures in some or all states. Wells and US Bancorp have not suspended foreclosures. Yesterday a coalition of all 50 state attorneys general announced an investigation of foreclosure practices in their states. Separately, Federal Housing Finance Agency Acting Director Edward DeMarco outlined a four-point plan of action for Fannie Mae and Freddie Mac to implement to address the foreclosure problem.
The crisis arrived just as bank repossessions reached record levels in the third quarter, filling lenders with unsold inventories of vacant properties. A total of 288,345 properties repossessed by the lender during the quarter - an increase of 7 percent from the previous quarter and an increase of 22 percent from the third quarter of 2009, according to RealtyTrac. These will join hundreds of thousands of other properties languishing in limbo. Even before the suspensions, REO inventories were high. Not only is third party demand down but it is taking banks 130 to 150 days or more to sell homes in high foreclosure states like Arizona and Nevada once they have taken possession, according to ForeclosureRadar.
Finally, more properties are entering the pipeline, adding to the pressure on inventories. The number of properties scheduled for auction increased 5 percent in the third quarter and were up 4 percent from the third quarter of 2009. Foreclosure auctions were scheduled for the first time on a total of 372,445 properties during the quarter.