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Meet The Monster Of The Housing Market: Presenting "vampire Reos" Where You Live Mortgage-Free

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http://www.zerohedge.com/news/2013-10-03/meet-monster-housing-market-presenting-vampire-reos-which-65-americans-live-mortgage

Over a year ago, in addition to the money-laundering aspect (confirmed previously) and the REO-To-Rent scramble by PE firms and hedge funds (which is now over as PE become active sellers of apartment rental properties), we highlighted the third implicit subsidy to the housing non-recovery: Foreclosure stuffing. We explained this scheme by banks to limit the amount of available for sale inventory as follows: "since the properties not entering the foreclosure pipeline are effectively kept out of inventory, even shadow inventory, and thus the distressed end market, the monthly drop in foreclosures has acted as a form of subsidy to the housing market, as month after month less inventory than otherwise should, enters the market.... What this has resulted in is a logical increase in prices of the properties that are on the market." Today, the mainstream has finally caught on, and courtesy of RealtyTrac has come up with its own name for this subsidy: Vampire REOs.

In a press release overnight, the foreclosure tracking service RealtyTrac, observed that a stunning 47% of bank-owned homes are still occupied by their previous owners who were foreclosed on, creating "vampire REOs."

Vampire REOs are bank-owned homes that are still occupied by the previous homeowner who was foreclosed on. On the surface these properties often will look like normal, non-distressed homes, but beneath the surface they represent a shadow inventory that is becoming more imminent as rising home prices motivate banks to sell off these homes to try to recoup their losses on soured loans.

The vampires are particularly acute in Miami (64%), Houston (65%), Los Angeles (61%) which have nearly two thirds of bank-owned properties falling into the "vampire REO" category. This means that in order to generate a housing scarcity, millions of deadbeat Americans have been given a carte blanche to live mortgage-free, in some cases for years, and in a state of default in their existing homes, as the banks have no incentive to actually clear out the properties to which they have title, making home purchases for everyone else - those who have the funds and are willing to purchase a home - impossible due to artificially los supply and artificially high prices.

Impressive, I wonder if these people living rent free have been maintaining the property? And naturally keeping up the property values.

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It's just the same tatic the banks have deployed here in Ireland, they are not repossessing the 12%+ of mortgage holders who are over 90 days in arrears! There are tens of thousands of people living in houses they stopped paying the mortgages on years ago.

IMO this is where all the central banks cash is going.. How long can this charade be kept going?

The banks are trying to remove and oversupply of property from the market whilst pushing prices up at the margin, hence the record property prices being achieved again.

Of course this does not apply to the UK where there is an acute shortage of property. Many here argue that the UK has an allocation problem, but if that was the case then the downsizers would rent out their 5 bedroom detached whils moving comftorbly into one of those nice new 2 bed bungalows on those 'nice' spacious new sites that do not exist. Hence fatty and his build bungalows for boomers shouting the other week.

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It's just the same tatic the banks have deployed here in Ireland, they are not repossessing the 12%+ of mortgage holders who are over 90 days in arrears! There are tens of thousands of people living in houses they stopped paying the mortgages on years ago.

IMO this is where all the central banks cash is going.. How long can this charade be kept going?

The banks are trying to remove and oversupply of property from the market whilst pushing prices up at the margin, hence the record property prices being achieved again.

Of course this does not apply to the UK where there is an acute shortage of property. Many here argue that the UK has an allocation problem, but if that was the case then the downsizers would rent out their 5 bedroom detached whils moving comftorbly into one of those nice new 2 bed bungalows on those 'nice' spacious new sites that do not exist. Hence fatty and his build bungalows for boomers shouting the other week.

I think we have mass "hidden" forbearance in the UK? - don't the FSA say 8% of borrowers are really in arrears - but banks keep capitalising the arrears so it looks like the borrowers aren't actually in default.

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