Great Debates 2011

Q1 Event

"Diving Into the Wreck: Sizing the problem and calculating the costs of foreclosure"

At the closing session of EuroCatalyst 2009 / Distressed Servicing 2009, “Thinking the Unthinkable,” we presented several catastrophic scenarios for participants to consider when attempting to understand the U.S. housing problem and prospects for recovery. At that time, one of our many hypothetical benchmarks for catastrophe was the prospect of 10 million foreclosures by 2012. By and large, our audience reaction was: “Impossible.” Today, the U.S. Treasury expects “8 to 13 million” foreclosures by 2012. What is important about Treasury’s expectations is the variance of 5 million foreclosures. Where do those figures come from? What metrics were used? How reliable are they? And what do these figures mean for loss severities, increases in servicing costs and changing loss mitigation strategies, the timing of investment entry and exit, the direction of housing prices, and long-term prospects for market recovery?

“Many analysts and investors believe that the sole problem with the housing market is the large number of non-performing loans that are creating an overhang or shadow inventory. The feeling is that once those loans are resolved – the market will heal.” (Laurie Goodman, “Facebook” Analysis of the Non-Agency Market – Participants Underestimating the Housing Problem, Amherst Mortgage Insight, January 3, 2011)

Are we underestimating the housing situation?

This webinar will address the following issues:

• Sizing the foreclosure pipeline
• Estimations of loss severities and their impact
• Estimations of servicing cost increases and changes in loss mitigation strategies
• Sizing the REO overhang and prospects of loss recovery from REO liquidation
• The potential impact on mid-term house prices

Q1 Debate in Conclusion

The first Great Debates installment took place on March 23, 2011. The webinar, titled “Diving into the Wreck: Sizing the problem and calculating the costs of foreclosure,” featured three expert panelists: Laurie Goodman, Senior Managing Director at Amherst Securities Group, L.P.; Mark Fleming, Chief Economist at CoreLogic; and Paul Miller, Jr., Managing Director of FBR Capital Markets. The panel was moderated by AmeriCatalyst and EuroCatalyst Founder and CEO, Toni Moss.

The panel tackled the massive, far-reaching issue of foreclosure projections and realities, and in less than 90 minutes managed to address from three different industry perspectives the majority of the topic’s most pressing questions regarding short sales, REOs, and shadow inventories, and the impact of foreclosures on investors, servicers, banks, house prices, and social policy. As expected, the webinar’s high-level audience responded enthusiastically to the answers presented by the panelists with even more questions, via the events real-time Q&A feature.

Q1 Reference Material & Recommended Reading