Utah Foreclosure News is Based on Garbage Stats

In Utah, foreclosures in March were up 74 percent over February.  In New Jersey, foreclosures in in April were up 72 percent over March.  In Tampa and Chicago, foreclosures in February were up 64 and 43 percent over January, respectively.

Now, here we are in mid-May and we’re to believe that everything has changed for the better?  That was then this is now, is that the idea?  Poppycock.

The Mortgage Bankers Association yesterday released a report claiming that the share of Utah’s home loans at least 30 days late dropped to 7.4 percent… from 7.58 percent in the previous three months.

Well, so what and who cares?  First of all, that’s just not a statistically significant difference, in fact, it would be well within the margin of error for any legitimate survey of such data.  And secondly, it’s an incomplete comparison.  One point being compared is presumably the “drop to 7.4 percent.”  And the other point against which the dropped 7.4 percent is to be compared, is a three month average of 7.58 percent.

If the last month of the three month average was 7.o percent, then this month’s 7.4 percent was actually an increase.

The Mortgage Bankers Association (MBA”) also claimed that in the first quarter of this year, six percent of loans in Utah were in default “” which the association defines being at least 30 days behind on payments.

Now, and you have to read this carefully to see the deception, they’re saying that at the end of the first quarter of this year… “2.5 percent of mortgage loans in Utah were in the foreclosure process.”

What the heck does that tell us?  Not a darn thing, although if you like to guess at things, here are a few things it could mean:

1. Nothing has changed ““ That’s right, based on those two claims by the MBA, the State of Utah could still have six percent of loans at least 30 days late and 2.5 percent in the foreclosure process.
2. Things have gotten worse ““ That’s right, based on those two claims, it’s possible that today there are more than six percent of loans in Utah more than 30 days late, and the 2.5 percent in the foreclosure process could be an increase from prior months.
3. Servicers are still preparing to comply with DOJ settlement ““ If the 2.5 percent in the foreclosure process is lower than expected it could be… and moreover likely is, due to servicers getting ready to comply with the DOJ settlement, meaning they have to foreclose without robo-signing and the like.

The point is that reports like this one are a study in obfuscation, which means: “muddying” or “confusing,” or refers to a “smokescreen.”  They don’t really tell us anything, but they’re designed to make us think something has changed, when it has not.

Why do I say that?  For several reasons…

To begin with, nothing we’re dealing with is going to change that quickly.  It was a huge problem yesterday… it’ll be a huge problem tomorrow.  If positive trends stay constant over the course of a year… then that will be something to cheer about.

Another reason for my skepticism is that none of the underlying fundamentals have changed one bit.  In fact, last month’s unemployment data was a nightmare, much worse than expected.  How could things have improved so dramatically so quickly when things have otherwise been moving so slowly?  Answer: They couldn’t.

And lastly, it’s the report itself.  The comparison of loans “in default,” which they defined as being over 30 days late, with loans “in the foreclosure process,” which they do not define, is an attempt to set up a deceptive or fallacious argument.

At the very least it’s an “incomplete or inconsistent comparison,” meaning that either not enough information is provided to make a complete comparison, or where different methods of comparison are used in order to create a false impression of the overall comparison.

The data above also was surrounded by irrelevant comparisons that I removed to show the deceptive structure of the argument being made.  In the original presentation of the data, the MBA compared the loans in default to the national average, which they claimed to be 6.9 percent, and loans in foreclosure, which they claimed to be 4.4 percent.

Why should we care about such comparisons by themselves?  We shouldn’t.  They tell us absolutely nothing.  It’s like saying, “In recent coin tossing experiments more coins preferred heads over tails.”

RealtyTrac chimed in with other statistics designed to be both encouraging and misleading:

 1.     “Foreclosure starts decreased in 41 states and the rate of loans in foreclosures fell in 22 states.”

 2.     “Foreclosure activity in all the judicial foreclosure states combined jumped 15 percent versus April last year.” 

 3.     “Taken together, non-judicial states saw foreclosure activity fall 29 percent.”

The first one is total junk, it is meaningless… and confusing… in fact, if you study it too long your hair will likely fall out. Foreclosure starts decreasing may just mean that banks decreased the number they started.  And the same for the loans in foreclosure garbage.

Banks control how many foreclosures start and how many are in foreclosure process, not borrowers.

The last two are more devious.  They are woven throughout stories in the media this week in order to make us believe that it’s the courts that are causing the foreclosure crisis to be prolonged.  Bad courts.  The clear implication being that if the courts weren’t in the way of the banks, we’d all be much better off, much sooner.  Abigail Field wrote a fabulous piece HERE.  Among many other things in her article, she wrapped up flawlessly:

Those darn courts, wrecking the housing market by slowing foreclosures and costing all of us more money.

Due Process is the Solution, Not the Problem

See where all this is going? Enough messaging like this and some states may change foreclosure laws more to the bankers’ liking. Short of that, people will target the courts as the problem instead of the bankers.

Whenever you read banker talking points embedded in news like this, remember: our Constitution guarantees Due Process for a reason. Due Process is essential to the rule of law and a fundamental check against the abuse of power. Don’t let the bankers sell you or your representatives into taking it away.

Obviously, the banking lobby would like it much more if they didn’t have to deal with things like… well, you know… like laws, for example.  Courts can be a real nuisance, I completely understand.

Look, if you’re doing just fine and you want to buy a house, go for it… I don’t care one way or the other.  If you’re planning on living there for a long time and you can afford the payments, what difference does it make if it goes up or down in the next so many years?  It’s a house, not a stock.  Buy it to live in it, not as an investment you’ll flip out of in five years.

But, of you’re struggling in this economy, at risk of losing a home, and stories like these make you feel like you’re alone in your financial misery, and that everyone is doing better while you’re not… please don’t feel that way because it’s all nothing more than one big pile of steaming freshness.  I’m not seeing anything improve anywhere.  In fact, I’m only seeing things worsen ahead.

So, just ignore it, and it will go away.  It’s like a ghost in your closet… go back to sleep and it’ll be gone in the morning.

Mandelman out.