Monday Morning: The Foreclosure Game, Before and After

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Good morning. There’s an excellent piece in Business Week today about the unusual efforts by lenders to help homeowners avoid foreclosure. Why are the lenders trying so hard? Because ‘never before have prices fallen so broadly,’ and they don’t want to own houses that are sinking in value. More important, Wall Street is pressuring the lenders: ‘a big chunk of the loans made recently are held not by federally insured thrifts or banks but by hard-charging hedge funds and other big investors that are aggressively pushing lenders to stop the bleeding.’

But the foreclosures are piling up, which means more properties are being auctioned off on courthouse steps. In the LA Times, Annette Haddad’s story of the foreclosure auction game -- told through the experience of a newbie -- is a good read. I won’t spoil the ending, but I will remind you that most of these courthouse foreclosure auctions are duds: Roughly 90 percent of the homes listed for courthouse auction in California don’t really sell -- they’re taken back by the banks or lenders that own the mortgage.

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