A study of 3.5 million mortgages nationwide found that in June loan servicers held 32,000 foreclosure sales, with an average loss of 64.7% of the original loan balance. Alan White, an assistant professor at the Valparaiso University law school in Indiana, looked at subprime and alt-A mortgages written from 2005 to 2007, sold as securities to investors, and now serviced by five of the biggest servicers, including Bank of America, Chase, and Litton Loan Servicing. Gretchen Morgenson of the New York Times reported on his study, which was based on data collected by Wells Fargo, which is overseeing the loan trusts. Losses averaged 56.1 percent of the original loan balance in November, and in February, 63.3 percent. Things are clearly getting worse for investors in mortgage securities. Morgenson calls the foreclosure sales “liquidation sales” and I can only assume she means properties sold at auction. That fits with what I observed at a trustee’s sale I visited recently in Santa Ana: Lenders or loan servicers offered an average 61% discount against balance due on first mortgages on seven properties, and they sold for an average 56% discount after investors bid up the prices a little. The study also found that modifications decreased in May and June compared to February, while foreclosures increased

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