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Foreclosure Investing: Where There is Smoke…

6 October 2008

If you ask any seasoned real estate agent, they will tell you the same thing — it is certainly the perfect time to buy one of these foreclosure properties. But the question of where to find these repossessed homes still remains.

Finding the smoke is so much easier if you know what to look for. For starters, you should look at areas where the inventory of foreclosure homes for sale has been increasing in the last couple of years. As you know, a large inventory of foreclosure homes means more competition among sellers. Aside from enjoying plenty of foreclosure homes to choose from, you will also be delighted with how low sellers can go to attract more sellers.

Another thing you should consider when in the market for foreclosure homes is home prices. Ever since the mess in the subprime mortgage industry erupted, there has been considerable decline in home prices. Look for cities where the decline has been significant enough for you to enjoy huge discounts. In most cases, states hit hardest by the foreclosure crisis – such as Nevada, Florida and California – are the ones whose median home prices have dropped dramatically.

In addition, you should also find out if the market has been seeing a marked increase in home sales activity. This means that the local real estate market is starting to recover from the housing bubble and buyers are slowly entering the market once again. In short, it is possible that the market in this particular area is bottoming out and it will only be a matter of time before the sellers regain the upper hand. For buyers, opportunities like this should not be wasted.

By knowing where to look for the smoke, you will soon find yourself benefiting from the advantages that the current market is offering buyers.

Home Prices Drop by 16% in July

3 October 2008

Last Tuesday, the housing index as monitored by Standard &Poor’s/Case-Shiller showed a significant drop in home prices for the month of July as compared to the same period last year. The 16.3 percent decline is believed to be the biggest drop since the index was created in 2000.

In addition, the 10-city index also dropped by 17.5 percent, the largest decline recorded in 21 years of its existence. On the other hand, the 20-city index is in a much worse shape, plummeting by 20 percent from its peak in July 2006.

Based on the index, there has been no observable home price gain in any city for the said month. This is actually the scenario in the last four months.

The only silver lining, in this otherwise terrible news, is that there is a somewhat slowing down in the pace of the declines. And yet, it is still not clear whether the market will bottom out any time soon.

Home prices in Las Vegas plunged the most followed by Phoenix and Miami. For most of the cities belonging to the Sunbelt area, home prices fell between 20 and 30 percent compared to last year.

Surprisingly, the cities of Denver, Boston, Minneapolis and Dallas all showed flat or positive gains in the last three months.

The decline in home prices can be attributed to the growing inventory of foreclosure homes in the market. To add salt to the injury, the tightened lending guidelines have recently made it nearly impossible for interested buyers to get approved for mortgages. For this reason, home sales activity in most cities remains to be sluggish.

Aside from this, the collapse of investment giants in Wall Street has created an atmosphere of fear among potential buyers. With the nation’s economy on the brink of a recession, it is not surprising that the real estate market is greatly affected.

Foreclosure Recap: The Collapse of the Subprime Housing Market

3 October 2008

Most philosophers think that the past is one of the greatest sources of answers to present questions. For instance, in the world of the housing industry, the collapse of the subprime market actually started the foreclosure crisis. If you have been confused with this nationwide problem, it will be better if you learn about what happened.

Around 2005, the real estate market enjoyed a “housing boom”. This meant that consumers, even those with poor credit, enjoyed the opportunity of owning a property; and the economy was doing good enough to make the decision to buy a good move.

Many mortgage servicers and lenders decided to take advantage of the situation, for it created opportunities of unlimited income. During this time, subprime borrowers or borrowers with poor credit, were hesitant to take out a housing loan because of the higher-than-average interest rate.

At first, they lured these subprime borrowers buyers with mortgage products that are just too good to be true. Buyers can choose from options such as no down payment, adjustable interest rate or interest only payment. Very few buyers asked the disadvantages of these mortgage products and if they could really afford them. Lenders focused only on their commissions.

Because of their undesirable credit record, their lenders decided to falsify information in order for the mortgage application to be approved. Initially, the subprime borrowers were ecstatic but when the interest rates on their mortgages began re-setting after a couple of years, they realized that they could no longer afford their homes. Their mortgage debts ballooned so much to the point where they have very little equity left on their property.

Sadly, most of these subprime borrowers ended up losing their homes to foreclosure. With the millions of homes in mortgage default, the inventory of homes for sale skyrocketed, causing home prices to decline and home sales activity to slow down. And the rest, as they say, is history.

Hispanics Fight Foreclosure by Staying Informed

1 October 2008

The worst thing about the mess in the subprime industry is that it left in its wake millions of innocent American families without a home. It has long been established that one of the reasons for the foreclosure crisis involved hybrid mortgages. In Phoenix, a group of Hispanic ireal estate agents has decided to help their community by making sure that all local residents avoid these risky loan packages.

In a meeting held last Sunday night, the National Association of Hispanic Real Estate Professionals stressed the importance of helping clients understand the meaning of “sustainable homeownership”. This means that real estate agents should take responsibility in providing their clients genuine assistance when it comes to choosing the perfect loan product for them.

Of course, it is also important that the public is educated about the advantage of saving and setting aside more money for down payment, in order to lessen the burden of having to pay a huge amount in mortgage dues every month. In addition, knowing the differences of the many mortgage products will help them make informed decisions and reducing the risks of losing their homes to foreclosure.

For the past three years, the housing industry has been battling with a foreclosure crisis, which has affected over three million homeowners. In an effort to address this problem, the government has already approved a rescue/bailout program (Housing and Recovering Act) that will benefit both mortgage lenders and distressed borrowers. This program is scheduled to be implemented on October 1.

Guest Speaker Bran Montgomery of the Federal Housing Commissioner believes that many consumers will benefit immensely from the said program since it also include provisions that will provide counseling to home buyers in order to help them make the right choices and avoid foreclosure in the future. As a consumer, taking advantage of the counseling sessions will be the smartest thing to do.

The Growing Popularity of Lease-to-Buy Option

29 September 2008

When the foreclosure crisis was traced to the aggressive lending practices in the subprime mortgage industry, underwriting guidelines were immediately tightened. As a result, more and more buyers are experiencing difficulties in getting approved for a mortgage. To get around this, buyers and sellers are entering into a lease-to-buy agreement, which leaves both parties satisfied.

Basically, a lease-to-buy back option allows the interested buyer to lease the property for an agreed period of time. After such time, the seller will then agree to sell the property. During the time when the buyer is essentially a renter, he will try to repair and improve his credit in order to put himself in a good position for home ownership.

In addition to this, the buyer will also be able to determine whether he is ready for the responsibilities that come with home ownership. After the lease expires, he can easily decide whether he still wants to buy the property or not. He can still choose to lease the property once again if he feels that he needs more time.

On the other hand, the seller will enjoy receiving a steady amount of cash in rent money and will look forward to the day when the property will finally be off his hands. As you know, vacant properties cost sellers much in terms of insurance, maintenance and taxes.

The growing popularity of the lease-to-buy option is not even surprising considering the present state of the housing industry. Across the nation, more and more homeowners are losing their homes to foreclosure, adversely affecting the entire industry.

Home prices have been steadily declining in states hit hardest by the foreclosure crisis and there are literally millions of foreclosure homes for sale in the market. And with the recent economic blows, it can be expected that more homeowners will lose their homes to foreclosure by the end of the year.

Short Sale Basics

26 September 2008

It is a known fact that owning a home is an American Dream. Sadly, there are already millions of families whose dream was taken away by foreclosure. It is perhaps the singularly most embarrassing and traumatic experience that a person or family can go through. For this reason, you should protect yourself and your family from foreclosure by opting for a “short sale”.

Simply put, a short sale in the world of real estate means that the lender is allowing you to sell your home for an amount that is less than the mortgage debt you owe. The difference is usually forgiven but may become taxable income.

Although a short sale is sounding more and more attractive, you should realize that not all lenders agree to this option especially if they stand to incur more losses compared to proceeding with a foreclosure.

In order to get the approval of the lender, you will need to provide proof that you can no longer afford your mortgage. In most cases, a Hardship Letter will suffice. This letter should contain facts about your current financial condition and should convince the lender that you really are in no position to pay your mortgage debt.

If the reason is job loss, long-term sickness or death in the family, you might have a good chance of getting their approval as long as you provide the necessary documents to support these claims.

Along with your Hardship Letter, you will have to provide an updated Statement of Assets and Liabilities. This document should contain all information to support your claim of financial difficulties including savings accounts, bonds, stocks, cash, negotiable instruments and other things that possess tangible value. Include a copy of your bank statements as well.

If you are found to be qualified for a short sale, you have successfully avoided a foreclosure! The next step is to find a real estate agent or broker that will help you find a buyer.

Declining Home Prices Hitting Seniors Harder

24 September 2008

Many of you might be hoping that your homes will be your source of security during your retirement years. But based on a study conducted by the Center of Retirement Research, one third of the older households are likely to enjoy security because of the current problems in the housing industry.

The worsening mess in the mortgage industry has not only threatened to take away the homes of millions of American families. It also looks like that the senior citizens of this country is at risk of losing their retirement security unless the foreclosure crisis eases up. More and more seniors are defaulting on their mortgages and/or losing their homes to foreclosure.

Across the nation, you will hear the same foreclosure story. Due to various reasons, millions of Americans are finding themselves unable to meet their mortgage obligations. To make mattes worse, the surplus in homes for sale in the market has caused home prices to plummet. For many of the senior citizens, this certainly is a nightmare. Not only are they at risk of losing their homes, but it will also mean losing all the retirement money tied up with the property.

The housing market right now is obviously favoring buyers, especially those looking for bargain homes. Unfortunately for sellers and homeowners, the declining home prices mean that you will have to settle for offers that are below your asking price. You will also notice that you have lost considerable equity and might now have mortgage debts larger than what the property is now worth in the market.

Selling your home, if you are having trouble keeping up with your mortgage payments, is certainly one of the options that could explore. But considering the odds, it would be better if you try working out your mortgage problems with your lender. Options like new repayment arrangements or even a loan modification could help you keep your home and secure your retirement years.

Mortgage Rates for Qualified Borrowers Only

22 September 2008

With the government taking over Fannie Mae and Freddie Mac, the rate for 30-year fixed mortgages dropped to 5.79 percent from 6.26 percent. Such low rate may spurn borrowers to buy real estate properties. Unfortunately, they will need to make a 20 percent down payment aside from a 740 or more credit score.

Before, a borrower with a 640 credit score can already enjoy the lowest mortgage rates available in the market. Such high qualifications come in the wake of the foreclosure crisis, where many mortgage lenders and servicers practiced aggressive lending practices. These practices were considered to be one of the reasons why millions of homeowners today are having trouble with their mortgage payments.

Learning from their mistakes, lenders have decided to tighten their underwriting guidelines and raise the credit score qualification in order to weed out the bad borrower from the good ones.

The government’s takeover of Fannie Mae and Freddie Mac has made it possible for many lenders to continue providing home loans. But because of what happened in the subprime industry, the lenders are now being extra careful. This means, that although credit is available, it can only be availed by qualified borrowers.

In the United States, the credit score is considered to be the basis of establishing a borrower’s credibility. Having a high credit score means that you are low risk and most banks will offer you low interest rates. On the other hand, a low credit score will make you unattractive to these banks and in order to manage the risks involved in lending you money, you will have to accept the high interest rate.

For consumers looking to enjoy good mortgage rates, you should make sure that your credit score is enough to meet such qualifications. If not, you will have to accept the relatively higher mortgage rates.

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Distressed Michigan Homeowners: Will they be allowed to vote?

19 September 2008

The Democratic Party and Barack Obama’s campaign have decided to file a lawsuit against Michigan Republicans for planning to prevent troubled borrowers from exercising their right to vote. The said lawsuit will protect homeowners facing foreclosure from not being allowed to vote just because their addresses appeared in the foreclosed properties list.

The Democrats’ action was actually based on an article that appeared in the website of Michigan Messenger, entitled “Lose Your Home, Lose Your Vote”. The story included a quote from Macomb County’s Republican Party Chairperson James Carabelli. He said, “We will have a list of foreclosed homes and will make sure people aren’t voting from those addresses.”

When asked, Chairman Carabelli denied saying such remark. Unfortunately, even with his denial, Obama’s campaign has proceeded with the filing of the lawsuit in a Michigan federal court, which seeks an “injunctive relief” from the action of the local GOP. Carabelli insisted that he did not say those things and even threatened to file charges against the Michigan Messenger.

For Obama’s campaign general counsel, the disqualification of these distressed homeowners can be considered as illegal. It is too much to assume that when a property is on the foreclosure list, the homeowners are no longer residing there.

In reality, a grace period will be enjoyed by these distressed homeowners so that they can still vote, even if the property in question will eventually be foreclosed.

As the presidential election draws nearer and nearer, more and more distressed homeowners are worried if they will indeed be prohibited from voting just because their homes are soon to be foreclosed.

Experts and analysts have actually predicted this particular problem early on, when the number of homes entering some stage of foreclosure are reaching record levels. This particular issue should immediately be addressed if the nation is expecting a clean and fair election.

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Stock Market Receives Shocks, Lehman Brothers Collapses, Merrill Lynch Sold

17 September 2008

The turmoil that the financial market in the United States is going through hit a new low on Monday. This has been the most terrible day Wall Street has faced in the last 7 years. With the collapse of one of America’s most respected banks, investors are now left to wonder which giant will fall next.

The industrial average on the Dow Jones fell in excess of 500 points (in excess of 4). This has been the highest decline since the reopening of the market post the attacks on 09/11/01. Retirement plans, pension funds of the government and various investment portfolios have seen around 700 billion disappear.

This butchery saw turbulent twenty four hours that has altogether rewritten American finance. Lehman Brothers, a bank that deals in investments and is as old as the Civil War, a bank that saw the Depression through, has filed for the biggest Fannie Mae in the history of the United States of America.

Merrill Lynch, another reputed bank, was sold to the Bank of America. It was easily one of the most tumultuous days since the beginning of the fiscal crisis which was a result of many billion dollars stuck in disintegrating home loans crippling many a banks balance sheets, and even landing giants in the mortgage industry, Freddie Mac and Fannie Mae, under government control.

Barry Ritholtz, who works as the chief executive of a research firm called FusionIQ, and also authors a well known finance related blog called ‘The Big Picture’ said that we are currently during a dark and deep recession, and he doesn’t see it ending any time soon.

The end does not seem in sight.

The largest insurance provider in the world, the American International Group, is also struggling to stay afloat. David Peterson, New York’s Mayor, has allowed the organization to get an urgent loan through a subsidiary in order to stay floating.

Despite AIG’s stock going down around 60, Mayor Patterson said that the organization continues to be economically sound. Monday saw around 20 billion being wiped off the balance sheets of AIG.

Henry Paulson, the Treasury Secretary in Washington, who declined from offering Lehman Brothers an economical lifeline, remained impenitent; as the country’s administration sent strong signals that no more rescues should be expected through Washington, by the Wall Street.

Paulson said on Monday that he’d never considered it suitable that the taxpayer’s money be put at risk in order to provide remedies to Lehman Brothers, which had around 60 billion stuck in disagreeable real-estate mortgages.

This has resulted in Dow industrials dropping 504.48 points to end up closing at 10,917.51. This was the first occasion since July that they ended below the 11,000 mark.

This has been the sixth largest drop in points and the largest since trading started post the 09/11 attacks, when there was an average fall of 684.81 points. In terms of percentage, Monday’s fall of the Dow has been the worst ever since 2002’s summer. After October’s record high, the value of the index has reduced by close to a quarter.

During the time when chapter 11 was being filed by Lehman brothers, and AIG was making last ditch efforts to stay afloat, Merrill Lynch made plans to avoid going down the same line, and sold itself to the Bank of America Corporation.

When it comes to asset sizes, this deal will end up creating a financial Goliath, in competition with Citigroup Incorporated.

While the largest numbers of deposits in any American bank are with the Bank of America, Merrill Lynch holds the distinction of being the biggest and the most renowned brokerage firm in the world.

Ken Lewis, the CEO and chairperson of the Bank of America termed this deal as a once in a lifetime opportunity. Lehman Brothers filing for bankruptcy raises the concern that credit shall now get tighter still, resulting in big organizations, small companies and homebuyers within America finding borrowing money even harder.

A pool of 70 billion has been created by a collection of ten banks which include Citigroup, Goldman Sachs and J.P. Morgan. This pool can be tapped into by brokerage houses and banks in order to take care of short term needs for funding.

Another worry is that Lehman’s filing for bankruptcy would have an adverse effect on other fiscal companies and could spread to other stock markets around the globe, which in turn would further harm global and American economies.

A decision on the policy of interest rates was to be reached at a Federal meeting. Rates are expected to stay at 2, but certain economists are of the opinion that they could be lowered to offer some respite to Wall Street.

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