Are You in an Upside-Down Mortgage?

As a Realtor for more than 15 years, last summer I was a guest at a dinner party in which I announced "that the 150 foreclosures per day in Los Angeles were about to rise to four times that level." My surprised dinner partners accused me of having one-too-many during the cocktail hour, but I was stone sober and most of the other successful business guests thought my doom and gloom remarks were intended to get them to list their property with me. They were smug with their success and their fancy high-rise million dollar condos to realize I was giving them sound warning of things to come, even in affluent Beverly Hills.
I live in one of the expensive zip codes in Los Angeles and when I look over my daily foreclosure list it is shocking that I am surrounded by dozens of foreclosures and properties with major tax liens in some of the most luxurious property in Southern California. The mortgage meltdown was believed to only affect the financial inept and irresponsible home buyers. But this crisis is proving to be an equal opportunity destroyer of lives, families and personal wealth. No one is immune to bad business investments and poor judgment, or worse, mortgage schemes.
Equally abhorrent is how fast our government came up with $350 billion to rescue Wall Street and the banks but not $50 billion to save strapped homeowners who suffer from this crisis in equal proportion.
If you are in an Upside-Down Mortgage in which you now owe far more than the property is worth then walk away! Yes, you read me right. If your lender or Loss Mitigation department will not honestly negotiate a modification or a workable resolution to your problem mortgage, walk away!
We read in the newspapers that lenders do not want your property because it costs them an average of $60,000 to dispose of an empty house. What they do not tell you is that most of those houses have been stripped of their sinks, bathtubs, toilets and anything that can be removed and sold from the structure. The really ugly aspect of any foreclosure transaction is that the unsuspecting buyer at a foreclosed sale may be unaware of the condition of the inside of these houses the day before the auction and is left to rebuild the property at their expense. The foreclosed deal turns out to be a financial albatross to the new owner that can be financially pushed over the cliff as the next victim of yet another foreclosure in the near future.
Too many shortsighted lenders threaten homeowners and pretend they win in foreclosure but it usually costs them more to foreclose then to negotiate a reasonable reduction in the balance of your mortgage. Therefore, instead of begging and pleading you might consider threatening to walk away, it might bring about honest negotiating in today's crisis.
If your interest rate is going to continue to escalate through the roof, walk away! If your financial circumstances are going to be further complicated with late fees, and various penalties, then walk away. Irresponsible advice? Maybe. Survival for you and your family perhaps.
The next financial crisis is going to be the credit card debt and lenders are already raising rates to 29 percent, a violation of the usury laws that Congress has ignored for decades. They are giving these banks tens of billions of dollars and the banks are nailing their cardholders with absurd interest rates. This will not stimulate the economy but drag in down into the cesspool of more greed. The House and Senate have finally taken the credit card industry and turn it a bit on his head, maybe now we will all have a fighting chance, especially those of us who pay our bills on time.
When your mortgage payment is due on the first of the month you have 15 days before it is considered late and reported against your credit score. But dare to be one day late on a credit card payment and they nail you to the wall.
American taxpayers need to hold our Congress and Senate responsible and insist that they start to uphold consumer laws already on the books that protect the consumers instead of giving lip service to the hoodlums in corporate America who continue to charge illegal "usury rates" by moving their credit card operations to states that permit this criminal activity which is sucking the very life blood out of this economy. Its time Americans start fighting back.

How To Buy Foreclosures

Real estate is an excellent investment because it is always in demand and everyone has to have a roof over their heads. Now real estate is a commodity just like anything else in our society in when the prices get to high just like the stock market it adjust down to where the majority if buyers believe that there is value. So when real estate is high few buyers buy and when real estate is priced below the comparables, more people buy. If you buy and you're an owner occupant and you plan on staying in your home 5 or maybe 10 years, the market ups and downs don't really concern you too much. How ever if you are a speculator and buy near the top of the market and the values peak and turn down, you could be holding a commodity that is worth less than what you paid for it. And that does not make a very good short-term investment. So exit strategies when buying property are pretty important. Now in our recent market many speculators and home owners have extended themselves by buying expensive properties with the expectation of continued appreciation in owner occupants with poor credit and no money down, used short termed A.R.M.S (adjustable rate mortgages) and went out on a limb and got involved in property they hoped would continue to appreciate, and so because of all the speculation we have the highest amount of foreclosures than ever before. Many homeowners thought that they would be in and out of a property in a short period of time, and opted to use the A.R.M.S thinking that they would sell the property before the interest rate reset to a higher percentage. How ever because property values turned down and property owners were not able to sell their properties, their A.R.M.S reset and left them with higher interest rates and higher payments that they could not meet. Now home owners that have own property that have lost value are not so worried because the property is providing them with a roof over their heads. So they just plan on staying put and in a couple of years the prices will come back. Now the circumstances have left first time homebuyers and investors with an enormous opportunity to make some money with these foreclosures. Now given that money and real estate investment is made when you buy the property. It's a great time to buy property at a discount with very low inertest rates; the only thing challenging us right now is the exit plans. So now with the present inventory it is imperative that you purchase at a low price and that you sale at a price compared to properties that are for sale in your area. Quick flips could take a little longer to sale and it is always best to price the property at a price that is less expensive than the other properties are going for in your particular area. Foreclosures have been around forever, only now there is just more of them. It kind of seems to be the buzz on the street. Seasoned and novice investors want to invest in foreclosures. In 2004 the number of foreclosures was 2% of the total sales in the U.S. In the first quarter of 2008 in Stockton California, 72% of it's sales we in foreclosures. In Las Vegas in the first quarter of 2008, 45% of the properties closed were foreclosures. So you can see why there is so much interest in foreclosures. Now the reason why they are so attractive is that if your going to be successful in real estate, you need to work with a motivated seller. And there are not any more motivated sellers than there are going to loose their homes because they are not making the payments. Now prior to this point foreclosures were typically as a result of divorce, unemployment, and medical bills. In addition to these recurring reasons today. There are also a result of the A.R.M.S loans being reset from low interest rates to higher and unaffordable for the homeowner and the property values dropping leaving no equity. Well what happen to create this situation? Well people with poor credit and bad credit were given loans for property when they should not have got them in the first place. In California they are actually qualifying people at 22 times their annual earning instead of 3 times which is the normal. They were hoping that they get out of their property wit a fist full of money and use it for a down payment for a more affordable market. How ever the market lost its steam and the property values dropped and these buyers were stuck with a property that many times were worth less than what they paid for it, and when their loan reset they could not make any payments. Investors also bought homes hoping that they could ride the glory train and make a lot of money being in the right place at the right time. Many of these people are actually walking away from their homes and they actually have good credit and can afford the payments. However their thinking is why make payments on a property if it is not worth what I paid for it and it might take several years for the property values to come back. So their just letting their properties go till foreclosure. So this brings us to a great opportunity for the investor who knows what their doing. Now let me underline that! Every once in awhile the planets are aligned and everything is in sync and an opportunity arises. And that's what is going on in real estate today. Now foreclosures are divided into 3 phrases. First phrase is the pre-foreclosure and that is when the home owner is still in control and if they have any equity then you can work directly with the home owner. How ever if there were no equity you would want to do a short sale. The second phase is the auction; this is usually reserved for the experienced investor because of the financing, the property inspection, and the attached liens. The third phase is what we call the REO; it stands for real estate owned. This is where the property has not been sold at the auction and the lender gets it back. This is the safest way to buy a foreclosure because all the incumbencies have been removed and you can also inspect the property before you buy. Now I am going to say this and it is very important. Not all foreclosures are a good deal. So it is important that you act like a real estate detective and get all the facts about the property before you buy. This is a very important part of the process and the more you know about the deal the better it is going to be for you. It really is all about the numbers. Now that sounds simple but it really is not. When I say it is all about the numbers I mean the number of properties to choose from, the amount of research that you do, the cost and expenses versus the potential profits, and the number of offers that you make. So depending if you are in a deed state or a mortgage state the foreclosure process could take anywhere from 21 days to 120 days or longer. If your in a state that gives you a shorter time to do your homework, you need to find the most efficient and fastest way to make a decision about each property that you are interested in. So remember a foreclosure is an opportunity to find a good deal. It is not always a good deal and in today's market there are some homeowners that are being evicted from their homes and they are leaving their properties in a complete state of disrepair. They are putting holes in the walls, taking out appliances, ect. So if you are if you are looking at a property that you are not allowed to go inside and se the condition of the property. You might be buying a property that would easily cost you more to fix up than it is worth. So again be sure to so your due diligence on each and every peace of property. Well people say why invest in foreclosures? Simply foreclosures are at all time high which presents an outstanding opportunity. High instant profit margin for the well-trained investor. You can buy at a steep discount in m any cases. The future trends for finding deals are up because borrowers are defaulting on their loans, A.R.M.S are resetting to higher percentages, falling property values, balloon notes coming due, unstable money markets, and security markets causing financial loses and uncertain economy which leads to layoffs. There is always a steady inventory of new property. Foreclosures are not really understood well or worked very well. Most people don't even understand the process; there is minimum good information available to the public. Some properties can be purchased for little of your own money. As we said before the sellers are definitely motivated and banks don't want properties so they want to get rid of them as quickly as possible. Why are foreclosures growing? Foreclosures area fact of life. Anytime a debtor breaches an obligation of a security document, like a mortgage deed, trust or something like that. The lender has the right to foreclose on the property. The grantor most likely does not want to acquire the property but they do want repayment of the funds owed. Now in today's markets we are seeing lenders lowering interest rates. Extending loan terms and there is even talk about forgiving of the mortgage amount. Even so there are tons of foreclosures to work. There is an orderly process to the foreclosure, which allows the opportunity to cure the situation. However some homeowners are not in a position to cure the default. This may happen because a number of reasons. Loss of job by one or more home owners, financial crisis need for immediate cash, a health or maybe family problem, business failure or down turn, divorce between couples causing a need for property liquidation. Death of the property owner resulting in payment default. Adjustable rate mortgages can increase quickly in times of high interest rate and result in the property owner not being able to make payment. Balloon payments, these are large payments that cause challenge for the homeowner. Job transfer, borrower may have two mortgage payments, out of state owner or out of Towner. Lets talk a little bit about pre foreclosures. Many times you can catch the situation before the property has gone on the auction block. We call this time period pre foreclosure. The property is in default and several months behind in payments. The owner may have no means of curing the default yet the clock is ticking towards the time the auction will take place and everything will be lost. Now given that a foreclosure on a persons credit record is the single most devastating item preventing any future borrowing for years to come. A homeowner should be very eager and happy to work with you. Without your help they might not just loose their home but their credit will be destroyed. A fundamental key of making money in the foreclosure market is understanding why the property went into foreclosure. Perhaps the owner just had a temporary cash shortage. You may be able to help them and take an equity position in the property in return for rectifying the situation. Or the owner maybe financially devastated and just wants to dump the property before their personnel credit is destroyed. You can help solve their immediate problem and give them a new start. When we talk about finding foreclosures there are many sources to aid you in finding foreclosures. Hopefully you can find the foreclosure before it is too far in the foreclosure process and all possibility of redemption has passed. In today's market there is more opportunity to find foreclosures than ever before. Following are a few locations to begin the search and will be going into much more detail in other courses of this product. They are classified sections, legal newspapers, attorneys, FSBO's, realtors, auction companies, IRS auctions, bankruptcies, probate court, and county courthouses, town hall or registrar of deeds.

The Stockton

Everyone knows that Stockton is ground zero in the foreclosure crisis that has swept the nation. The media has painted a grim picture of the northern California real estate market encompassing the cities of Stockton, Sacramento and Modesto, among others. In Stockton home building in the Central Valley skyrocketed in 2000 and home prices doubled in nearly 4 years, fuelled in large part by Bay Area commuters and investors looking for cheaper housing. But of course what goes up, must come down and come down it has. Stockton has the highest foreclosure rate in the country with 1 in 27 households facing foreclosure, up 250% from the same period last year. It's not surprising then that several organizations have been offering advice and educational seminars and resources to local homeowners to try and help them hang onto their properties. Some of the organizations in and around the Stockton area include the following:
ClearPoint Credit Counseling Solutions (formerly ByDesign Financial Solutions) - www.bydesignsolutions.org
ClearPoint is a non-profit consumer credit counseling service which aims to improve consumer financial health through education. It offers homeowners free seminars such as "Alternatives to Foreclosure Workshop" and "First-time Homebuyers Workshop."
Hope Now - www.hopenow.com
HOPE NOW is an alliance between counselors, mortgage companies, investors, and other mortgage market participants. The alliance seeks to assist homeowners in distress by helping them stay in their homes. They offer face to face help to homeowners from servicers and counselors via organized "Bringing Hope Home" foreclosure information sessions. These events are an opportunity to learn more about local housing task force efforts and state programs that offer assistance.