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Mortgage Foreclosures At An All Time High! Who Will Clean Up The Mess? Foreclosure Investors That's Who!

Dec 21, 2007
Foreclosure investors need to take note. Every newspaper in the U.S and every TV station are bombarding the public with the news that mortgage foreclosures have reached an all time high. The Mortgage Bankers Association said that the percentage of homes that entered foreclosure in the third quarter of 2007 also hit a record at 0.78%. That means the almost 8 out of every 100 households in this country are in foreclosure. That is staggering. Even more unbelievable is the fact that sub prime loans account for 43% of all new foreclosures, even though they comprise just 6.8% of all loans outstanding. What happened here is explained by good old American greed combined with good old American stupidity on the part of consumers.

What this all means is that there is a huge opportunity for foreclosure investors right now and if my suspicions pan out the opportunity will become even greater in 2008. The government is beginning to realize that this problem is far bigger than they anticipated and they are beginning to take some actions. The big questions are is it too little too late and will it even work. The chance are it will not be effective enough to head off the deepening mortgage crisis.

Indeed, if this program is like most government mandated programs it will become bogged down in paperwork and bureaucracy. The average person in foreclosure will get more confused and more discouraged. The average person in foreclosure will have a tough time benefiting from these new programs. Perhaps the programs themselves may be streamlined to be more efficient but I tend to doubt it.

There is no doubt that there are going to be huge ramifications left behind by the mortgage crisis. Who is going to clean up the mess that the sub-prime lenders have left behind? The answer is simple and obvious. It is going to be active foreclosure real estate investors. Each foreclosure investor must begin to plan ahead for this flood of new business. They will need to line up financing sources and design creative exit strategies to dispose of their properties. Expert advice and guidance will become more necessary than ever before.

In the last five years the mortgage industry has done a fabulous job in stripping much of the equity out of homes around the country. Interest rates were low and prices were high. This allowed many people to re-finance their homes and take the equity out. Much of it was transformed into vacations and vehicles.

As price peaked and started to decline it became increasingly hard to re-mortgage a home to get out of an adjustable mortgage. As the crisis continues to deepen a great majority of the people in foreclosure find themselves "upside down" in terms of value to mortgage amount. This has opened the door to a great increase in "short sale" negotiations.

A short sale is nothing more than the lender agreeing to take something less than the balance of the loan as payment in full on the debt. This is allowing many investors to begin to purchase many properties that currently in foreclosure at favorable prices. However, many properties are not sold prior to foreclosure and go back to the banks and become REO (real estate owned) properties.

Banks are starting to realize that their inventories of the REO properties are beginning to get out of hand. They are getting more aggressive with their pricing and their willingness to do short sales. This is allowing real estate investors to begin to take up some of the slack in the current inventory of homes that are for sale.

Real estate investors are going to have to develop non- traditional funding sources to handle the flood of property that will be available at bargain prices. Many of these home will be in perfect shape. A good majority have never been lived in. The properties that will be the best bargains are going to be the ones that have been neglected and need to be rehabbed. These properties will not be purchased by end buyers but will be of interest to real estate investors. Banks and lenders will soon realize that they will have to steeply discount prices on such properties. This will open the door of opportunity to the astute investor. Great opportunities are here now and will grow abundantly over the next year.

If you want to learn more about how you can benefit from this future bonanza subscribe to my monthly Investor Newsletter or visit my Blog for comments on the current market.
About the Author
Dick Weiss is a full time Real Estate Investor in Florida. Visit my Blog at http://www.shortclosures.com Subscribe to my Newsletter at http://www.whoisdickweiss.com
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