A Refreshing Real Estate Market And Pre-Foreclosure Investments
With the housing market cooling and demand for home loans shrinking, banks and other lenders are turning to non-traditional and sometimes riskier mortgages to generate additional business and make up for their abandoned businesses.
Many lenders have turned to mortgage products designed to reduce monthly loan payments and help borrowers more easily qualify for larger loan amounts, while others require little documentation during the approval process. These loans make it easier for some people to get mortgages, but they can also increase the chance that some borrowers will end up in foreclosure. For the real estate investor or home buyer, these market conditions represent a window of opportunity.
As domestic dollar appreciation rates decline, more mortgages default. Foreclosure notices have been on the rise in recent months, which is another sign of a cooling in the housing market in the United States, for example in San Diego County, California. Banks and other lenders sent 1,266 insolvency letters to borrowers in the third quarter, a notice giving homeowners 90 days to keep up with payments before moving on to a foreclosure auction.
At the height of the housing boom, double-digit increases in real estate meant that clients could withdraw money from the rise in real estate to enjoy a lifestyle they really couldn't afford. With the ability to take advantage of home equity loans, homeowners have pulled out cash to buy new cars, furniture, vacations and other luxuries. Another boost to their lifestyle came when homeowners refinanced themselves through variable rate mortgages that lowered their monthly payments.
But now conditions are changing, in many areas of the country property price levels are stabilizing and in some real estate markets they are not even growing. With little or no increase in home equity, or even lost equity, homeowners could find themselves in a difficult position.
Additional forces are also impacting the housing market: New federal credit card payment laws have moved towards an increase in the mandatory minimum payment of credit card debt. For many people, that payment will now be double what it was in the past. And as energy prices and healthcare costs continue to rise to new all-time highs. An increasing number of people find themselves in financial situations where the money spent outweighs the money earned. For the first-time real estate investor or seasoned veteran, current market conditions are a window of opportunity for those buying real estate just prior to foreclosure. An increasing number of homeowners have withdrawn all of their equity (sometimes up to 110% of their home's value) and now the home's value has dropped and they find themselves turned upside down, where they owe more than they can sell the home. Caught in a situation where they can't pay their debts and can't find a buyer for their home, real estate investors who understand the default process can offer a solution that gives the defaulting homeowner a way to escape the installments. of the mortgage. and for the investor a way to secure ownership in the process.
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