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Foreclosures on Rise

Posted by 15789465 on

[caption id="attachment_2057" align="alignleft" width="300"]Source: Source: RealtyTrac[/caption] It looks like foreclosures are on the rise again. Things started getting better in October 2010, and then we had fairly steady declines. As of April 2015, there was a sharp increase to early 2013 levels.  On the chart at left, light orange represents foreclosure starts, and dark orange represents completed foreclosures. Experts say the increase is because the interest-only HELOCs, from 2005 through 2007, are now either maturing or switching to fully amortizing loans.  Many people can't afford it, so defaults are on the rise.  Look for more opportunities for short sale investing, and foreclosure investing. It's crazy, but many lenders ARE NOT ALLOWED to negotiate significant changes to the HELOC loan. On the other hand, they are legally allowed to approve a short sale, receive a small payment or a very minor payment at closing, and then set up a payment plan for the balance at 0% interest over 15, 20, or even 30 years!  Sad for the homeowner, who must sell their home. Stupid for the lender, who loses all that interest. Good for the investor. Ah well, we live in the world we are in, and have to act accordingly. Double click on the graph to see a large size.

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  • It’s in the foreclosures and short sales class, but just a minor part. It’s mostly just an FYI comment, that many lenders will agree to such an arrangement on a 2nd mortgage after a short sale. For first mortgages, I’ve been successful in getting the deficiency written down to 25% of the balance, and then THAT number set up on 30 years, 0% interest. I think what started as a $200,000+ deficiency on one deal, ended up with a payment plan of $135 per month. Then, one year after that agreement, my client came into some money and we bought out of the entire deficiency for $15,000 cash payment. It all has to do with what they are allowed, or not allowed, to do, depending on where the “file” lives during it’s life cycle. In that particular deal, the short sales department was able to negotiate the write down and payment plan, but that was all. Once we got set up on the payment plan, the file was transferred to the collections department. That department had different authority, and different things they were allowed to do, including the write down to $15,000. The trick is understanding that, finding out who is able to do what, and then being patient. You get what you want over the course of a year, instead of all at once, but you eventually get what you want.

    Denise L. Evans on
  • Oh my. I need to learn more about the 0% for 10 years! Is that one of your classes?
    Thanks Denise!

    Steve Payne on
  • Sure!

    Denise L. Evans on
  • Okay. So, if I come up with a homeowner or two who would like to pursue a short sale route, then I can come to you to help negotiate it through the process? I think the knowledge that the bank may forgive the deficiency would be very attractive to the seller.

    steve gregory on
  • I was still getting deficiencies forgiven in 2014. The bank knows the borrower can just file for bankruptcy. So, they forgive the deficiency in order to encourage the short sale.

    Denise L. Evans on

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