The Foreclosure Report

'Creative' Lending Producing Foreclosures

Author Tom Kelly has this editorial on lending. "It's difficult to have a housing slowdown when there is very little inventory. But inventory is only one component. What has become more of a factor is the incredibly flexible loan programs offered by many lenders. When a buyer can get 95 percent to 100 percent financing on an investment property with stated income and a lousy credit score, it becomes a road map for trouble, especially in a flat market."

"When a buyer purchases an investment property with very little or no money down, there's no margin for error when the renter bolts in the middle of the night because of job loss or a death in the family. Lenders are floating a carrot, and there's nobody to save overeager consumers from following it. An example is a recent advertisement in California that says 'Buy the home you want..not the home you can afford!'"

"Appreciation is no longer floating all boats in all regions of the country. Some areas of Colorado, Georgia, Indiana, Michigan, Ohio and Texas have been absolutely flat, and homes in those places haven't even rendered enough appreciation to pay the closing costs for a seller who bought in 2003. The bottom line is that foreclosures are up in areas that once were strong, and lenders are getting more real estate-owned, or REO, property back on their books."

"Tom Dimercurio was asked to give a broker price estimate on a well-kept home in a nice Denver-area neighborhood. He said all three of the comparable sales that he used to arrive at his selling price were foreclosed homes. 'I've never seen that before in any neighborhood,' he added."

posted by Ben Jones @ 3:03 PM