The Foreclosure Report

'Plenty To Buy, Nowhere To Sell It'

The Associated Press has this on the foreclosure business. "They gather outside the courthouse every day for the latest real estate auction. Some are professional investors; others come to ply skills gleaned at get-rich-quick seminars. All of them are trying to scoop up homes that belonged to others who died, divorced, were thrust into bankruptcy or fell too far behind on their mortgage payments and failed to sell."

"But these days, those investors are having a harder time finding good deals, as the once red-hot housing market cools amid rising mortgage interest rates. Many homes that do end up in court are saddled with more than one mortgage and have little or no equity, so the investors take a pass."

"'In the last six months or so, it has been like this,' said James Lee, who has mined trustee auctions for investment property for 15 years. When home price increases were stronger, investors could buy a property and sell it a few months later for a hefty profit. 'Now you're getting into the market where there's plenty to buy, but there's nowhere to sell it,' said Peter Winn."

"As home prices soared in recent years, many buyers had to take out more than one mortgage with low-interest, adjustable rates to close their deals. Those rates are now climbing, forcing many homeowners to drain their equity to cover larger payments then try to sell their property to stave off foreclosure."

"As the market slows, finding buyers in time to avoid foreclosure can become more difficult, said Brad Geisen. That could aid well-funded investors who buy directly from homeowners and may no longer have to compete with buyers who took advantage of cheap borrowing in recent years to drive up prices. 'There's definitely a turn,' Gelsen said."

"Other factors suggest problems ahead for the housing sector. Historically, borrowers who run into trouble paying their mortgage tend to do so within the first three to five years of the loan period. Currently, more than half of the nation's $9.2 trillion in outstanding residential mortgage and home equity loans are less than three years old, said Doug Duncan, chief economist for the Mortgage Bankers Association."

"Another potential trouble spot: About 24 percent of all home loans are adjustable, which can be risky if borrowers end up paying far more than they bargained for as the Federal Reserve hikes interest rates. 'Adjustable rate mortgages always have a slightly higher delinquency rate than fixed-rate mortgages,' Duncan said."

"An increase in the number of homeowners in trouble could mean big business for companies like Dallas-based HomeVestors of America, which proclaims, 'We Buy Ugly Houses.' Less than 5 percent of deals now made by HomeVestors franchisees involve foreclosed homes. But CEO John Hayes expects that to increase."

"'I am certain that as we've seen in the last few months more incidences of pre-foreclosure activities, we're going to see an increase a year from now,' Hayes said."

posted by Ben Jones @ 12:44 PM