Ben, you’re not kidding: I just got a call from a woman in foreclosure who owes $150K on a home that is not worth more than $60 FMV. Max. On a good day. She is elderly, though and I am giving her the name of a lawyer that deals with predatory lending practices toward the elderly.
I saw the same thing just three months ago, not an elderly borrower, but a bank that lent $150K on its appraiser’s valuation of $175K on a home that comped out at $110.
The foreclosure numbers in the next few years are going to be staggering, I’ll bet, especially if the layoff trends continue or increase.
I’m reading the Cashflow Quadrant. Kiyosaki talks about how he and other investors twith established cash machines were able to take advantage of the huge volume of foreclosures dealt by the RTC resulting from the passage of the 1986 Tax Reform Act and attendant closure of all the loopholes relating to passive income losses. Anyone with the ability to find cash could pick up all ther eal estate they could handle for pennies on the dollar.
My appraiser just completed the FHA appraiser education and certification. He learned that Fannie Mae had recorded a record LOW number of foreclosures over the past year. Why? Because there were so many people in default, instead of foreclosing on them all, they restructured the notes by adding the arrearage to the balance. Now, how many of those people are just going to end up in default in the next couple of years? I’ll bet most of them will.
I am continually amazed at the types of people that can get loans, these days. I’m even more surprised at how often a finance company like Citifinacial or Greentree will loan money on a second mortgage for up to 125% of the value of a house - and that is even based on VERY generous appraisals. People call me every month that are facing foreclosure because they got a 2nd and 3rd mortgage, and of course now cannot handle the payments.
It seems to me, that very soon there will be a flood of foreclosures - even more than there are now. FHA and VA will be overrun. The RTC, or something like it will need to be reinstated to handle the volume, and anyone with a source of cash, or the ability to find it, will be able to make a killing.
I primarily work the foreclosure market, buying mostly at Sheriff Sale. I am continually astounded at the current number of forclosures, after the great econcomy that we have lived through the past 10 to 15 years. People have no savings, (contingency plan), and if/when they hit the first bump in the road, the car heads for the financial ditch!
I am torn as to my emotions, whether salavating for the shear numbers of future foreclosures, or in fear of the same, as what reaction this may trigger in the overall economy.
I am not analytical enough to determine which will be the case, so I remain prepared for both possible results, and will profit from REI, either way it turns out.
I have never seen any good analysis of precursers to changed foreclosure numbers. The odvious thing is that they go up when the times get bad and down when times are good. Right now, nationwide, we are going from good times to ?? Well, it is not real clear. Thus, I predict that the number of foreclosures in the next couple of years is not real clear.
The number of delinquent loans and foreclosures are tracked by the Mortgage Bankers Association, I believe. They come out with new figures regularly. I believe quarterly, but they may do it monthly.
You might contact them to get figures for your analyses. Or search the internet.
Good Investing and Good PredictingRon Starr*************