New Foreclosure Wave Helps Investors Wholesaling Banked Owned Properties
A new tsunami of foreclosures appears to be making its way through the process to provide those wholesaling bank owned properties with plenty of inventory as we roll into 2013.
Some real estate investors have been expressing concern about the volume of distressed properties in some parts of the country and are hungry for more deals. According to the latest data from home loan lenders, it looks as if their wish may be coming true too.
Mortgage Defaults Surging
According to Bloomberg News, re-defaults on modified mortgage loans surged by a whopping 25% in September 2012.
These are borrowers who already received loan modifications and that are now back in trouble again. This means they won’t be eligible for new modifications from their lenders, even if the banks were interested in helping them. This will result in a whole new wave of REOs in the New Year, on top of the current surge in many states and the fallout from Sandy.
Plus of course this is all on top of mounting FHA losses and 40% of subprime loans defaulting.
Finding Big Discounts on Distressed Bank Assets & REOs
Recent data puts subprime securities trading at around a 40% discount. This suggests savvy investors ought to be able to dig in and negotiate plenty of acquisitions for wholesaling bank owned homes at 40-60% discounts depending on how they find them and who from.
Of course it may take some time for these delinquent mortgages to make their way through the foreclosure process to become REOs, especially in areas which are already hard hit. However, forward thinking real estate pros can certainly target these non-performing loans early as mortgage notes and either flip the paper or foreclose and convert them into hard property for flipping or holding.
On the flip side, new construction and new home sales are booming which will continue to lift home values, creating the perfect conditions for wholesaling bank owned homes, with plenty of distressed inventory to come for years.
At the same time banks and mortgage lenders are also dramatically ramping up mortgage lending staff, hiring thousands and transferring thousands more in order to handle increased demand. Who knows, this might even lead to some loosening of underwriting standards and access to credit. Just don’t expect to see it on government backed loans.
The Fed now recognizes the dampening effect an over correction in mortgage markets is having on the U.S. housing market; though continue to make moves which tighten credit further in the short term. A loosening of credit in 2013 would certainly open the market up and help many eager home buyers to move forward, enabling real estate investors to crank up their volume.
It will happen, it is just a matter of how fast. In the meantime, smart investors are being more careful with their property picks to ensure a rapid turnaround and fast profits on those homes, most in demand and which have the most qualified buyers lined up waiting to buy them.
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