When a bank’s level of non-performing loans and foreclosed assets increases to the point that the bank’s costs and expenses exceed its revenues, the resulting deficit erodes the bank’s net worth and reduces stockholders’ equity.  Depending upon the particular bank’s level of net worth, a serious problem will result at some point in time unless steps are taken to mitigate the problems.  This article deals with the administration of real estate properties that have already been foreclosed.

The lender must examine and truly understand both the regional laws of foreclosure, and the documents for the specific loan at hand.   Depending upon the various factors contained in loan documents and the nuances of state foreclosure laws, there are usually factors that dictate the timing of when a foreclosure must be initiated.  In some cases, a lender’s failure to initiate a foreclosure at the proper time might result in the postponement of the foreclosure to a much later time, allowing further arrearages to accrue and possibly further deterioration or damage to the collateral property.

Once the foreclosure decision is made, the bank needs to automatically involve its foreclosed property department.  In a commercial bank, foreclosed real estate properties are referred to as Other Real Estate Owned, or “OREO,” as distinct from real estate owned and used in the operation of the bank, such as the main bank building and bank branch properties.  The equivalent term at savings banks is Real Estate Owned or “REO.”

Here are some guidelines for the successful management of foreclosed properties:

• Make sure that the homeowners’ or fire and extended casualty insurance is cancelled and that the property is added to the bank’s blanket insurance policy for foreclosed properties.(Note: I have seen properties and profits literally up in flames where there was missing coverage due to not keeping track of this.)
• Assign the responsibility for managing foreclosed properties to one person.If the foreclosure volume is sufficient to occupy one or more people fulltime, then naturally you will need to hire someone fulltime for this project.  Don’t rely on the loan officers that initiated the problem loans to begin with to now miraculously solve the problems that they could not foresee in the beginning.It is very helpful to have some “distance” between the OREO/REO professionals and the borrowers.
• Once the properties are foreclosed or abandoned, secure them immediately.There must be a central key repository in the OREO or REO department.
• Keep the properties looking decent.  Do whatever is required to avoid deterioration of the properties.No property buyer, commercial or residential, wants to purchase an ugly piece of real estate.
• If the property has problems, find a specialist in buying and fixing up properties, and provide financing to make the deal workable and attractive.  Include a commitment to provide financing for the ultimate customer to whom the fix-up specialist will sell.
• “For Sale” signs should be put up right away after foreclosure.  (Note:  It is astonishing to me how many times I have gone into OREO and REO operations and found management amazed that a property has not sold, yet there is no “For Sale” sign on it!)
• Only list with a real estate agent if truly necessary.Your Department of OREO or REO will understand the property than any realtor, and your financing will be a major selling point to the purchaser.You are the one to control the financing, not the a real estate agent.
• Chat with the neighbors who live near the property.Friends and family of the owner will often be interested in the property.  Your offering favorable financing might be the factor that tilts the scales in favor of a relative relocating close to another relative.
• Inspect the properties regularly, and document what you find.  Take any needed corrective actions immediately.
• Offer helpful financing to persuade purchasers to jump on the deal.  Remember that a sale turns a cash consuming asset into a cash producing asset.
• Consider holding periods and the net present value of a probable future sale when setting a sales price.  The “net” part of net present value allows for the holding costs which include taxes, insurance, any required maintenance, lawn care or landscaping, and any expenditures such as painting, carpet, and any other cosmetic expenditures that may be required in order to market the property.
• Take note of OREO / REO events and issues at meetings of the Board of Directors.  Directors often have market knowledge and contacts that can help with OREO / REO problems.

Obviously, this list of items is a lot to think about.  It requires special expertise to initiate all of these various activities and to keep them moving toward the multiple finish lines

About the Author

This article was written by one of Consolidated Consultants Co’s Banking Expert Witnesses. He is a manager and banking regulator, has managed hundreds of millions of dollars of “problem properties” including duplexes, condos, subdivisions, office buildings, and many others across the nation.  He is available on a contract basis to discuss your bank’s particular needs, and works regularly with real estate experts.

Flipping foreclosures has become a profitable venture because of the presence of so many foreclosed homes for sale.  However, make sure that you have a good knowledge of how to estimate the price of particular home, the foreclosure laws in your state, and where to find those properties that can provide with a net profit.  

It is vital to conduct a lot of research before choosing the specific property to buy to make sure that you will indeed gain some profit.  While there are several factors that you need to examine, basically what you have to look into are the projected expenses, the estimated market value, the total amount of outstanding debt, and the possible amount of profit.  You may need to be patient when you are searching for the foreclosed property but it may be found through direct mail, banks, seminars, newspapers, word of mouth, real estate agents, lis pendens lists, friends, and the Internet.  

However, locating the right real estate agent will make the process of flipping foreclosures much easier for you.  It is important for this real estate agent to have extensive knowledge and experience regarding the foreclosure market, especially with regards to Real Estate Owned (REO) properties, which are those that remained in the inventory of the banks after the foreclosure auctions.  It is also vital to examine the real estate agent’s knowledge about foreclosure laws, his ability to close a deal, and his access to other mortgage professionals to facilitate the buying process.  If the property that you are targeting is not found in another state, you also need to ensure that your real estate agent is knowledgeable about the market conditions in that state.

After determining the specific home that may offer a net profit, it is important for you to be prepared with your own financial resources.  The lender may not be too willing to provide you with a loan.

If it is your first time in flipping foreclosures, it is advisable to avoid the courthouse auctions because you will be competing against those who already have much experience.  Also, the properties are sold as is and you may not be able to inspect the property before the auction.  It may be more advisable to begin with an REO property or with a home still in the pre-foreclosure stage.  In the pre-foreclosure stage, you can negotiate with the owner and buy directly from him.  It is vital to always remember that flipping foreclosures is a profitable activity but only if you ware willing to learn through experience and if you do your research properly. For more information stop by http://www.bestforeclosurenews.com

There was a five percent increase in the number of foreclosure homes during the third quarter of 2009 when compared to the second quarter of the same year.  The increase occurred despite the presence of the Making Home Affordable program of the federal government that attempts to help borrowers undergoing financial hardships to get a loan modification to reduce their monthly payments.  Apparently, the government program was overpowered by the large increase in the number of people without jobs.

Approximately 48,000 homes were added to the number of foreclosure homes listed as of June 2009, thereby pushing up the number of foreclosed properties to 938,000 during the third quarter of 2009.  At this rate, the number of foreclosure filings is expected to reach approximately 3.5 million for the whole year of 2009, which is much higher than the 2.3 million filings in 2008.

Many economists have been declaring that the recession has ended but the foreclosure rate is still on the rise because the unemployment rate has reached an unprecedented level of 9.8 percent during the past 26 years.  To make matters worse, the unemployment rate is predicted to continue to rise until it will reach its peak in the middle of 2010.  Mortgage lenders are trying to help by permitting the homeowners to be delayed by three to six months in their payments as they look for work.  Unfortunately, looking for work at a time when the unemployment rate has reached an all-time high is very tough.

The Obama Administration had recently claimed that its program had reached a milestone when more than half a million homeowners had their loans modified and monthly payments reduced.  However, the rise in the number of people defaulting on their loans has been much faster than the increase in the number of people getting loan modifications.

Mortgage lenders have been doing their share in minimizing the effects of the housing crisis by reducing the rate at which they are filing  foreclosures.  They have been attempting to assess whether homeowners would be eligible for the Making Home Affordable program of the government.  However, analysts believe that a large number of these homeowners would not be eligible and they predict that more forecloser homes will become available in 2010.  This is expected to pull down home market values further.  It has been observed that the financial problems being experienced by some of the borrowers are so massive that banks and lenders are finding it impossible to structure a loan modification plan that would fit their current income capacity. For more foreclosure news stop by http://www.bestforeclosurenews.com

A foreclosure is a process in which all of the rights of the homeowner that have been specified in a mortgage are terminated.  Thus, a foreclosure is a procedure in which the bank or lender gains absolute control of the mortgaged property, which is usually a home.  The foreclosure process is usually initiated by the lending institution after the homeowner has stopped making the monthly payments for a certain number months.  The actual number of months that the borrower is delayed before the banks starts the foreclosure process may vary and may depend on the particular lender.

There are various possible reasons why the borrower was incapable of paying what was due at the proper time.  These include the loss of a job, a serious illness in the family, a divorce, death in the family, and the terms of the loan agreement.  The terms of the loan could be one of the factors if it is an adjustable-rate mortgage and the interest rate has gone up to a level that is no longer affordable to the homeowner.  However, the main cause of default during the recession has been the loss of a job as the unemployment rate attains heights that have not been reached for the last three decades.  

In reality, both borrower and lender do not want a foreclosure.  It is obvious that the homeowner would not want to leave his home while the lender prefers to have the steady stream of monthly mortgage payments instead of selling the property.  The foreclosure process is also a time-consuming and expensive process for the lender.  It is possible for the lender and borrower to cooperate with each other in looking for a solution to the problem that would be acceptable to both parties.  Thus, it is advisable for the borrower to contact the lender if he has begun to experience problems in making the monthly payments.  It is possible for both parties to find a solution that would be beneficial for both of them.

The foreclosure process normally begins with a the lender issuing a Notice of Default (NOD), which is a letter formally asking the borrower to pay what is due.  It is common for the NOD to be issued after the homeowner had been delayed for three months in his monthly payments.  The homeowner should remember that this notice is actually a warning that the lender is ready to regain control of the property, sell it, and evict him from the home.

A superb resource: Stop Foreclosure Houston

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.

A superb resource: Stop Foreclosure In Houston

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.

A superb resource: Stop Foreclosure In Houston

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.

A great resource: Stop Foreclosure In Houston

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.

A superb resource: Stop Foreclosure Houston

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.

A superb resource: http://realestate.bryanellis.com/1565/stop-foreclosure-in-houston-3-legitimate-solutions/

To Stop Foreclosure in nearly any city in the United States of America, there are basically only a few legitimate options. Some of these you’ll know, and some will be brand new to you.

Here are a few directions you can take:

• Sell your house prior to the foreclosure auction. The value of this idea will vary heavily depending on the nature and quality of your local real estate market. If you’re in a market that still has very slow resale rates, selling your home could be a challenge. Ask a local real estate agent to determine the average number of days on the market for properties in your area.
• Initiate a loan modification. A loan modification is a process through which your lender changes the payment terms of your loan to more closely match your ability to pay. While this is not a guarantee, loan modifications have become more popular in the last 12 months.
• Refinance the property. If you are not yet fully into the foreclosure process but have reason to expect you will fall behind on your payments, it may be wise to try to refinance your mortgage to a lower rate. If your property is worth less than the balance of the mortgage, you’ll want to inquire regarding a “short refinance”, which is when a lender forgives a portion of the debt against you in order for you to refinance your property and pay off the remainder of the debt you owe.

When you’re trying to stop a foreclosure, the key is fast action.

Warning: Be very wary of people who aggressively attempt to purchase your home for investment purposes. While there are many legitimate real estate investors, there has been a significant amount of fraud with “Stop Foreclosure” scams, and it is wise to be very, very careful.

Please remember: The crisis you now face will soon be over. As a foreclosure survivor myself, I’d like to encourage you to remain hopeful, and to understand that your future does not equal your past!

Thanks for reading this information about how to stop foreclosure. I hope you’ve found value here.