As Foreclosures Continue to Rise, The Demand for Educated Investors is Needed

LPS Applied Analytics recently performed a study of the state of foreclosures in the United States. The results of this report contained some interesting numbers:

• Delinquent loans have passed 10%, with the total rate (including foreclosures) at 13.3%.
• 7.2 million homeowners are behind on their payments. Almost 1 million of these properties are in REO status.
• The average number of days delinquent on these loans has risen from 249 to 406 days between 01/2008 and 12/2009. That’s a 63% increase.
• Prime loans have deteriorated at the worst rate compared to all other loans types as a whole. Prime loans with balances between $417,000 and $600,000 performed the worst.
• The “new” delinquency percentage, at 4.64%, is the highest it’s ever been in the same period during any other year.

It’s been said by many, including myself, that a major market correction was underway and nothing could be done to stop it. Not even the bailouts and other government interventions. If you are paying a mortgage on a house worth less than than what is owed, only a few things can happen. You keep making the payments, hoping the market will recover, or default on the loan. You can plead with your lender to find a solution to avoid foreclosure. Or, as is the case with so many homeowners, you will have to go to foreclosure.

Perhaps the lender is open to alternatives to foreclosure. Then you are left with two options. Stay in the house and workout a forbearance plan or Short Sale your house. Without a loan modification to reduce the mortgage to fair market value, it is nearly impossible to stay in the home. Most lenders don’t offer modification programs that would allow this, therefore the only option left is to form an agreement with the lender to allow you to move out and avoid foreclosure, which results in a Short Sale.

These Short Sales could be the solution to the foreclosure crisis, provided that investors have the knowledge to make these deals happen. According to foreclosure data from LPS Applied Analytics, more well trained Short Sale investors are desperately needed to match the increased number of foreclosures flooding the market today.

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