3rd Wave Of Foreclosures is Coming..... Get Your Money Lined Up

[Tony Severino]

So far we have seen two waves of foreclosures... the speculators and the sub prime debacle.

The tide is rising now on the 3rd wave.... those who had great credit, but now have issues because of job losses etc.

To Read The entire story Go to:http://articles.moneycentral.msn.com/Investing/CompanyFocus/coming-a-3rd-wave-of-foreclosures.aspx

It is a pretty good read...

[Rich Weese]

I'm ready for the next wave. I did well on the current wave and will do VERY well on the next one. Bring it on!!! Rich.

[Rob Rinaldi]

Originally posted by Tony Severino:

So far we have seen two waves of foreclosures... the speculators and the sub prime debacle.

The tide is rising now on the 3rd wave.... those who had great credit, but now have issues because of job losses etc.

To Read The entire story Go to:http://articles.moneycentral.msn.com/Investing/CompanyFocus/coming-a-3rd-wave-of-foreclosures.aspx

It is a pretty good read...

[Eddie Ziv]

Everything written here just shows that in Real Estate, just like in politics, everything is local. Some areas experience reductions in REO, and some see increases. I don't think we've even seen the beginning of Alt. A and Option ARMs defaults yet.

As to the claims that the banks keep the best ones for last, it's systematically their biggest mistake. Those properties that could have been sold for a decent price six to eight months ago, now have been so badly deteriorated that the bank need to substantially reduce their price just to get rid of them.

[Will Barnard]

While that may in fact be the case, that is not the entire picture from the banks perspective. Because of marked to market accounting practices, it was more beneficial to them to hold that asset rather than sell it at a discount, as that would have a negative affect on ALL of their assets on the balance sheet. The difference in loss now rather than selling 6 months ago is much less than the amount of loss to the balance sheet and therefore, the amount of moeny they are allowed to loan.

[Debbie B.]

I work in the IT department for a subprime servicer. I was talking to one of girls in the REO department. She schedules the REOs for auction. I asked her if investors (banks) were holding onto REOs intentionally. She said somewhat, but, for the most part it's just taking a long time (sometimes up to 6 months) to get them listed because the REO brokers are so backlogged.

[Eddie Ziv]

"While that may in fact be the case, that is not the entire picture from the banks perspective. Because of marked to market accounting practices, it was more beneficial to them to hold that asset rather than sell it at a discount, as that would have a negative affect on ALL of their assets on the balance sheet. The difference in loss now rather than selling 6 months ago is much less than the amount of loss to the balance sheet and therefore, the amount of moeny they are allowed to loan."

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I don't see how holding a REO property helps the balance sheet. It may do just temporarily unless you want to look good for a certain quarter, but for the most part it looks like kicking the can. Eventually that property will be sold for much lesser money and since it's attached to a loan figure that negative would just keep growing.

[Scott Hubbard]

Originally posted by nationwidepi:

With Mark to Market, those assets which are nonperforming are allowed to remain at full loan value until remarketed. One of the reasons banks are not agreeing to short sales is that assets value is supposed to immediately be readjusted to sale price upon acceptance of a sales contract. After it closes, the remaining value at sale price is wiped off the balance sheet and the deficiency (loss) moved to the income statement. As a result, short sales reduce asset value and negatively impact earnings.

However, as an REO it remains on their balance sheet as an asset for the full original loan amount until it is sold. Effectively, the banks are able to hold value longer on their books as an REO. Banks use leverage to borrow money from other banks, so if their balance sheets were to suddenly lose a tremendous amount of value from their balance sheet, their ability to borrow would be greatly diminished. I have not seen any changes in Mark to Market to address this advantage.

Currently, banks are heavy with REO inventory and that "moratorium" they speak of is really just a political spin. Really, the banks do not want to foreclose because they are choking on them. Since there is no difference between holding a non-performing asset as an REO or in pre-foreclosure, banks are simply delaying the sale in those states where it is possible.

I doubt we will ever see a second, third, or any wave of REO's because it is self-defeating. They will slowly (trickle) release them into the markets as resales and rentals. This is already underway. If any of you know any large property management companies, you already know this to be true.

We will continue see REO's that are particulary in lower income areas and in cities and towns where the upside in valuations are limited.

Moving forward, I see lenders improving their loan modification processes, working out deals with rented properties to keep cash flow, and short sales. As a last resort, they will foreclose and hold it as an REO. Don't get me wrong, there will still be plenty of foreclosures hitting the markets for the next two or three years, they just will not be flooding the market because that would not make business sense.

The next wave is really in commercial. With liquidity issues (no ability to refi), inflation knocking, and a slow and gradual recovery expected, we will see defaults continuing to climb. This is where I want to be next year!

[Al Ber]

Originally posted by Tony Severino:

So far we have seen two waves of foreclosures... the speculators and the sub prime debacle.

The tide is rising now on the 3rd wave.... those who had great credit, but now have issues because of job losses etc.

To Read The entire story Go to:http://articles.moneycentral.msn.com/Investing/CompanyFocus/coming-a-3rd-wave-of-foreclosures.aspx

It is a pretty good read...

The third wave is well on it's way the Alt-A mortgages are at 50%+ default and many more will walk from their homes that are now worth far less than what they owe.

[Stephani Davis]

I keep hearing that, yet the supply of REOs continues to dwindle.

I'm getting impatient..

[Jon Klaus]

Dallas-Fort Worth foreclosure postings hit new high

http://www.dallasnews.com/sharedcontent/dws/bus/stories/061909DNBUSforeclosure.24dc707.html

Standing on the beach waiting for that next set....

[Anson Young]

Originally posted by Stephani:

I keep hearing that, yet the supply of REOs continues to dwindle.

I'm getting impatient..

The moratorium was on foreclosures, the process from foreclosure to listing can be 3+ months depending on a bunch of factors. We are starting to see the foreclosures trickle (or spike in some counties) through more, which means in 2-4 months we will see more REO inventory.

[Stephani Davis]

I hope so.

I'm bringing my A game this time around.

Steph

[Rich Weese]

Like surfing, pick your spot and catch the wave. I'm sure there will be more than one spot to catch that perfect one. I'm stalking 4 areas in 2 states because I've done my homework and feel comfortable with them. Remember, "no one will ever take as good of care of your money as you will". So, do your homework and enjoy the ride, as will I!! SURFS' UP. Rich.