Nobel Finance Sydney – Money Matters Newsfeed

By Cory Boatright

I was reading more about deficiency questions with short sales and I thought I would elaborate a little on the subject. When you get a lender to accept a short sale the amount of debt forgiven becomes a taxable event.

Example: Homeowner owes $250,000 on a house. The lender accepts $170,000 for it. The homeowner is responsible for paying taxes on the $80,000 forgiven amount.

First thing that is important to realize is this.

Not ALL states have the option to file/collect on a deficiency judgment You may want to do some studying or contact a Real Estate attorney to find out which states have the ability to file/collect on a deficiency judgment.

Second is this. The homeowner is typically facing this REGARDLESS of your involvement. For a better understanding of a deficiency judgment let’s define it.  {continued}

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Posted in Buying property, Foreclosures, Real Estate | | No Comments »

by David E. Williams
Earning profits from real estate investing is a time-tested and popular method. Many rich and famous people have made and continue to make millions in real estate. However, not every one can mobilize the level of capital needed for these investments. If so, how can people like you and me with more modest means get into real estate investment business? Fortunately, there is way to do this. Foreclosures, especially government foreclosures, are a good source of properties that are affordable and in which you can invest.

Sometimes, when a foreclosure action is taken, the government takes possession of that property. It is now their property, with which they can do whatever they wish. So before doing an investment in government foreclosures one must be familiar with HUD homes. HUD is an acronym that represents the Department of Housing and Urban Development, a United States government agency.   {continued}

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by Jacob Daniel
Buying foreclosures can be extremely profitable for real estate investors. It means that you need to be aware of local laws and how they may affect the ownership of a property. Buying below market value with no money down is easy, you just need to know how to do it. You can usually purchase a foreclosure for no more than 75% of retail price.

Homeowners usually face foreclosure on their properties for failing to pay their mortgage payments. Because the homeowner has been delinquent their mortgage, they are now in a position to entertain offers by investors. Depending on your state, the lender will issue this notice when the homeowner has been 3 months delinquent on the mortgage payments. In order to buy during this period, you first have to make a deal with the homeowner. Buying a pre-foreclosure means dealing and working out an agreement with a homeowner, attempting to buy the property from them before it has been foreclosed on.  {continued}

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US sub prime market – What is it and why does it matter?

What is the US sub prime market?

The “US sub prime market” is a part of the residential mortgage market in the US and is characterised by low income borrowers who have a bad credit history in servicing their home loans. In 2005, the United States real estate market experienced an all time high and as part of this, financing became more creative to make owning a home more accessible to the wider population – in particular, to those who may not have otherwise been able to afford to do so.

Characteristics of the changes in lending practices included:

• Credit became available to low income members of the community with a poor credit history, who are known as ‘sub prime borrowers’.
• Low-start and teaser rate loans – the ‘catch’ to these types of loans was that they included an interest rate reset condition that doubled the initial loan rate after a short period of time.
• Honeymoon rates – Some initial interest rates were as low as 1% to 2% for the first two years then they increased to the standard rate of 7% pa. This caused sub prime borrowers to default as they could not keep up with the repayments on their loans.
• High Loan to Value Ratios (“LVRs”) – some as high as 140%. Traditionally, LVRs do not usually exceed 80%. As property prices began to fall, this made the position of the sub prime borrower even worse.

Therefore, as the interest rates increased on these types of loans, many sub prime borrowers could not meet on their repayments, and so defaulted on their loans. It is now believed that up to 7 million people in the US have taken out sub prime mortgages.

Why has this fallout in the US sub prime market affected other markets around the world?

The crisis spread because many sub prime mortgages in the US have been “packaged” by lenders with the help of investment banks and sold around the world to financial institutions and hedge fund managers. These packages are often referred to as ‘Collateralised Debt Obligations’ (“CDOs”).

In basic terms, as the value in the US real estate market began to decrease and the level of defaults began to increase, the investments in these CDOs became non viable to the point where many major investors lost substantial amounts of money. Two Australian fund managers who have been affected are Basis Capital and Macquarie Bank through its Fortress Products.

There has been some concern that the Australian mortgage market may follow suit. However in Australia there are significant differences, so that it is unlikely that the negative impact will flow into Australia.

What  are the differences for most Australian Lending Institutions?

Because the approach to lending by the majority of Australian Banks and mortgage lenders, the problems experienced in the US sub prime market should not affect Australia, for the following reasons:

1. The basis of funding the underlying loans is different     Most home loans in Australia have neither been packaged in the way the US loans have been nor have they been funded by the US capital markets, so most lenders are not directly exposed to this specific risk in the broader financial markets. In the US, most mortgages are issued on a fixed 15 or 30 year mortgage basis, while the underlying funding is from short term capital markets debt paper.
2. Borrower capacity testing      Australian lenders that do lend to sub-prime borrowers assess the capacity of borrowers to service their loan commitments by obtaining (depending on the circumstances) a combination of:
   • an independent credit check on the borrower;
   • a letter from the borrower’s accountant confirming the borrower’s repayment ability; and
   • a repayment declaration from the borrower.
3. In the US, they have been lending to borrowers who are known as NINJAs – No Income, No Jobs, No Assets.
4. Loan to Value Ratio (“LVR”)    Generally, the LVR that Australian banks apply is 65%, up to a maximum of 80%. In the US, LVRs frequently exceed 80% and can be as high as 140%.
5. Honeymoon Rates or Reset Clauses    Australain home loans do not use any borrower ‘reset clauses’ with deep discounts causing repayment shock to borrowers. Some Australian Lenders offer to some borrowers a Honeymoon Rate loan which is currently only 1.5% below the standard rate and is limited to the first 6 to 12 months of the loan. But a compelling difference is the borrowers repayment capacity is tested on the full interest rate rather than the discounted or honeymoon rate. We find therefore that borrowers are more than able to cope with this increase in interest rates at the end of the honeymoon period. In the US, borrowers were assessed on the lower discount rate and the discounts were often 3% for the first two years (a much longer discount rate than Australia). After 2 years, the rate increased substantially. These loans are known as “2/28” loans, where the first 2 years was on the discount rate and the next 28 years were on the much higher rate.
6. The proportion of loans that are sub-prime   The proportion of loans in Australia that are sub-prime remains very low, in the order of 1-2% of all mortgages in Australia. In the US, the sub-prime mortgage market constitutes 17% (up from 4% in 2003) of the current US mortgage market.
7. Delinquency rates are very low in Australia    Mortgage delinquency rates in Australia still remain very low. According to a recent Moody’s report on the Australian residential mortgage market, delinquency rates, defined as mortgages 30 days past due, for all mortgages are currently at 1.26% for “full doc” lending and 2.03% for “low doc” lending. In the US, sub prime 30 day past due rates are currently 9.45%.
8. Recourse to the borrower    Lenders in Australia have direct recourse against the borrower in the event of a default of the loan. Lenders can obtain legal orders to declare the borrower bankrupt and seize other assets belonging to the borrower to recover any shortfall. In the US, significant difficulties exist to prevent lenders obtaining the bankruptcy of borrowers and many mortgages do not have personal covenants allowing lenders to proceed directly against borrowers and their assets.

Posted in Foreclosures, General, Real Estate | | No Comments »

By: Heather Seitz

Every time you turn around, the word “foreclosure” is all over the news! So, if you’re a homebuyer looking to buy a foreclosure property or an investor wanting to learn how to invest in foreclosure property, then you’re timing couldn’t be better!

There is a lot out there on foreclosures; from how to stop your own foreclosure to how to “get the deed”. You could probably go to a different foreclosure seminar every other night for a month to learn the tips, tricks and tactics.

But… none of that matters unless you know how to FIND FORECLOSURES. It doesn’t matter how you negotiate with homeowners, what you say to the banks, or what paperwork you need to have if you don’t find the foreclosures first.

We define 4 marketing stages during which you can find foreclosures: “pre” pre-foreclosure, pre-foreclosure, foreclosure auction, bank owned real property (after the foreclosure)

1. “pre” pre-foreclosure: This is the one that most people are confused about! This is NOT the same as “pre-foreclosure”. This is BEFORE the foreclosure ever even begins. It’s the time during which the homeowner realized he/she is going to be late on payments – or is even a couple of months behind – and the point at which the bank starts the formal foreclosure process. Properties you can find at this stage are “gold” because the homeowners aren’t yet being bombarded by foreclosure investors. Finding pre-foreclosure sellers here takes a little more creativity and ingenuity. This is where marketing and advertising play a huge role as well as networking.

2. Pre-foreclosure: This is the “hotspot” for investors. This is when people are getting hundreds of letters and postcards from hungry foreclosure investors. This stage can last several weeks to several months or even longer. The key to finding foreclosure properties at this stage is consistency and persistence. There are a number of strategies that you can use at this time ranging from door knocking to a sequential foreclosure mailing and anything in between.

3. Foreclosure: We define this stage as the “auction”; the actual sale at the courthouse. This is not recommended for home buyers simply looking for a great deal on a foreclosure property nor do we recommend it for an investor unless you are quite advanced and have a good team working with you because there are a lot of considerations that could wind up costing you money if you’re not careful.

4. Real Estate Owned (Bank Owned) Foreclosures: Foreclosure properties reach this stage when nobody purchases the home during the first 3 phases and the bank takes it back. There are lots of good deals to be had once the bank takes back the foreclosed property. You will need a good Realtor that knows how to handle the banks to help you here, but you can find foreclosure deals well below market value here.

Each of these 4 stages of provides great opportunities for finding foreclosures. Depending on where they are in the foreclosure process will determine how you will locate the sellers, how you will market to them, and how you negotiate the deal.

Article Source: http://www.realestateinvestmentarticles.net

Heather Seitz is the author of Finding Foreclosure Deals and the founder of The Real Estate Training Academy, LLC. Get your free foreclosure case study and your foreclosure marketing tips newsletter at www.FindingForeclosureDeals.com.

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