It’s quite a fight! We’re in the early rounds of the latest foreclosure bout and so far from all appearances it looks like an even match.

In the red corner, weighing in at an impressive 115,292 properties, are the foreclosures (nationwide for August) resulting from a number of economic factors presently affecting the real estate sector such as higher interest rates, fluctuating energy costs, job losses in some instances, lower sales volume, longer marketing time and a significantly reduced rate of price appreciation.

In the blue corner, throwing their political weight around, are the cities and states fighting to keep foreclosures from adversely impacting their economies while helping homeowners in distress out of the financial predicament that landed them in foreclosure.

It seems to be a growing trend that states and cities — particularly those that are rampant with foreclosures — are seeking solutions to help their troubled citizens be it through  counseling hotlines like in Colorado or Baltimore, or by seeking to make public the names of mortgage brokers, appraisers and “other professionals connected to each mortgage loan” like in North Carolina.

Whether these efforts pay off, or if this is just the latest attempt for politicians to look good to their constituents in an election year, only time will tell. In the meantime, there’s many rounds left in this bout, and the judges (at the Federal Reserve) are observing and scoring the fight very carefully.

Real estate pundits are saying not to expect a knockout punch anytime soon. While the economy is cooling off, they are predicting a soft landing which would stand to benefit both contenders in this bout. Investors, real estate agents and hopeful homebuyers registered with RealtyTrac would continue to have a pool of potential investment opportunities to choose from, and economies — both at the local and state level — would not be devastated by skyrocketing foreclosures and their underlying causes — widespread unemployment and soaring interest rates.

In that case, all bets are off. Stay tuned for the later rounds!

Appearing on the CNBC news show  Power Lunch Monday, RealtyTrac Chairman and CEO James J. Saccacio fielded questions from co-anchor Bill Griffeth in a segment titled Upside of the Downturn.

Discussing the state of the nation’s real estate market and how investors may profit from foreclosures, CNBC displayed RealtyTrac’s numbers for August 2006 showing a 24 percent increase in foreclosures from July 2006, and a 53 percent increase in properties entering some stage of the foreclosure process from August 2005. RealtyTrac’s numbers are gleaned from public records in 2,500 counties around the country — 74 percent of all counties, accounting for over 94 percent of the nation’s households, Saccacio noted.

With all that information available, Griffeth asked for a laundry list of things investors should look for when deciding whether to invest in foreclosures. Saccacio pointed out that first and foremost it is important for investors to do their homework: To determine the level of the mortgage or trust deed being foreclosed — first, second or third in line; to determine if there are any other outstanding liens such as tax or bankruptcy liens presently attached to the property; and to get an idea of the potential value of the property to decide whether or not it is a viable investment opportunity.

He also reminded viewers that there are different stages of foreclosure, each with its own level of risk. The riskiest situation being the trustee’s sale (a public auction) where the property is being sold in its most “as is” condition since it is often impossible for an investor to inspect the property before purchasing it. Buying from the homeowner at the default stage or from the bank at the REO stage are slightly less risky. The best time, Saccacio said, was during the pre-foreclosure stage when the investor can work directly with the owner in foreclosure.

To learn more about investing in foreclosures, check out our resource center on our website at www.realtytrac.com.

That’s the implication of a study released Tuesday by Jacksonville Area Legal Aid, an organization that provides legal assistance to low-income residents of Jacksonville, Fla. — including help for those facing foreclosure.

According to an article in The Daily Record in Jacksonville, the study compared foreclosure rates to murder rates in Jacksonville and found a correlation:

“Neighborhoods within the 32206, 32208 and 32209 zip codes have the highest murder levels in the city. Those areas also have the highest foreclosure action levels, according to information released by JALA in conjunction with reports from the Jacksonville Sheriff’s Office and RealtyTrac, a California-based company that measures foreclosure actions nationwide.”

Jacksonville Foreclosures by Zip Code – July 2006

JALA identified “abusive mortgage lending” as the culprit behind the high foreclosure rates, which in turn lead to vacant homes that are a magnet for crime. Evelyn Mew, a distressed Jacksonville homeowner, was quoted in the story:

“It causes the neighborhood to go down,” said Mew. “Drugs cause good people to lose what they’ve got. It’s overwhelming.”

The article also referenced a Chicago study that found that a one-percentage-point rise in the foreclosure rate increases the violent crime rate 2.33 percent, all other things being equal.

These studies put a whole new spin on “saving” a home out of foreclosure. It turns out buyers or investors who purchase a property during the foreclosure process not only have the opportunity to help a homeowner out of a tough spot financially, they also could help improve the quality of life for an entire community.

Let the finger pointing proceed! There’s definitely enough blame to spread around. If you’ve been following the business news at all in recent weeks, you will see that the academic pundits, and the professional ones as well — better known as economists — are ready to point their fingers at the Federal Reserve, should the economy tank and fall into a recession instead of a soft landing like many of them are forecasting. “Those 17 consecutive hikes in the Federal Funds Rate killed us!” they’ll exclaim.

But probably the greatest amount of finger pointing these days is directed at the lending institutions of America. “Darn those lenders! They did this to us!,” they’ll proclaim.

What’s it all about? Everyone who is a so-called expert (some self-proclaimed) in the real estate industry is coming out with articles these days pointing to the adjustable rate mortgages (ARMs), the interest-only loans, the negatively amortizing loans and the option loans. Even a grass-roots consumer organization has been formed by a consumer advocate who is complaining that there is no formal training or licensing required in order to become a loan officer.

Labeled “exotic” loans by today’s standards, these easy-to-get-into trouble products are nothing more than what the industry used to call “creative financing” back in the late 1980s and early 1990s — and we know what happened when that buying frenzy came to an abrupt halt.

Did lenders misrepresent or fail to fully disclose the downside of these easy to qualify for loans? Maybe in some cases. But the fact is that soon up to $1 trillion in these adjustable-type loans are due to readjust at higher interest rates and, in a worst-case scenario, hundreds of thousands of homeowners could find themselves losing their homes in foreclosure.

Who can they blame? Financially-distressed homeowners will likely point fingers at lenders, mortgage brokers and even real estate agents for selling them homes and mortgages that they ultimately couldn’t afford. But in the end analysis, the ultimate responsibility always lies with the consumer to make sure they understand the financial obligation that they’re signing up for.  And to never sign a document without being sure that they understand the terms and conditions they’re agreeing to.

The fall-out from all this finger pointing is that the foreclosure pipeline is going to open up, providing RealtyTrac members with multiple win/win opportunities to find hidden gems in the foreclosure market while helping distressed homeowners avoid a financially-devastating foreclosure.
 
We’d like to know how you feel about this. Feel free to respond to this article. All feedback and comments are greatly appreciated.

As the nation takes this day to remember and commiserate about the terror attacks that crossed our borders five years ago, a lot of talk is rightfully focusing on the heroes of that day as well.

Just as they did back then, heroes come in all shapes, sizes and from a myriad of backgrounds. And different types of heroes emerge on the home front for various reasons.

Today, a serious problem facing many Americans — specifically homeowners — is the possibility of foreclosure. Just read the latest headlines, “Foreclosures Haunt Homeowners,” or “Foreclosures Up Sharply in Maine” and you’ll see why people are scared. Mortgage fraud is becoming more rampant around the country as well, exacerbating an already painful situation.

A lot has been written about how lenders — some of whom helped borrowers buy more home than they could realistically afford — are now trying to step in and save the day, for their own bottom line and for homeowners in default.

The latest article has some big name lenders aligning themselves with non-profit credit counseling agencies to help stem the tide before a flood of foreclosures comes down the pipeline. That is, of course, after interest rates are reset on an estimated $1 trillion of those creative financing vehicles such as option loans, interest-only loans and conventional adjustable-rate mortgages next year.

Homeowners caught asleep at the wheel may wake up to find a mortgage payment that increases as much as 50 percent in short notice. They will need saving, and that is where real estate investors, agents and potential homebuyers subscribing to RealtyTrac can become all-American heroes overnight, allowing a homeowner in distress to bow out gracefully, with their credit history still intact and maybe a few bucks in their pocket.

We’d like to hear about a situation where you’ve been a hero to a homeowner in distress. If you have any comments, questions or feedback, please feel free to respond to this article.