By Eddie Speed, Editor, REal Income Alert
There are three trends that have changed the real-estate landscape. Last week, I spoke about the one I call the Blackstone Effect. That is, institutional investors are pouring cash into the real-estate market at an incredible pace. As I mentioned, a recent Goldman Sachs study I saw estimated that almost 60% of all real-estate transactions are currently conducted in cash. We’ll definitely be keeping a close eye on this.
The second trend is the changing attitude of banks and government-sponsored entities (GSEs) like Fannie Mae, Freddie Mac, and the Federal Housing Authority (FHA).
Nowadays, lenders and their government partners are shifting away from real-estate owned (REO) and foreclosure sales.
Instead, they’d rather sell mortgage-backed notes on the properties in question. In fact, it’s become policy.
In September of last year, the FHA launched the Distressed Asset Stabilization Program in an effort to allow lenders to place some of their non-performing notes into mortgage pools, which could then be sold to investors on the open market.
At the time, the FHA Commissioner and Assistant Secretary for Housing said: “Currently, FHA’s inventory of REO properties available for sale is at its lowest level since 2009. At the same time, the inventory of seriously delinquent loans is near an all-time high. With many neighborhoods still fighting to recover from the housing crisis, going upstream will allow us to help more borrowers before they go through foreclosure and their homes ever come into the REO portfolio.”
Driving the point home, Housing and Urban Development Secretary Shaun Donovan said the following during the same press conference: “With this program, we will increase by as much as 10 times the number of loans available for purchase while making it easier for borrowers to avoid foreclosure. Finding ways to bring these loans out of default not only helps the borrower, but helps the entire neighborhood avoid the disinvestment and decline in value that accompanies a distressed property.”
But it didn’t stop there. The banks and GSEs have kept up a steady pace on their new plan, selling 26,000 notes during the recently-ended fourth quarter.
So you see… government officials know it’s better for everybody — the property owner, the lender, the neighbors, and the local government — to sell the note rather than foreclose on the property.
And that creates the perfect opportunity for you.
Next week, I’ll tell you more about the third trend.