BY BILLY BRUCE
The Valdosta Daily Times
Mike Kane comments: Debora Blume, Wells Fargo Communications Officer recently sat down with Bill Bruce of the Valdosta Times for a brief question and answer session. ForeclosuresDaily found the lender’s position on foreclosures interesting in that it supports a stance on the industry that the company has maintained for some time: foreclosure investing is a win-win-win solution for the property owner, the lender, and the investor.
Here’s the blog:
— VALDOSTA — A query to local mortgage lender Wells Fargo Home Mortgage, located at 406 N. Valdosta Road, for advice to consumers on how to avoid or survive foreclosure produced the following responses.
The local office forwarded e-mailed questions to Wells Fargo’s home campus in Des Moines, Iowa, where company communications officer Debora Blume provided the following responses:
Q: A lot of folks might believe banks or lending companies can’t wait to get their hands on your property and are sitting like vultures waiting to jump at the chance to foreclose. But the fact may be that foreclosure is the last option a lender wants to exert because it’s a no-win situation for any involved party. Is that in fact the case? (the latter scenario)
A: Wells Fargo Home Mortgage has a number of options available to help customers who are facing financial difficulties.
We use foreclosure only as a very last resort. We make every attempt — within the confines of investor requirements — to develop an individualized solution that helps our customers get through a difficult time so they can stay in their homes.
Every party to a foreclosure loses — the borrower, the community, the investor and the mortgage lender. Profitability for the mortgage industry rests in keeping a loan current and, as such, the interest of the borrower and the lender are aligned. Therefore, mortgage lender have a significant incentive to prevent foreclosures.
Our national foreclosure rates have historically been below the industry average; currently 0.88 percent compared to the industry average of 1.18 percent (as of fourth quarter 2007).
We work hard to keep our customers in their homes, whenever possible, if they do experience financial difficulties.
We also proactively contact customers, and work with them on potential solutions based on their personal financial circumstances.
Q: What signs might homeowners see that should warn them to take preventative action to avoid foreclosure … like, if you missed the second payment in a row and know you’re going to miss the next one too … what should you do?
A: Timing is critical for borrowers facing financial difficulty. Homeowners should begin by calling us and expressing their interest in keeping their home; the sooner a homeowner reaches us, the more options we have to find a solution. The homeowner should prepare for the call by gathering income and expense documentation that might be needed to consider a potential modification.
Q: If a homeowner already has been snagged in a foreclosure, is there any way out to keep the home?
A: Wells Fargo’s servicing approach is unique in that we work with borrowers to offer them solutions at every stage of default continuing up to the point of foreclosure sale. Through this multi-step effort, we maximize the customer’s access to available loss prevention options.
Q: We keep hearing about potential federal help for homeowners and lenders. Is any of that on the way? How soon?
A: Wells Fargo can’t answer this question. Perhaps contact the HOPE NOW organization for more information about what’s going on at the federal level. Also the Mortgage Bankers Association may be able to help provide an answer.
Q: What can a potential homebuyer do to avoid any preventable circumstance that could lead to a foreclosure… like… don’t borrow in over your head, don’t get a monthly payment that’s more than 35 percent of gross monthly income, don’t get into dumb risky loans, etc.
A: Areas where home values are depreciating at a fast rate are the most challenged in terms of foreclosures. This includes areas where investor-owned properties and related exotic loans are high, such as Florida. Nearly 60 percent of subprime ARM foreclosures are occurring in eight states: Arizona, California, Florida and Nevada have experienced rapid price appreciation followed by today’s market correction, and in Illinois, Indiana, Ohio and Michigan have been affected by job loss.
Frequent root causes for delinquency remain job loss, illness, marital status change and death. As of late, consumers are also citing increased energy costs and other utilities, as well as insurance and taxes in unique markets where weather has been an issue, as key factors of being financially overstretched .
Posted on May 2nd, 2008 by ForeclosuresDaily
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Homes offer deals to those willing to buy
By Diane Knich The Post and Courier
Sunday, April 13, 2008
Mike Kane comments: Realtors are becoming more creative in their strategies to reach potential buyers, as evidenced by the following article. Also, the fact that they are reaching out to first time buyers indicates that the foreclosures market is widening significantly. However, ForeclosuresDaily clients have long known the real way to get solid, up-to-the-minute foreclosure leads is online through the ForeclosuresDaily subscription. They also know that they’ll have almost no competition and won’t have to waste time riding around on a bus, captive to a real estate agent’s agenda.
Here’s the blog:
Ethel Campbell says she and her husband are going to try to buy one of the six homes they saw on Keller Williams Realty’s foreclosure bus tour Saturday.
But she doesn’t want to stir up any competition, so for now, she isn’t going to say which one.
The couple owns a house in Summerville, but the pair wants to purchase another to provide a home for their son, who might relocate to Charleston, she said.
The tour was a great way to go house- hunting, she said. ‘We really liked that we could see more than one’ unit in a single outing, she said.
Tours of foreclosed property have been reported in Ohio, Florida and California, but this weekend’s excursion was the first widely publicized tour of its kind in the Charleston area. The idea springs from the growing number of foreclosures across the U.S., as lenders take ownership of properties from borrowers unable to make mortgage payments.
Saturday’s minibus tour took 14 potential buyers to six homes in West Ashley, Keller Williams agent Donald Russell said. But the company plans to organize similar expeditions a couple times a month to various parts of Charleston, Dorchester and Berkeley counties, he said.
Russell said most of the 14 people who showed up for the tour were either first-time home buyers or investors looking for a good deal.
Ruby Sexton, who now lives in North Charleston, said she’s thinking about purchasing another property as an investment. She said she wanted to look at the properties available in West Ashley on Saturday, but that she also wanted to learn more about purchasing foreclosed homes.
Russell said all of the properties on the company’s tours are now vacant and owned by various banks.
The prices listed might not appear low, he said, but usually there is much room to negotiate. He advises potential buyers on how to best negotiate a good price, he said.
The homes on Saturday’s tour ranged from modest town homes to larger single-family homes. Listed prices ranged from $89,000 to $339,000. Each home is owned by a lender that already has gone through the foreclosure process.
The houses were in various states of disrepair, but Russell said most of the damage was cosmetic.
People who have financial problems and fall into foreclosure often don’t have the money to properly care for their homes, he said.
The electricity and other utilities also had been disconnected in several homes on the tour, so agents carried flashlights to let potential buyers get a better look at rooms without large windows.
But bargain-hunters could inspect the homes, at least, because they are owned by banks. They would not be allowed to do that if the foreclosed homes were being sold through a courthouse auction.
After the tour Saturday, Russell said the event had been a great success. When it was over, a few people who had participated were discussing with agents about how to best make an offer, he said.
Agents will work closely with them this week to help them through the process, Russell said.
If people can get a good deal on a property and arrange payments they can afford, he said, perhaps fewer people in the future will slip into foreclosure.
Posted on April 28th, 2008 by ForeclosuresDaily
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Plan includes tax breaks for builders, credit for the purchase of foreclosed property and grants to buy and repair abandoned homes.
Mike Kane comments: This legislation provides little real help to the growing ranks of homeowners facing foreclosure. But it helps just about everybody else, giving generous tax breaks to home builders, lenders and buyers of foreclosed properties. The bill would allow people who don’t itemize on their tax returns to take a standard deduction for property taxes. But homeowners who aren’t in danger of losing their homes would benefit the most. Meanwhile, a buyer of a foreclosed home would get a $7,000 tax credit. That could actually encourage foreclosures and further drive down real estate prices.
Here’s the blog entry:
WASHINGTON (AP) — The Senate on Thursday passed a bipartisan package of tax breaks and other steps designed to help businesses and homeowners weather the housing crisis.
The measure passed by an impressive 84-12 vote, but even supporters of it acknowledge it’s tilted too much in favor of businesses like homebuilders and does little to help borrowers at risk of losing their homes.
The plan combines large tax breaks for homebuilders and a $7,000 tax credit for people who buy foreclosed properties, as well as $4 billion in grants for communities to buy and fix up abandoned homes.
Despite the impressive vote, the bill will be significantly redrawn by critics in the House.
The White House opposes the plan but has not issued an explicit veto threat. It says parts of the legislation would make the problem worse by depressing some home values and the measure inappropriately uses taxpayer money to bail out lenders saddled with foreclosed houses.
The House challenge
The House is likely to reject key portions of the Senate measure, including $25 billion over three years in tax breaks for money-losing businesses such as homebuilders. A plan adopted Wednesday by a key House panel dropped that idea as well as the tax credit for purchasers of foreclosed homes.
Senate Majority Leader Harry Reid, D-Nev., acknowledged changes will be needed in upcoming talks with the House and the White House.
“This is just the beginning of the process,” Reid said. “This bill will go to the House. With the House and the White House we can come up with a piece of legislation fairly quickly.”
Before passing the measure, the Senate added $6 billion in unrelated tax breaks for renewable energy producers, despite Senate rules that say tax cuts need to be “paid for” with revenue increases elsewhere in the tax code.
The bill also offers $150 billion for pre-foreclosure counseling and stronger loan disclosure requirements.
Objections
The $25 billion tax break the plan offers to homebuilders and other businesses absorbing heavy losses and the energy tax package were both dropped from an economic rescue plan enacted in February. Critics of those proposals said they were overly expensive and would not stimulate the economy.
But deepening public worries about the housing crisis appear to have emboldened lawmakers to swell the $9 trillion deficit to pay for the measures.
The $7,000 tax credit for the purchase of foreclosed homes, opponents argue, would unfairly reward purchases that would have happened anyway while possibly devaluing other homes. It also could give banks an incentive to foreclose on homes by subsidizing purchases of such properties.
The measure calls for a long-awaited modernization of the Federal Housing Administration that would enable more homeowners to refinance into loans backed by the Depression-era agency.
It includes $10 billion in tax-free mortgage revenue bonds to help homeowners refinance subprime loans, a move endorsed by President Bush.
A House bill takes a far different tack, steering tax breaks toward first-time homebuyers and investors in low-income rental housing. The measure is likely to be paired with a broader housing rescue package being drafted by Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, that would have the FHA step in to back $300 billion in refinanced loans for 1 million or more homeowners who otherwise might face foreclosure.
Under a similar plan by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, the FHA would insure up to $400 billion in loans.
The Bush administration countered those plans Wednesday with its own, far narrower, proposal. It would expand an existing FHA program to allow more homeowners who are facing large rate hikes to refinance into more affordable government-insured loans. 
Posted on April 24th, 2008 by ForeclosuresDaily
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Mike Kane comments:
The Real Estate Loop (www.realestateloop.net) is an online community where investors can gain knowledge, share ideas, information, and resources and help each other achieve financial success through various aspects of the real estate industry. The site offers Community discussion forums, real estate resources, various articles, blogs, and an online real estate store.
Recently, the Real Estate Loop blog reviewed three online foreclosure information companies: RealtyTrac.com, Foreclosure.com, and ForeclosuresDaily.com. At ForeclosuresDaily, we were not surprised at the conclusion they drew: ForeclosuresDaily was the hands-down winner.
Here’s the blog entry:
“I was introduced to foreclosures daily about 9 months ago. In fact it helped me to purchase my first investment property here in Florida. I found the listing on the web site. I then went to the house and was able to secure a contract and take over the payments by warranty deed. The net profit from that house was $24,000 dollars.
“The company places an individual in every county court house that records the lis pendence and brings you the information the day of filing. This was a very big advantage during my foreclosure chasing days. I was able to be the first investor to knock on the door. Sometimes I would even beat the sheriff that serves the homeowners foreclosure papers.
“If I had to choose one of the foreclosure listing sites above I would have go with ForeclosuresDaily.com. I say this because the foreclosure information is provided to you the day of filing.”
Posted on March 5th, 2008 by ForeclosuresDaily
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Defaults are on the rise according to a new report, and the trend could last for years
CNNMoney.com
Mike Kane comments: As we have seen, the economic instability in wide ranging sectors of the economy are interconnected. At ForeclosuresDaily, we agree with the premise of the following article: the window of opportunity for foreclosure investors will stay open for quite some time to come. Unlike the foreclosure boom on Florida’s Treasure Coast, the Central Valley foreclosure spike was driven by people forced by high prices in Los Angeles to seek lower prices in outlying communities such as Bakersfield. When the LA property prices began to tumble, the resulting vacuum pulled potential buyers back to the city, reducing demand in places like Bakersfield and resulting in a surplus of property inventory. While the two are remarkably different phenomena, they produce the same result: foreclosure investing opportunity.
The risk of foreclosure is on a rapid rise nationally, and could last for years. Monday, the government reported the steepest drop in new single-family home sales ever recorded. It was the first year on record that new home prices posted declines. That followed last week’s announcement from the National Association of Realtors that home prices had recorded their first annual decline ever.
After price drops, many mortgage borrowers find themselves owing more on their mortgages than their homes are worth. It then becomes more difficult for them to maintain their house payments if they run into any problems, because they can’t borrow against their home.
The price declines are hitting hardest in California, especially the Central Valley cities that had recorded outsized price gains during the boom. Of the 36 markets nationwide undergoing double-digit price declines, 22 are in California. And five off the top 10 large cities facing the highest risk of foreclosure over the next six months are also in California.
Bakersfield was rated the highest risk market among the 100 largest metro areas. Home prices there are in steep decline, falling 16.9 percent during the past year. Bakersfield is a good example of a trend that is playing out in many markets. Bakersfield acts like a satellite city for Los Angeles, where population density makes further housing development expensive. Supply of developable land in Los Angeles is scarce, which props up its prices, even in down years. During the boom, home buyers priced out of L.A. purchased in far flung markets like Bakersfield, where plentiful agricultural land was cheaply converted to housing. Many of the new residents continued to work in the Los Angeles area, a long but doable commute. When demand slackened and prices slumped in Los Angeles, more people could afford to buy closer to the city, and demand dropped disproportionately in Bakersfield as well as in other nearby cities like Riverside and San Bernardino, sending prices plunging.
Posted on February 27th, 2008 by ForeclosuresDaily
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Wall Street Rebounds After Shaky Opening; Foreign Markets Up
Washington Post Mike Kane comments: In the view of ForeclosuresDaily, institutions that trade in complicated debt securities based on mortgages or other kinds of loans will likely generally remained troubled despite the rate cut. This because many financial firms tied their fortunes to the housing industry by buying mortgages, packaging them and trading them like securities. That business started to spread the risk of making the loans across many parties and, for years, it generated huge profits and fees for Wall Street’s biggest banks. Financial firms, hedge funds and investors around the world rushed to get a piece of the action. Now, as defaults and foreclosures soar to record levels in the United States, these mortgage securities are plummeting in value, and even the most savvy investors aren’t sure what they are worth. Firms around the world, facing huge losses, can’t sell the securities, and their ability to support all kinds of loans is threatened. The Federal Reserve slashed a key interest rate by three-quarters of a percentage point, a bold action designed to prevent steep losses in world stock markets from causing an all-out panic.
The rate cut, the largest in 24 years, soothed financial markets. The Dow Jones industrial average fell 1.1 percent, far less than the drops of 7 percent and more that staggered Asian and European markets earlier in the week. After the cut was announced, stock prices moderated in Europe and Asia.
Investors in futures markets are betting there is a strong likelihood that the Fed will cut rates again.
The cut in the federal funds rate, to 3.5 percent, should make it cheaper for consumers to borrow money with credit cards or through home equity loans, or for businesses to take on loans to expand. It should also lead to lower rates on most adjustable rate mortgages, though it is less likely to affect rates for long term, fixed rate home loans.
The cut did not immediately restore confidence to key segments of the debt markets, which are at the root of the problems threatening the economy with recession. There is also increasing concern in the markets that the tax cuts and other stimuli being discussed by President Bush and Congress will not ease the underlying credit crunch.
“The financial system has been infected,” said Mark Zandi, chief economist of Moody’s Economy.com. “Providing tax cuts and lower rates gives policymakers more time to solve the problem, but it doesn’t heal the infection.”
Yesterday’s rate cut was dramatic for its scale; after the Sept. 11, 2001, terrorist attacks, the Fed cut rates by only half a point. Fed leaders decided not to wait until next week’s meeting to act. Although they worried that they might be seen as overreacting to stock market volatility, they figured there was even greater danger if they did not move. Left unchecked, a hard-to-reverse cycle could set in with giant worldwide losses leading to a severe recession in the U.S. economy.
The central bank cut the rate “in view of a weakening of the economic outlook and increasing downside risks to growth,” the Fed’s policymaking committee said in a written statement. Credit is becoming harder to obtain, the housing contraction is worsening, and so is the labor market, the statement said. It said that Fed leaders expect inflation to moderate in the coming quarters, and that they “will act in a timely manner as needed to address” financial and other risks, both signals that the central bank is inclined to continue cutting rates.
The latest rate cut was on top of a full percentage point reduction that the central bank enacted over its previous three meetings. In the view of Fed leaders, the U.S. economy is slowing so that a large interest rate cut was justified by conventional economic analysis. But it was the crisis in financial markets and mounting gloom that created a reason to enact the cut between meetings, a practice that Chairman Ben S. Bernanke resists.
In the view of Fed leaders, a decline in the stock market is not, in and of itself, a reason to cut interest rates. In this case, the policymakers viewed the declining stock prices around the world not so much as an inherent problem but as emblematic of declining confidence in the financial system.
Lower rates, in addition to making it less expensive for consumers and businesses to borrow, stimulate the economy in other ways. They cause weakness in the price of the dollar, which helps U.S. exporters. And they make banks more profitable, which in the current crisis could allow them to rebuild their capital positions and get on more solid footing.
The rate cuts, coupled with proposed tax cuts and spending increases, could shore up confidence among companies and consumers. But they do not directly address the root cause of the crisis—a set of bad bets made by financial players all over the world over many years that roiled the fundamental business of lending money.
Fed officials are particularly concerned about the financial health of bond insurers, some of which may be close to failing. Those firms help municipalities and companies with weak credit borrow money, but over the past few years they also delved into the business of providing insurance for mortgage backed securities. The insurers now have to cover more losses than they can afford. If any of them fail, the value of the municipal and corporate bonds they insure would suffer a huge drop.
Nearly 5,000 bonds insured by Ambac Financial Group were downgraded yesterday and have dropped in value. On Friday, Fitch Ratings downgraded Ambac itself. The rating of another bond insurer, ACA Capital Holdings, was cut from investment grade to near junk by Standard and Poor’s last month after the company revealed that it faces $60 billion of mortgage security insurance losses that it can’t pay. Yesterday it won a month’s grace to unwind these contracts from the people who bought the insurance.
New York insurance regulators, officials of the Federal Reserve Bank of New York, and many of the biggest firms on Wall Street are discussing how to infuse new capital into the bond insurance companies to prevent the losses from rippling through the financial system. The New York State Insurance Department has persuaded billionaire investor Warren E. Buffett’s company, Berkshire Hathaway, to enter the market for municipal bond insurance. (Buffett is a director of The Washington Post Co.)
“What’s going on is the unwinding of probably the biggest credit bubble in history,” said David Shulman, senior economist at the UCLA Anderson Forecast. “It will take a while to undo this, and it could get very messy.”
Posted on February 21st, 2008 by ForeclosuresDaily
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By Linda Rawls
Palm Beach Post Staff Writer
Mike Kane comments: As this article illustrates, the Florida Treasure Coast foreclosures boom was filled with speculators, weak borrowers, and people stretching to buy more than they could afford. ForeclosuresDaily is in the unique position of being able to help all the distressed parties involved: by using our tools and information, foreclosure investors can extricate the owner and the bank from a potentially disastrous situation—while at the same time making a pprofit for themselves.
Nearly 5,000 St. Lucie County households defaulted on their mortgages in 2007, as resetting mortgages crashed head on into plunging home prices and tightened loan policies. Every single month of 2007 had more foreclosure filings than all 12 months of 2005, the figures for St. Lucie County show.
Martin County homeowners didn’t fare much better. A total of 797 homeowners faced foreclosures last year, a 215 percent increase from 2006. Previously reported numbers for Palm Beach County pegged 2007 foreclosures at 13,962, a 189 percent hike from 2006’s 4,831. All foreclosure figures are from the county clerks’ offices.
“We have a lot of investors and average homeowners who took out mortgages they really couldn’t afford,” said analyst Mike Larson of Weiss Research in Jupiter. “Now that home prices are falling and housing inventory has piled up, those who get into financial trouble have less incentive to tough it out and keep paying their mortgages.”
To understand just how fast and how high foreclosures have shot up in Port St. Lucie—the fastest growing city in America a few years ago, according to a front page story in The New York Times—consider that there were only 203 foreclosures in all of 2005.
During the heady real estate boom that peaked late that year, home builders flocked to land-rich St. Lucie and new homes sprang up seemingly overnight. As home prices soared during the boom, the only way many people could afford them was to take out so-called “exotic mortgages.” Subprime loans, no-doc or low-doc loans, teaser rates or adjustable rate mortgages became available to nearly anyone who could fog a mirror, said some critics.
Treasure Coast homeowners with such loans got stuck between their unaffordable loan payment and a hard place. That hard place, of course, was foreclosure. A total of 4,840 St. Lucie homeowners walked away from mortgages they could no longer afford last year. That’s up 265 percent from 2006, when 1,327 homeowners couldn’t pay their loans.
At first blush, it would seem St. Lucie’s lower home prices would generate fewer foreclosures. Economists even joke that St. Lucie County is Palm Beach County’s affordable housing program. That’s because homes in the Treasure Coast can cost considerably less than in Palm Beach County. The median price of an existing single family home in the Treasure Coast in November was $206,300, compared with $345,700 in Palm Beach County.
However, according to federal guidelines, homeowners should pay no more than one-third of their incomes for housing and utilities. Those who pay more are “cost burdened,” the government says, a label that affected an increasing number of St. Lucie County homeowners in 2007. The median mortgage for owner occupied homes in St. Lucie County is $1,425, according to Census figures—almost $600 more than they could afford without being financially burdened.
Those trying to sell their homes, or who just walked away from their homes, swelled the already soaring inventory, and have further depressed prices. “In areas where the supply of homes far exceeds demand at current prices, home prices are falling and leading to more foreclosures,” said Doug Duncan, chief economist for the Mortgage Bankers Association.
As the inventory of homes on the market has soared, values have declined from boom time highs, causing some homeowners to owe more than their houses are worth and prompting lenders to quit making loans—or else making it difficult to qualify for them.
“More stringent financing requirements and foreclosures will impact demand,” predicts real estate analyst Lewis Goodkin of Miami. But the bust may have been unavoidable. “This (boom) was filled with speculators, weak borrowers and people stretching to buy more than they could afford,” he said.
Posted on February 14th, 2008 by ForeclosuresDaily
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As homeowners get more desperate, the insurance industry is bracing for an increase in arson.
By Jon Birger, senior writer
NEW YORK (Fortune) — Faced with foreclosure on her Russellville, Indiana home, Christina Snyder allegedly concocted the kind of plan that now has insurance executives on edge.
According to the county prosecutor, the 31-year-old Snyder allegedly offered to pay a neighbor $5,000 to help her burn down her house and make it look like a botched rape attempt - all in order to claim $80,000 in insurance money. Snyder wanted the neighbor to bind her hands in duct tape, write “whore” on her shirt, and then help her escape once the blaze was set, the prosecutor says. The neighbor demurred, instead reporting Snyder to police.
With the national foreclosure rate zooming and the real estate market in a two-year funk, the insurance industry fears more homeowners will see arson as a way out of their financial woes. A recent report by the industry-funded Coalition Against Insurance Fraud notes that with “untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments.”
History indicates such a spike is coming. “When the economy is down, we see an increase in fraud,” says Dennis Schulkins, a claim consultant in State Farm’s Special Investigative Unit.
It may already be happening. Allstate (ALL, Fortune 500) spokesman Mike Siemienas says his company has seen an increase nationally in arsons among homes in foreclosure. In California, the state¹s insurance division reports that the number of questionable residential fires in 2007 increased 76 percent over 2006.
National arson statistics for 2007 aren’t yet available, but Federal Bureau of Investigation crime data shows there was a significant uptick - 4 percent - in suburban arson in 2006, when the real estate downturn began to take hold. The arson increase in 2006 marked a change from the prior three years when suburban arson fell 3 percent, 5 percent and 6 percent, respectively. Says Dennis Jay, the Coalition Against Insurance Fraud’s executive director, “It’s a growing problem.” 
Posted on January 23rd, 2008 by ForeclosuresDaily
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The Chicago Tribune
Janet Kidd Stewart
Mike Kane comments: As discussed in this article, foreclosure investing can hold pitfalls for the investor who is not knowledgeable of the market or the techniques necessary to take advantage of the tremendous opportunity the market presents. That’s why ForeclosuresDaily.com has made training and education vital to the company’s offering to the investor. One of the major features of the ForeclosuresDaily Investing System is complimentary admission to the company’s Intensive Foreclosure Training programs as often and for as long as a customer choooses. IFT offers continuing education for both the novice and veteran investor alike. For four days, ForeclosuresDaily instructors teach the skills and techniques necessary to succeed in foreclosure investing, from the short sale to land trusts, from wholesaling to long term investing. Giving its investors every key to success is a commitment ForeclosuresDaily makes to its customers and one that we do not take lightly.
Worried about stocks, some investors are putting their retirement money into something they’re convinced will be plentiful in 2008: foreclosures and tax liens.
Using self-directed individual retirement accounts, investors are buying depressed real estate, making loans to private companies and buying up tax lien certificates on properties, which give the investors a government-determined yield that the homeowner pays to release the lien. If the homeowner doesn’t do that within a prescribed time period, the investor receives the property.
A handful of firms specialize in helping clients make alternative investments in their IRAs, but industry players say it’s still a tiny fraction of the overall IRA market. Brian and Rosanne Wassom bought a Utah condo a couple of years ago with their combined IRAs, and now they’re considering tax liens as they look for ways to be less reliant on the stock market for their long-term wealth.
“I got hammered in the Internet bubble,” said Brian Wassom, 51, of Pleasanton, Calif., near San Francisco. He was also disillusioned by working with a stockbroker.
Cheryl Wolf, 47, invested in shares of Starbucks Corp. for her retirement account and did well — for a while. But when the shares started dropping, the Seattle woman started looking into alternatives.
In March, she took a portion of her retirement savings and loaned it to a developer who was in the midst of converting an apartment complex into condominiums. It was a one-year loan paying a 12 percent interest rate.
“I figured that was a good return and I could take that year to look around for other deals,” said Wolf, a project manager for a software developer.
Worried about downturn?
Neither Wolf nor the Wassoms expressed much concern about what the real estate downturn will mean for their retirement savings.
In fact, the downturn will provide more opportunities to invest in foreclosed properties and other distressed investments, said David Nilssen, chief executive for Guidant Financial Group, a Bellevue, Wash., provider of self-directed IRAs, including the IRAs for Wolf and the Wassoms.
Also driving interest is the use of alternative investments in Roth IRAs, in which investors use after-tax funds to invest and then withdraw them tax-free in retirement. This avoids having to pay ordinary income tax on property appreciation, and it’s less complex because Roth IRAs aren’t subject to required minimum distribution rules. (Required distributions typically are paid from other funds in a traditional IRA if the property has not been liquidated by the time an investor has to take the distributions.)
For all the opportunities, however, many investors are likely to face losses in the real estate investments they’ve made in recent years. “If you don’t screen the investments very carefully, you can end up in trouble,” said Nora Peterson, author of “Retire Rich with Your Self-Directed IRA: What Your Broker & Banker Don’t Want You to Know About Managing Your Own Retirement Investments.” If you’re looking into tax liens, for example, keep in mind that if a homeowner files for bankruptcy protection, the tax lien certificate could be worthless, she said. That’s because creditors or even other lien holders might be ahead of you in the collection line.
Even without the recent downturn, the risks are high. Developers typically aren’t rated by credit agencies, for example, and project funds certainly aren’t guaranteed. And the twin benefits that entice many investors into real estate — the leverage they can receive on appreciation from a small down payment and the mortgage interest deduction — generally are moot in an IRA. (A few banks will offer mortgages inside IRAs, but most investors typically buy property outright with their accounts.)
Hugh Bromma is the founder of the Entrust Group in Reno, one of the largest providers of administrative services to self-directed IRA account holders. Bromma has been burned himself on an alternative IRA investment — a $50,000 developer loan that was never repaid because of improprieties at the development company. And he warns that many investors who dabbled in real estate deals in recent years will be burned as the shakeout continues.
Fees, tax penalties high
Still, he believes alternatives are here to stay for a small segment of retirement account holders looking to avoid the stock market. Indeed, his firm plans to branch out into direct foreign currency and gold investments this year, he said. Critics say the investments can be costly in a number of ways, including high fees attached to the underlying investments and huge tax penalties if mistakes are made in setting them up. “The biggest issue is self-dealing,” said James Lange, a Pittsburgh estate planning attorney and an accountant who specializes in IRA planning. Investing in a home in which you live, or for your relatives, is prohibited. “They’ll buy a vacation home or a place where their mother can stay or a child in college,” Lange said. “And when these things blow up, they blow up hard. If your IRA is disqualified, the whole thing is taxable and there are penalties.”
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Posted on January 16th, 2008 by ForeclosuresDaily
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by The American Dialect Society
Mike Kane comments:
While the selection of “subprime” as the American Dialect Society’s “Word of the Year” has no official status—the society is not actually changing the English language, merely underscoring the fact that such change is occurring—it is very much a reflection of the most important phenomenon in America in 2007: the state of the housing market in general and foreclosures in particular. The word “subprime” touched almost every facet of American life, finding its way initially into the financial, building, and real estate sales and investment industries and eventually into common economic, political, and even social conversations.
It is the view of ForeclosuresDaily.com that the foreclosures boom still represents a tremendous investment opportunity in the real estate industry and predicts that the foreclosure investing segment will continue to remain a strong source for wealth building in America
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HILTON CHICAGO—JAN. 4—In its 18th annual words of the year vote, the American Dialect Society voted “subprime” as the word of the year. Subprime is an adjective used to describe a risky or less than ideal loan, mortgage, or investment. Subprime was also winner of a brand-new 2007 category for real estate words, a category which reflects the preoccupation of the press and public for the past year with a deepening mortgage crisis.
Presiding at the Jan. 4 voting session were ADS Executive Secretary Allan Metcalf of
McMurray College and Professor Wayne Glowka, Dean of Arts and Humanities of Reinhardt College, chair of the New Words Committee of the American Dialect Society. Wayne edits the column “Among the New Words” in the society’s quarterly journal American Speech.
“When you have investment companies losing billions of dollars over something like bundled subprime loans, then you have to consider whether it’s important,” Professor Glowka said. “You probably also want to think about paying off that third mortgage.”
Posted on January 14th, 2008 by ForeclosuresDaily
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