I have been a Real Estate Broker for 11 years.  As are you, I am very concerned about the mortgage crisis not only for its affect on the real estate business but more importantly for its affect on homeowners.  The more important thing to understand is that not only are those with subprime loans affected, today we are seeing more and more defaults by homeowners with conventional, "A" paper loans. 

Because of the magnitude of the problem, I am working toward gaining my designation as a Certified Distressed Property Expert (CDPE).  My coursework will be completed and the designation earned by the end of October 2008.  I am learning the tools, information and tactics to effectively help homeowners who are in financial distress.  I will and can be an advocate to help homeowners find the best solution to whatever financial crisis they are facing.  My goal is to be fully informed of the issues and know the detailed processes and procedures for working with and through the banks.  Experts who understand this can close a short sale in a much quicker time frame (weeks or a few months rather than 6 or more months). 

What is the Problem Anyway?

Today, more homeowners than imagined are in some sort of financial distress. Historically, at any given time, there are always a certain percentage of homeowners that can't pay their mortgage. In a healthy market, typically 1 to 3% of properties fall into this category. Today, this number is frighteningly higher; as many as 1 out of 25 homes are at some stage of the foreclosure process.

Not only have foreclosures been going up exponentially since 2005, so are defaults or missed payments before the foreclosure process begins.  It is important to note that as part of this debacle, mortgages actually were being written and closed where homeowners could not even make the first payment.  ationally, 1% of all mortgages (ARMs, non-ARMs, sub-prime and conventional) are in foreclosure and 6.35% are not making payments.  

Right now, an estimated 1.15 million homeowners are at some stage of the foreclosure process, and 5.6 million are 30+ days late on their payments.  This translates into almost 6.76 million homeowners being in some sort of financial distress.  This number is huge given that the National Association of Realtors estimates that in 2008 approximately 5 million properties will sell in the U.S. 

In a HousingWire article released September 2, 2008, there is grave concern since Option ARM loans will soon reset.  The facts are:

• $96 billion in Option Arms will reset by 2010;
• 90-day+ delinquencies, already ranging from 10-24% could more than double;
• The potential payment increase on these loans will be 63%; and
• Option ARM defaults are expected to spread into more expensive neighborhoods & higher priced homes.

In data released by HOPE NOW on August 28, 2008, it is clear that problems have spread to prime credit borrowers as well.  Recently, prime foreclosure starts moved ahead of subprime foreclosure starts.  In July 2008, foreclosures were initiated on 105,000 prime borrowers and 92,000 subprime borrowers.  These starts on prime foreclosures are more than double the same time last year and are 10% higher than in June 2008.  Subprime starts are up 22% over last year and 10% since June as well.

The goal in earning my designation as a Certified Distressed Property Expert is to help people find solutions to their financial problems well in advance of the foreclosure process starting.  If a homeowner qualifies for a Short Sale, there are huge benefits to going that route -- most importantly little to no blemish on your credit report, you typically can negotiate the deficiency with the bank and today, if your home is a primary residence and less than $2 million, you do not have to pay tax on the deficiency.

If you want to learn more about Short Sales, contact Team Jodi at www.ShortSalesInNC.com.

See also:

• Short Sales
• North Carolina's Governor Signs 3 Foreclosure Bills
• Freddie Mac and Fannie Mae