Dean Graziosi

The Neighborhood Assistance Corporation of America (NACA), the brainchild of Bruce Marks, has been reaching out to troubled homeowners with its Save The Dream presentations.  Based on the theory that bad things happen to good people, Save The Dream conferences provide homeowners the opportunity to meet with many of the nation’s lenders to attempt on-the-spot modification programs instead of foreclosure.

NACA has already hosted more than 400,000 homeowners at a dozen conferences.  The organization has entered into agreements with many of the country’s lenders whereby the lenders would offer 2% mortgages over the life of the modified loan.

At its most recent conference in New York City, NACA posted its best results yet.  Steve and Elena Servi of California received a 2% loan modification from Wells Fargo.  Their previous loan was at 6.75%.  Approval was issued the same day.

In a similar case, Rodney Wynn of North Carolinas received another on-the-spot modification.  Wynn had a 13.4% mortgage that he can no longer afford.  His previous monthly payment was $1800 per month.  His new 2% mortgage payment is $970 per month.  Wynn avoided foreclosure and the bank avoided repossessing the home. 

Banks have come to realize this is an extraordinary market.  In the past, banks would foreclose based on the market conditions.  In today’s flooded market, banks are finding that they must hold properties longer than usual.  As a result these lenders are leaning toward attempting more and more modifications.

When loans are made affordable, homeowners are less likely to re-default.  Reports from RealtyTrac suggest that after one year, only 34% of modified loans whose payments had been reduced by 20% or more actually ended in foreclosure.  This is a significant improvement.  Loans with modifications that created payments with less than 20% reductions failed at a 63% rate.  Perhaps banks are finally coming to understand that giving up a little can save them a lot.

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During the preceding three months, anyone who has tried to buy a property would have been advised to look at foreclosed properties. The first time investors with some understanding of the market would have definitely understood that there is a lot of help from the foreclosed properties. Most of the properties are much below the fair priced bracket and are great buys. However, few would have known the differences between short sale and REO properties, or known where to get the best deals. Knowing about it and actually getting the best deal is the gap filled by an experienced agent.

REO means Real Estate Owned. These are properties are owned by lenders, mostly by the bank, posted after an unsuccessful attempt at auctioning. Once the bid is put up, (usually up to the outstanding amount) and there are no takers for the property, the bank has to transfer the ownership legally to its name. Once there are distress signals from the property like delayed or missed payments, the value of the property is quickly determined.

The price of the property is understood by obtaining the Broker Price Opinion (BPO) or by issuing an appraisal. Once the value is determined, the property is put through short sale or a foreclosure. In the case that the property goes through the short sale or foreclosure process, it is not listed under a REO. In the cases where the property doesn’t go through the foreclosure auction, it is listed as a REO. The bank repossesses the property and allows it to go through the normal channels of selling.

The bank will usually remove the liens and other expenses; this “new” product would now be sold through another set of auctions or through professional sellers. As real estate investors or first time homebuyers, it makes a lot of sense to go after these properties. The value to be paid is well below the existing market price and the title of such properties is also very clear.

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