The proposal – which would sell foreclosure homes, often in bulk, to private investors from government inventory – is set to go live in the “near term”, according to the Federal Housing Finance Agency. According to reports, the two government-sponsored enterprises will allow pre-qualification for investors and third parties who want to bid on foreclosure properties owned by the government. This effectively opens the doors for foreclosure investors to get in line for bidding and save time before the full allotment of government foreclosure listings becomes available.

Government foreclosures come from several sources, most notably Department of Housing and Urban Development (HUD homes) and the Department of Veterans Affairs (VA homes). These homes come under government ownership when the federal government – due to its role as the guarantor of the mortgage secured by the property in question – takes possession of the home due to the homeowner’s default.

The hope is that investors and private equity firms will want to capitalize on a large inventory of cheap residential real estate properties that can be converted into income-generating rental properties – which are in high demand and have been for the past two years from previous homeowners, those looking to avoid buying a house in this climate, and those relocating for jobs.

As it stands now, the rental market suffers from a lack of supply while the housing market suffers from a glut of supply – a glut that has kept prices going down more and more with each quarter.

Already several major private equity firms have thrown their hat into the ring and announced intentions to actively participate in the government program. Some estimate that the foreclosure-into-rental market could be worth billions in the long run, and could deliver economic benefits to the economy as a whole beyond the profits obtained by investors if mass purchases cause home values to rise throughout the country.

The timeline for the full implementation of the program is still unclear, but the FHFA is seeking to make this a reality sooner than later – especially given the political pressure from the White House to bring stability to the housing market before presidential elections in November. Chances are the housing market will be a key issue.

Federal Foreclosure-into-Rental Program Picks Up Steam is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Where should you look, though? Some states are hotter than others, and the success of your venture will depend on finding the right markets. Here are ten states that hold the most promise to budding homeowners, entrepreneurs, and investors looking to score big in the market.

Ten States for Great Foreclosure Savings

One easily way to find foreclosure savings – the amount of money you can expect to save by buying foreclosures versus buying non-distressed properties – is to take the average home sales price in the state and subtract from it the average foreclosure sales price. Then, divide that number by the average home sales price to get the average discount available in the state.

Using that formula, the ten best states are:

Delaware

Georgia

Illinois

Maryland

Massachusetts

Michigan

Ohio

Oklahoma

Virginia

Wisconsin

The average foreclosure discounts for these states range from a low of 37% (Virginia and Georgia) to a high of 50% (Oklahoma). That last number is astounding. Just think – on average, buying a foreclosure in Oklahoma will save you 50% off the market price of a similar property!

The highest average foreclosure sales price was Virginia, with $237,742. The lowest average foreclosure sales price was in Michigan, at $60,211. Michigan also has the highest foreclosure rate in the bunch, with one out of every 346 units in the foreclosure pipeline.

Clearly, states like Michigan – states with high foreclosure rates, low average foreclosure prices, and substantial discounts – are the ideal shopping places for investors looking to turn distressed properties into lucrative investments. Of course, virtually any state has good deals available; all it takes is a little research and some simple math calculations.

Fine-Tuning Your Foreclosure Discounts

To get a better idea of how much you can truly save on a home, take into account the quality of the property itself and estimate how much money you will need to spend on it to make it livable. Also consider the neighborhood for the individual property and do your due diligence. Sometimes the largest discount isn’t the best. (In Michigan, after all, there have been foreclosure homes practically given away for free. The catch? They’re just one notch above condemned.)

Want Terrific Deals on Foreclosure Properties? Check Out These States is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

As 2012 begins to kick into full gear, the real estate market is already heating up.

If you’re talking about rentals, that is.

Truth be told, renting has become the fastest-growing component of the overall real estate market over the last year, simply because fewer people are buying homes than they otherwise would in a healthy year. Falling home prices, incredibly-tight lending standards, and stubborn unemployment rates have all contributed to pushing would-be buyers to the other side – renting.

This isn’t to say that renting is inherently “bad” – for many people, renting is the cheaper and wiser option. But for those who want to build up equity in a home, break free of a landlord once and for all, and purchase a home at severely-discounted prices, renting just will not do.

Fortunately (or unfortunately), renting will have a noticeable impact on buying and selling homes in 2012, perhaps even more so than in 2011.

The Market Outlook for 2012

First, we will take a look at the general outlook for real estate as a whole –both in the residential rental market and the new/existing home sales market – to see where we are headed.

Home Sales Outlook

The general consensus among industry experts is that median home prices will continue to fall in 2012, perhaps as much as 3.5% by mid-year. This will impact new and existing home sales, but perhaps not in a negative way. The National Association of Realtors, for example, predicts that home sales will increase by 5%, with new housing starts going up by 15% from 2011. Naturally, this depends on where you live, and largely trends began in 2011 will continue through 2012.

In short, demand for homes will rise – but so will foreclosures. In fact, foreclosure properties are expected to increase throughout 2012 and likely into 2013, meaning the residential real estate market will have plenty of supply in the form of cheap, discounted properties in the form of foreclosed homes.

Rental Market Outlook

By and large, the rental market across the nation will continue to improve as it did throughout 2011. In many metropolitan areas in particular, vacancy rates have plummeted and rental prices have risen sharply. This trend may taper off a tad, but more or less will continue throughout the year – meaning people will be paying more money to rent the same apartment in 2012 as they would have in 2011.

In fact, the proposition that more job growth in 2012 will lower the unemployment rate (as is expected) will only increase this because more people will be relocating for these jobs – which always translates into upward pressure in real estate.

How Foreclosures Benefit the Rental Market

How do foreclosures and rentals interact with each other, and with the real estate market as a whole? Well, when everything above is put together, we see a picture of a lot of people looking for affordable places to live.

Since rental prices are increasing, people will be looking for some relief from rising rates – which could very well come in the form of foreclosures being opened up to renting by investors who want to capitalize on more home foreclosures on the open market. This is especially pragmatic because buying foreclosures and profiting off of an appreciation in value – the traditional way to profit in a down real estate market – may seem less attractive than buying foreclosures and simply renting them out.

We expect higher numbers of foreclosures to provide additional supply in a tight rental market – meaning more families will have more opportunities to find affordable housing, particularly in metropolitan areas. For investors, all of that translates into enormous potential.

How Renting Can Soon Change the Real Estate Market is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

If recent political developments are any indication, the latter is more likely to occur.

The most recent debates for the Republican nomination for president were held over the past two weeks and featured hours worth of back and forth from the large field of would-be nominees who threw mud at each other over a litany of issues – but rarely mentioned anything about foreclosures. This is not unusual; the only candidate who has really put forth a solid plan for helping people stop foreclosures and deal with the massive surplus of foreclosure listings that are on the market now is Mitt Romney, and his plan was far short of an actual strategy.

As we’ve covered previously, Romney’s plan revolves around the notion that we should just let home foreclosures run through the system uncontested, so that current backlogs can be resolved as quickly as possible. This would clear out the foreclosure process, but would also send a wave of distressed properties into a waterlogged market and could continue to collapse home prices even further – and at a much faster rate.

At least that is some semblance of a position on the issue. The only other time the word ‘foreclosure’ was uttered on stage came when fellow candidate Jon Huntsman, the former governor of Utah, talked about the crisis as one of the problems facing America today. He then proceeded to neglect to mention any real solution for a problem that is facing millions of Americans and has impacted millions more over the past five years.

There is too much at risk for no action. Great bargains are good for investors and homebuyers, but at some point, too much supply and not enough demand are bad for everyone – especially homeowners whose home values plummet even further and create negative equity, contributing further to a cycle of foreclosure.

If the problem worsens – which virtually everyone expects it to do over the next year – the foreclosure problem could be one of the defining issues for the presidential election held next year. And the Republican Party’s refusal to adequately address the problem may cost them dearly.

As Election Year Nears, Politics and Foreclosures Become More Intertwined is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Now, as December nears and the rumored settlement still hasn’t come anywhere close to being signed, pressure mounts on both sides of the negotiating table for some kind of resolution to slow an impending tsunami of home foreclosures into the market.

One of the rebel attorneys general trying to break away from the negotiations, Martha Coakley of Massachusetts, is coming under increased pressure from both the Obama administration and housing advocates to act a particular way regarding the settlement, currently valued at around $25 billion. Coakley has previously voiced an opposition to the settlement in its current form, arguing that it does not do nearly enough to punish Wells Fargo, JPMorgan Chase, Citigroup, Bank of America, and Ally Financial and the other lenders involved and make sure that these problems are not repeated.

Housing advocates continue to encourage her to reject the proposal and work on her own independent investigation, or perhaps join a probe with other attorneys general, like Beau Biden of Delaware and Eric Schneiderman of New York. The Obama administration, meanwhile, is exerting heavy pressure to settle the negotiation and put this issue behind them in the run-up to the 2012 elections.

On the other coast, California’s AG Kamala Harris is also coming under pressure to agree with the settlement from various community leaders and government officials on the state and federal levels. She has already withdrawn from the negotiation process, and wants to see the banks penalized more heavily for the round of residential foreclosures that were wrongfully executed.

At this point in time, the settlement remains stuck, down from the progress that was being made this summer toward a pending resolution. Hopes that a favorable deal would be reached before the end of the year have apparently evaporated, and both sides are reconsidering the terms of a proposed settlement that will undoubtedly have far-reaching consequences in the real estate industry.

The upcoming elections next fall throw even more pressure onto the situation, as if a veritable flood of foreclosed properties for sale wasn’t enough. Look for some kind of settlement to be reached before the end of spring, with an outside shot at an agreement before the end of the year – but don’t be surprised if it comes later rather than sooner.

An Update on the Foreclosure Settlement Deal is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

However, how are things going in Nevada?

As foreclosure and delinquency rates rise, Nevada is actually experiencing a significant decline in default notices due to a new state law. Specifically, in September there were 5,360 default notices sent out to homeowners. As of October 25 there were approximately 600 notices sent out throughout the month. Obviously the new state law has definitely had an impact on default notices, which has resulted in a huge decline.

The law, which went into effect on October 1, aims at cracking down on robo-signing in which banks claim to have reviewed cases before sending out default notices. Furthermore, the new Nevada law takes it one step further and will be holding individuals responsible for any false representations they make in regards to titles. In fact, some of the illegal actions that have taken place in Nevada will now be felonies.

Clearly, the new law has forced lenders to at least slow down with sending out default notices as they can be held liable for their faulty actions as of October 1. However, is there really a decline in delinquency or merely a slowing of the paperwork and processing?

The law has threatened to hold individuals liable for their actions, which will definitely slow down the robo-signing that often leads to wrongful foreclosures. Fortunately, this will protect homeowners that have been receiving default notices and entering into the foreclosure process without justification. However, this new law may have the same outcome as judicial foreclosures cases. Although homeowners are giving more protection it may only further prolong the foreclosure process and therefore temporarily hide the true effects.

In the end, Nevada’s law is definitely doing what it is designed to do, which is to make lenders (and individuals) more careful when sending out default notices. Only time will tell whether or not the delinquency rates in Nevada are truly declining or if they are merely being delayed.

Nevada Default Notices Plummet is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Starting in November, the federal government will send notices to these homeowners that reveal an opportunity to review and appeal any residential foreclosures on primary residences that occurred in 2009 or 2010. Upon a successful review, the homeowner could receive restitution, although it is unclear what form that would take or how much it would cost mortgage loan servicers.

The move comes after a year-long investigation into foreclosure process procedures from some of the nation’s leading banks. Currently, Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial are embroiled in an ongoing settlement dispute with state governments over alleged unethical and illegal procedures, including rubberstamping and robo-signing foreclosures.

The plan was recommended by independent consultants in conjunction with the investigation, and would be supervised by consultants with oversight provided by federal regulators. The end result could be millions of homeowners compensated for the damage wrought by the financial industry.

This idea sounds terrific – obviously, homeowners who were wronged need some sort of appeal process and remedy, and violators of law and basic morality should be punished – but will it do anything to systemically help the real estate market as a whole? In other words, will it help reduce the number of foreclosed homes for sale, or help slow down the rate at which residential foreclosures enter the market?

Probably not – and that is the main concern about a program that sounds great, but ultimately could prove to be of little help for the overall market. One primary benefit is an indirect one; lenders who have to pay restitution will have more of an incentive to avoid similar behavior in the future. Another benefit could show that the government is committed to resolving the problem, but admittedly that could only be for the party that is viewed as being responsible for making the plan happen – reason enough for the other party to oppose it.

Until there is some way to help the 11 million homeowners who are currently underwater, and to help millions of foreclosures for sale leave the market, the real estate market as a whole will not improve permanently – no matter how good of an idea this restitution plan may be.

Millions of Foreclosed Former Homeowners to Get Chance at Foreclosure Review is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Now they’re leaving their mark on our legal system.

The past week has had several interesting developments in courtrooms across the country when it comes to foreclosures, the foreclosure process, and homeowners’ rights. We’ll take a look at a few cases and events and see what we can glean from a big picture perspective on the market.

North Carolina Court Hears Foreclosure Case

In North Carolina, the state Supreme Court is hearing what would be a landmark case for the state – and possibly other states – on whether or not lenders have to provide original paperwork in order to initiate foreclosure.

It seems relatively straightforward that lenders would have to produce such evidence, but in reality a lot of foreclosure cases have been processed over the past few years without original documentation. The plaintiff is alleging that the documentation was never shown to her, and she has no idea who know owns her mortgage. Wells Fargo, the bank under fire in the case, is arguing that it will provide the documentation if the case is remanded to a lower court – which sounds extremely suspect.

The court more than likely will argue that the exact original copy does not need to be produced, which is standard fare for many contractual disputes (since originals are often destroyed or damaged).

Massachusetts Court Rules Against Homebuyer

In another court ruling, the state Supreme Judicial Court of Massachusetts ruled that a buyer who purchased a foreclosure that had been wrongfully foreclosed on by the bank did not have possession of the property, since the transaction was never lawful to begin with. The ruling was not unexpected but did provide an intriguing glimpse into how faulty foreclosure processes have impacted the legal system.

The buyer purchased the foreclosure at auction like thousands of foreclosure auctions held monthly. But, in his case, the lender who owned the home wrongfully foreclosed on the original homeowner, so there was no transfer of property from the original homeowner to the lender. You can’t buy something that isn’t supposed to be for sale, so the buyer was left empty-handed for his troubles. This closely-watched case will likely be emulated elsewhere in the country.

Florida Case Throws Wrench Into State Foreclosure Process

In a very interesting case from foreclosure-heavy Florida, the 4^th District Court of Appeals ruled that a foreclosure affidavit from a bank employee testifying to the validity and existence of original loan documentation on several Wellington, Florida foreclosures was hearsay because the employee had no first-hand knowledge of the documentation itself.

In other words, when challenged to prove the existence of paperwork showing that the bank owned the loan and could initiate foreclosure, the bank instead got an employee to swear that he or she saw “computerized information” showing the documentation – without having any knowledge of the document, the original contract, or anything else related to the case.

This is pretty much the same thing as robo-signing, so it’s no wonder why the Court of Appeals decided to rule in this manner. To say that it has disrupted residential foreclosures in the state is an understatement, though, so it will be highly interesting to see what now comes out of a state that already is ridiculously behind on foreclosure processing.

A Whole Lot of Legal Action Going On in the Foreclosure Market is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

In addition to the substantial hit on one’s credit score, a homeowner could also be pursued for the difference between the amount owed on the loan and the final sale price at auction – via a legal process called a deficiency judgment.

In most states, lenders can pursue a legal judgment against a homeowner for the remainder of the debt owed, even after the home has been taken via foreclosure and the homeowner has moved on. This is subject to limitations in approximately a third of the states; the rest have no limitation, or do not allow deficiency judgments at all.

In fact, in order to completely remove one’s self from the debt owed, one must either go through bankruptcy or have the lender waive the remainder of the debt – which then opens up the homeowner to a litany of potential tax problems, due to the fact that the IRS considers forgiven debt as income in most cases.

Of course, not every lender goes after these debts. Some do, however, and whether or not a homeowner is pursued depends very much on the amount of the debt and the ability of the ex-homeowner to pay.

In most cases, declaring Chapter 7 or Chapter 11 bankruptcy is the only way out.

The Wall Street Journal estimated that roughly $100,000 is owed with each foreclosure that occurs in this country. That is a substantial amount of money that is insurmountable for many, especially when forced to pay in a short timeframe by a lender seeking to cut its losses and recoup as much money as possible.

Homeowners who are facing foreclosure should consult with legal assistance and talk to a real estate lawyer or bankruptcy lawyer to explore one’s options when foreclosure is on the table. The legal ramifications of having any remaining debt can be a massive burden and an obstacle to restoring financial stability after eviction.

Review your mortgage documentation carefully, and talk to a legal professional about the real estate laws in your particular state for further guidance.

Foreclosures Don’t Necessarily Mean the End for Homeowners is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Last month, the number of notices of default – the first step in foreclosing on a home – rose by 33%. This is important because a NOD generally means the borrower is at least 90 days behind on payments, which is considerable and evidentiary of a home that is more than likely going to foreclosure versus a home that is only 30 days behind and could catch up and stay out of trouble.

Granted, not all NODs turn into foreclosures, but the vast majority of them do. And when the market is already chock-full of foreclosures sitting on the shelves, waiting for buyers to pick them up – or at the very least, waiting to even get to the shelves with banks dragging their feet on foreclosure processing – more NODs are worrisome.

(Unless you’re an investor or someone looking to buy a home on the cheap.)

Cities are still leading the way in foreclosure filings. Los Angeles, for example, has an estimated 200,000 homes that will head to the foreclosure line from now until the end of 2012. That represents an estimated $25.9 billion worth of real estate.

From a state-by-state perspective, the leaders in rising foreclosure filing rates are, predictably, California, Arizona, and Nevada, followed by Oregon and Washington (a bit surprising, since the latter two aren’t usually grouped with the former three in terms of topping the list).

Collectively these states represent a good portion of the estimated 2 million homes that are 90 days delinquent or more in the nation’s inventory as of March, 2011, according to a Harvard University study. Another 2.2 million foreclosures, according to the study, are in the foreclosure pipeline at some point.

That is an incredible amount of properties sitting vacant or headed that way. And if the rate of filing for notices of default continues to rise, as it did in August, there is no telling how many more homes will inflate that number.

For investors and prospective homebuyers, the market couldn’t be any better. Higher supply means lower prices, which means homes will be more affordable to those who have access to credit or capital. Couple that with low interest rates and one starts to see reasons for not buying a home disappear.

More Foreclosures on the Way With More Default Notices Filed is a post from: Foreclosure Magazine - Read more about how does foreclosure work.