The real estate market today has a plethora of opportunities for savvy investors willing to take on a little risk in exchange for significant upside profit potential. The wide range of foreclosure properties – including land parcels in addition to foreclosure homes – means investors have more avenues than ever before for cheap homes and cheap land.

That’s right – land can go through the foreclosure process just as residential homes can, with the same results: lower prices and higher potential.

What are some key benefits to purchasing land foreclosures, and how can investors capitalize on this opportunity today?

Land Foreclosures Give You a Footprint in Prime Locations

The reason why land is so valuable isn’t because of its aesthetics.

Land is valuable, commercially speaking, because people can build on it. And developers greatly prefer to build on land that is in an ideal location, particularly if they are developing commercial retail space and want high traffic levels for maximum visibility.

As a result, one main benefit for cheap land foreclosure is the ability to grab a footprint in hot, in-demand locations that fetch a premium price from developers. Commercial properties thrive on visibility; otherwise, that business wouldn’t do as well as it otherwise would if it were in a visible spot versus one tucked away in a corner.

Speaking of commercial real estate…

Commercial Real Estate Has Tremendous Upside Potential

Supply and demand for commercial real estate have combined for a new, low equilibrium in the market – one that is expected to take a year or two to correct. But low prices today mean high upside tomorrow – especially considering that vacancy rates for office space are falling slowly but surely.

One area of particular importance is with multi-family housing. Vacancy rates for this sector of the market have plummeted over the last two years, primarily due to the fact that more and more American households are either unable to purchase a home or are unwilling to take on the risk of falling residential prices.

Throw in rising rental rates and you can see how commercial real estate has the potential to turn a plot of distressed land into a future apartment building – especially as builders scurry to take advantage of a red-hot rental market.

Quick Profits Can Be Found

Investment groups right now are scooping up foreclosure properties and lands because they anticipate quick returns in the rental market. One does not even have to sell foreclosed land to a developer; a profit can be made just by selling to another investor who then sells it to – surprise – yet another investor, a chain reminiscent of the pre-bust days of the real estate market.

Benefits of Buying Land in Foreclosure in Todays Market is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Over the last few months, the White House has been pushing the Federal Housing Finance Agency (FHFA) in an effort to get Fannie Mae and Freddie Mac to write down the principal balance on underwater mortgages.

Although both Fannie Mae and Freddie Mac have tried other (albeit minor) efforts to improve the real estate market, President Obama is adamant that mortgage reduction is the only true way to help move the real estate market from “crisis” to “normal” in the most efficient way possible.

Despite Obama’s best efforts, FHFA has been trying to fight this move, arguing that mortgage reductions will costs tax payers (or more accurately lenders) entirely too much money and will be less effective than the White House claims. Funny how Fannie Mae and Freddie Mac were not too concerned with costing tax payers a significant amount of money before their actions led to a government bailout, but now apparently this is their utmost concern (at least on the surface).

Where, exactly, do we stand on this issue today? In short, we are at a standstill with decision coming in the very near future.

FHFA Upcoming Decision

Fortunately, there is less than a month left before FHFA makes a decision in regards to mortgage reductions. However, President Obama has provided multiple incentives for Fannie Mae and Freddie Mac to agree to principle write-downs for underwater homes, nearly tripling the incentives originally offered to these government-backed entities.

The battle has been so heated that many Democrats have called for the Acting Director of FHFA, Edward DeMarco, to be fired due to his resistance to the call for mortgage reduction for underwater properties.

Effect of the Decision

The decision, which will ultimately be made by FHFA, will affect approximately 3 million underwater mortgages for Fannie Mae and Freddie Mac combined. If the average size of a write-down is $20,000, that would cost approximately $60 billion over the course of the average loan. How much of that though would be balance by the economic benefit of the sizeable portion of these underwater homeowners keeping their homes?

Arguably, it would be better for the budgets of state and local governments because they would have fewer homes falling victim to the foreclosure process, which would lead to more property taxes and less money being spent my lenders to upkeep vacant homes.

In the end, FHFA’s decision will not make or break real estate market recovery but could impact the process significantly.

FHFA to Make Decision on Mortgage Reduction is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

The record-making $25 billion National Mortgage Settlement Agreement that was signed earlier this year involved five major lenders, like JPMorgan Chase, Bank of America, Wells Fargo, Citibank, and Ally Financial. According to recent reports from the Federal Reserve, regulators are looking at adding another eight lenders to that list.

According to officials, the eight firms that will be recommended for fines and penalties due to flaws and irregularities in the foreclosure process over the past five years include HSBC, SunTrust Bank, MetLife, EverBank, Goldman Sachs, OneWest, U.S. Bancorp, and PNC Financial Services.

The addition of Goldman Sachs is a bit surprising to some for several reasons. For starters, Goldman Sachs was never a major player in the mortgage processing industry like the original Big Five in the settlement and some of the newer additions. In fact, Goldman Sachs sold its loan processing unit – called Litton Loan Servicing LP – to Ocwen Financial Corp in 2011 for roughly $264 million (after a $200 million write-down and loss taken by GS).

Perhaps the biggest reason, though, is because Goldman Sachs has largely survived the near-collapse of the U.S. financial system and foreclosure crisis relatively unscathed. Where other instigators of the crash have either disappeared altogether (like Bear Sterns and Lehman Brothers), or have been penalized (the Big Five), Goldman Sachs continues to turn in staggering profits with a minimum of legal troubles from the feds or state governments.

Goldman Sachs did agree, however, to leave itself open to future penalties and fines due to its role in creating wrongful foreclosure properties across the country when it sold Litton Loan Servicing in 2011. This agreement leaves the case open for penalties that could come close to – but probably not meet or exceed – the fines levied on JPMorgan Chase, et al., in the original agreement.

How much in penalties, fines, write-downs, and other credits and obligations will these eight lenders expect to pay? The previous five owed $5 billion each, on average, but these eight lenders are much smaller (by revenue and total assets), so the amount of money they would owe would similarly be less. Plus, the percentage of wrongful foreclosure homes caused by these lenders across the nation is less than those caused by the Big Five, which is why these eight lenders were not previously targeted in the first round of allegations and charges.

More Mortgage Lenders Could Be Targeted for Foreclosure Fraud is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

There was a lot of hype when the foreclosure settlement agreement was finally reached, requiring banks to pay approximately $25 billion for their negligence and unethical actions (and inactions), including faulty foreclosure processes and procedures. However, when you take a closer look at the details of the foreclosure settlement agreement it quickly becomes obvious that there are a ton of loopholes that lenders can jump through.

Common Lender Practices

As with many other large organizations, banks have routine practices that they are able to write off on their taxes. For example, some banks will donate a home to a family in need or a disabled veteran. Other lenders, such as Bank of America, have been known to write off debt for those who have lost their home to foreclosure, but only after the property sells.

Unfortunately, a majority of these routine practices do very little, if anything, to help stop foreclosure or alleviate the real estate market struggles.

Lender Practices and the Settlement Agreement

The foreclosure agreement only requires banks to utilize $17 billion of the $25 billion dollars to help keep homeowners facing foreclosure stay in their homes. The remainder of the money can essentially be used however the banks see fit, which is ironic since the banks participated in unethical actions that led to this settlement agreement that seems to give the banks discretion to handle mortgages appropriately.

Furthermore, of the $17 billion required to help those stay in their homes, the agreement even allows lenders to lower their obligation by demolishing homes, reducing the $17 billion by over $2 billion. Furthermore, lenders can even receive a credit of almost $1 billion by helping people who have been evicted move out of their homes. Unfortunately, these actions do nothing at all to keep struggling homeowners in their home.

Finally, of the $25 billion settlement agreement, a mere $10.2 billion (only 40.8% of the entire agreement) is actually required to reduce principal balances for struggling homeowners facing foreclosure or considering short sale.

Will the Settlement Help the Real Estate Market?

The short answer is no. Although the foreclosure settlement will definitely help some struggling homeowners have more time to sell their property or make mortgage payments, a majority of the homes will still face foreclosure, being unable to stop foreclosure with minimal assistance.

In the end, the real estate market is in a huge rut and the $25 billion settlement will only minimally decrease the size of the rut.

A Deeper Look at the Foreclosure Settlement is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

The real estate market’s collapse in 2007 and subsequent foreclosure crisis over the last few years has taken its toll on millions of homeowners and former homeowners. Increasingly, though, another unusual class of individuals is feeling the weight of the crisis: lenders.

In what some might call poetic justice, banks and lenders across the country are actually finding themselves with far fewer options when it comes to managing home foreclosures. Even the usual process of eviction followed by a foreclosure auction to get rid of a property and recoup losses has been far from reliable, primarily because the market is flooded with foreclosure listings.

As a result, lenders are becoming increasingly forced into loan modifications, principal reductions, and – surprisingly – allowing homeowners to stay in the homes without making mortgage payments at all.

One woman in Florida, for example, has been in her home for over 40 months without making a single mortgage payment. The process has taken so long because the bank has attempted several loan modifications with her, to no avail. In the meantime, the bank actually pays the homeowners’ insurance for her while she makes payments on utilities.

This arrangement is becoming more and more popular with each passing month. Lenders, by and large, always prefer to sell a foreclosure and recoup their losses. Since that is becoming less common, though, they will settle for having to avoid paying thousands of dollars every year to maintain properties that would normally lie vacant – and become prone to neglect and vandalism. In some cases, this means that the lender allows the tenant to rent the home; in others, like the one mentioned above, the lender is quietly looking the other way and not pursuing evictions (or at least not pursuing them with their full attention).

The result? Some homeowners are benefiting from rent-free arrangements, having only to pay utilities for the time being until some resolution is reached in their cases.

No one can really fault ex-homeowners from taking advantage of this arrangement. Losing one’s home is a traumatic experience, and society arguably benefits by having as many properly-sheltered individuals as possible. The downside to lenders is that the failure to recoup losses cuts into their ability to originate new mortgage loans to prospective homebuyers. This may not seem like a big deal at the moment because demand is slack, but a market recovery has to have buyers in order to occur.

Lenders Have Fewer Options With Foreclosures, Allowing More Ex-Homeowners to Stay is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

When most people examine the current real estate market a few things become apparent. First and foremost, there has been a significant decline in home prices since 2006. Second, the foreclosure inventory is incredibly large. Finally, interest rates remain low.

Immediately you are likely to see the bigger picture in one of two ways. For example, you may see these three aspects as completely negative, indicating a weak real estate market and a struggling economy. On the other hand, you may read these three facts and think opportunity.

Home Prices and the Foreclosure Inventory

Although many people suspected that home prices would finally hit the bottom in March or December of 2011, home prices continued to ebb after these dates. Currently, home prices sit around 35% below the peak price of 2006 and have yet to show an indication of a quick recovery.

One of the main reasons for the low home prices is the high foreclosure inventory. When homeowners attempt to sell their homes, they are often competing with distressed properties with significantly reduced prices. Therefore as long as the foreclosure inventory remains high, home prices will remain low.

Foreclosures Offer Opportunities

The high foreclosure inventories coupled with low interest rates provide an exceptional opportunity for real estate market investing, both for investors and individuals. Fannie Mae recently announced that they would sell bulk foreclosure properties in several metropolitan cities to interested investors, at the same time that numerous other incentives are being offered to attract homebuyers and investors alike. The high foreclosure inventory provides endless opportunities for purchasing distressed properties for well below market value.

The Road to Recovery

Many analysts suspect that the real estate market is very close to hitting the bottom, especially with the unemployment rate starting to drastically decline and foreclosure processes speeding up in most states. The quicker the real estate market hits rock bottom the sooner real estate market recovery will start to occur.

Everything from lender incentives to investor confidence and the unemployment rate will inevitably affect market progress. With time, low home prices and high foreclosure inventory coupled with the falling unemployment rate and lender incentives will help renew real estate market confidence. This confidence is essential in the road to recovery—and is on the horizon.

In conclusion, although home prices are still low and continue to fall, we are very close to the bottom of the real estate market and once we reach the bottom there is nowhere to go but up—real estate market recovery is on the horizon.

Falling Home Prices are a Plus is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Late last week, Bank of America – one of the largest originators of home loans in the country – revealed that it would cease selling new home mortgage loans to Fannie Mae in the wake of a controversy over previously-written loans that were deemed deficient after most resulted in foreclosures.

The case gained attention last year when Bank of America agreed to buy back approximately $2.5 billion in toxic mortgages from Fannie Mae and Freddie Mac. As a part of this deal, Bank of America was left open to additional claims from Fannie Mae, who is now fighting with BoA in court over the exact amount of loans that were not written according to underwriting standards.

As a result, Fannie Mae will no longer be able to purchase home loans from BoA and repackage them into mortgage-backed securities and sell them to investors. This in theory cuts down on the amount of liquidity in the housing market and could potentially crimp attempts to jumpstart the home-buying process in the U.S. – something BoA says will not happen for its customers.

In the meantime, Fannie Mae has stated that it is dedicated to working out a mutually-beneficial solution with BoA about the buy-back case and arrive at an acceptable dollar amount for repurchases. It still sticks by its original contention that a mass of mortgages sold to Fannie Mae by BoA were improperly originated and shouldn’t have been written in the first place. When they defaulted in mass and resulted in home foreclosures, Fannie Mae’s balance sheet took a major blow.

Bank of America still has other options to replace Fannie Mae in its list of sources for liquidity. Freddie Mac and Ginnie Mae are two other government-sponsored enterprises that could sponsor BoA mortgages, and other private investors could also step in and fill the gap.

This case comes as the federal government is seriously considering the role of Fannie Mae and Freddie Mac in the overall mortgage market. Previously, the two were relied on to provide much-needed liquidity in the market by purchasing home loans and freeing up capital to be then used by home loan originators to make new mortgage loans. That role may seriously change over the next few years.

As for BoA, its situation continues to worsen. BoA is now the second-largest bank in the country by assets and is the second-largest originator of home loans, taking a backseat to JPMorgan Chase.

Rift Between Bank of America and Fannie Mae Grows is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Of the millions of foreclosures that have occurred during the foreclosure crisis, few cause more controversy as those that happened due to bank neglect, malfeasance, or mishandling of the case.

One former Marine in Riverside, California appears to be one of those cases that is bringing national attention to the foreclosure process in this country.

The Marine – Arturo de los Santos – has been handed an eviction order after his home was foreclosed on in 2010. The order says for him and his family to leave, but de los Santos refuses – accusing the bank of wrongfully foreclosing on his home that him and his family have been struggling to keep.

According to de los Santos, he pursued a loan modification with JPMorgan Chase after his hours at a manufacturing facility where he worked were cut. The premise was that lower income should result in lower payments, which was what originally happened.

Suddenly, according to de los Santos, the JPMorgan Chase stopped accepting his house payments and initiated foreclosure proceedings again him in conjunction with Freddie Mac, the owner of the loan.

A spokesperson for JPMorgan Chase disagreed, stating that the decision was with Freddie Mac, not the bank, and that de los Santos did not meet the qualifications for a loan modification under the rules and regulations used by Freddie Mac.

As a result, the home foreclosure occurred in late 2010, at which time Freddie Mac became the owner of the property.

De los Santos states that his attempts at discussing the foreclosure case with Freddie Mac were rebuffed, which is unfortunately a very frequent tale with several victims of foreclosure who have had to deal with the mortgage giant. As a result, he decided to move his family back in and stop foreclosure by protesting the eviction, essentially forcing law enforcement to kick them out.

Even though the letter of the law isn’t on his side, de los Santos undoubtedly is receiving a lot of sympathy from countless citizens who question Freddie Mac’s role in the foreclosure crisis – especially revelations that the mortgage giant essentially placed bets on falling home prices and mass defaults while the crisis was taking place.

What makes the matter worse is that de los Santos and homeowners like him do not qualify for the recent mortgage loan settlement because loans owned by Freddie Mac and Fannie Mae are not included in the foreclosure fraud agreement.

Embattled Marine Resists Home Foreclosure is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Specifically, the report took a look at roughly 400 foreclosures in San Francisco County from January 2009 to November 2011 and examined them for errors, irregularities, and other signs of fraud or flaws in the process. Approximately 84% of home foreclosures reviewed contained what the report called “clear violations of law”, and nearly 66% contained at least four violations or questionable components.

The reaction was swift and brutal. Critics who have been attacking lenders and complicit entities for well over a year let loose again with salvoes targeting not only the lenders at the heart of these irregularities and violations, but also the state attorneys general who were, in their view, complicit with settling even though foreclosure abuse was so outrageously widespread.

In light – or in spite – of that, the foreclosure report deserves a second look to see if criticism is deserved.

The report was very clear that many irregularities were found in case files, and that is bad – especially when someone’s home is potentially on the line. But, that is not necessarily an indication that the foreclosure properties in question were illegally foreclosed – at least, in the sense that the homeowners were making payments on time yet were foreclosed on anyway.

Additionally, the sample size and breadth is very small and confined. The study only looked at just under 400 home loans in San Francisco, a state with one of the highest foreclosure rates in the country. A more-comprehensive study would have to be undertaken, and chances are, the rate of incidence would be lower than 84%.

With that being said, the report rightfully raised fresh alarm about the level of irresponsibility on the part of lenders and mortgage loan servicers. Many of these violations involved robo-signing, which is indefensible by any stretch of the imagination. Plus, 84% is entirely too high of a number, even if the sample size was small.

“Foreclosure in California” may not be a sweeping indictment of the system, but it is a powerful reminder of exactly why lenders and servicers are – and will continue to be – in the hot seat.

Recent California Foreclosure Report Gets a Second Look is a post from: Foreclosure Magazine - Read more about how does foreclosure work.

Sometimes good ideas are copied by others – which is not necessarily a bad idea. In this case, the federal government’s plan to convert thousands of government foreclosures into rental properties through a partnership with private equity investors is being copied (in a manner of speaking) by New Jersey.

New Jersey has been hit hard by the foreclosure crisis since it began with a bang in 2007. There are an estimated 35,000 foreclosure properties in New Jersey currently, roughly one out of every 3,340 units (and those figures may be low; some suggest there are upwards of 125,000 foreclosure properties). Most are concentrated in Ocean, Atlantic, Cumberland, and Salem counties in the south, with a heavy dose of foreclosures also in the Trenton state.

It makes sense, then, that the Garden State would want to find some way to alleviate the burden of so many foreclosure listings on the market while also offering affordable housing to its residents. Thus, the state is seeking to create a state agency that will purchase some of these home foreclosures and convert them into rental units or homes to buy. Approximately 10,000 homes will be converted in such a manner, according to current plans.

It will be funded through a combination of sources, such as an existing state fund, federal dollars, and settlement money from the recently-signed National Mortgage Settlement Agreement, and would be administered by the New Jersey Housing and Mortgage Finance Agency.

Will the program have success in its presumed goal of lowering the amount of foreclosure listings on the market today? More than likely, it will – if only because buying foreclosures and putting tenants or owners in them no longer makes them foreclosures. Home values could rise as a result of downward pressure being eliminated by fewer foreclosures on the market, and it is likely that homes will be divvied up, so to speak, to homeowners viewed as “responsible” by the agency – like teachers, firefighters, and police officers.

It is not entirely clear if the proposal will involve rental units, like the federal program, or homes for purchase, or a combination of the two. What is clear, though, is that the role of the government in influencing the foreclosure market is being established at the state level as well as the federal level – a fact that may have lasting implications for the market going forward.

Federal Approach to Foreclosure-Into-Rental Plan Has Copycat in New Jersey is a post from: Foreclosure Magazine - Read more about how does foreclosure work.