There’s no quick fix to protect your home – many companies claiming to offer loan modifications and foreclosure prevention have turned out to be scams. Countless struggling homeowners have been tricked, losing thousands of dollars that could have helped save their homes. The Federal Trade Commission (FTC) works hard to fight these fraudulent schemes, but they often only find out about them after homeowners have already suffered losses and lost their homes.
The expected 3.7 million upcoming foreclosures raise questions about their possible effects on the real estate market, stock and bond markets, and the overall economic recovery.
Don’t be fooled by the recent drop in foreclosure numbers. In April 2011, foreclosures were down 34% from the previous year, with 219,258 foreclosed properties compared to 332,209 in April 2010. This decrease doesn’t mean fewer homeowners are in trouble; instead, banks are just overwhelmed with a backlog. This slowdown is more due to delays in processing foreclosures than an actual improvement in the housing market.
Foreclosures have been climbing every year: from 1.3 million in 2007 to 2.3 million in 2008, 2.8 million in 2009, and 2.9 million in 2010. So, the big question remains, how many more homes will be lost this year? According to data from the Mortgage Bankers Association, around 3.7 million properties are seriously delinquent, suggesting slow growth in real estate values until 2013 and indicating that over 13 million homes might face foreclosure before the market stabilizes.
Pete Flint, CEO and Co-founder of Trulia, agrees that it will take at least another 18 months for prices to stabilize. He also thinks many Americans have unrealistic expectations about how quickly the housing market can bounce back. Ironically, Flint suggests that now might be a good time to enter the housing market despite potential short-term price drops.
In summary, the real estate market is in a fragile state. With at least four million homes still needing recovery, prices are likely to fall further. However, with interest rates at a 40-year low, financing a home purchase could be more affordable now than in the near future. For those looking for properties that offer positive cash flow and are willing to hold onto them for more than seven years, now might be a good time to invest.
If you’re struggling with an underwater mortgage, don’t lose hope. HopeNow.com reports that there were 1.76 million permanent loan modifications in 2010. Seek help from HUD-approved counselors by calling 1-888-995-HOPE. The HOPE NOW Alliance is a network of counseling organizations that offer comprehensive debt management, credit counseling, and foreclosure assistance.