Where Is YOUR Government Handout?
Excuse my play on words in creating the term “OBOMBMODS.” Within the word, of course, connects our president Obama, the word bomb, and mods. In late 2008 in attempt to sort out our mortgage and foreclosure crisis, the government came out with a program called “Making Home Affordable.” This program was designed to lower mortgage payments for homeowners in default on their current mortgage. Borrowers are given a mortgage payment equal to 33% of their current gross income. In some cases borrowers are even granted principal reductions on their mortgage loan. (Not large enough to gain equity in the property.)Sounds like a good idea right?I think this is the most asinine idea I have ever seen. We are issuing loans and payment plans to borrowers based on jobs they may have only had for a few weeks. Also, there is absolutely no asset or cash reserve requirement. Homeowners can still live pay check to pay check! Any type of pay decrease or increase of living expenses and they lose their home! We are simply stalling the inevitable. Even with the new payment plan, borrowers still have no equity in their home. So if they have any financial troubles at all, they will be unable to sell their home. (Hence, more foreclosures to come.)Still think it is a good idea?
As I predicted, default rates are beginning to increase now, but the government still has not pulled these programs. With a combination of FHA loan defaults and loan modification defaults, some of the most incredible single family real estate oppurtunities are still yet to come… Let the fun begin!
In my previous email I discussed how we can take advantage of the government’s HUGE mistakes by implementing loan modification programs for homeowners in default. This month’s article explains how leverage in today’s market is such an incredible asset in itself.
When people talk about real estate, I always hear the expression: “Location! Location! Location!”. I always argue that the expression should be: “Financing! Financing! Financing!”.
What good is an investment property in an incredible location with a mortgage payment that exceeds the rental income?
In the recent real estate crash, investors and homeowners lost properties in some of the most desirable locations in the world due to payments they could not afford.
In an attempt to stimulate the economy, interest rates on home loans are as low as 3.5%. Buyers, in many cases, are still able to obtain 100% financing! I explained in the March article why this is another crazy government decision! Why not take advantage of it? If you sit on the side lines in hopes to see lower real estate prices you could miss out on these incredible financing opportunities.
Could interest rates be rising soon due to inflation?
Are we headed into an inflationary marketplace?
The government is currently injecting a ton of money into the marketplace through institutional bailouts and economic stimulation packages. If the government injects too much money into the marketplace we are headed towards another inflationary marketplace! Does anyone know what that means??? Yes! Real estate prices will rise!!!
After this occurs if you are sitting on LEVERAGED cash flowing real estate, you will have a much greater use for your capital at that time.
I cannot answer what those opportunities will be yet!
To be continued…
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