Experts Say REO Can Be an Affordable Housing Resource
Some housing experts are trying to make the best out of a bad situation using rising foreclosures due to a weaker housing market to generate affordable housing opportunities for first-time low-income minority buyers.
The new market trend appears to get momentum as time goes by.
Gary Acosta, the founder of the National Association of Hispanic Real Estate Professionals, has teamed up with Jim Park, Asian Real Estate Association of America president and CEO, in establishing the first-of-its-kind minority-owned national REO management and marketing company, New Vista Asset Management.
Its mission, according to Mr. Park, is "to turn a bad situation into a positive one by using REO properties to create more affordable housing opportunities for minority homebuyers and other underserved populations."
The strategy, the executives say, is to leverage their "broad connections within the minority real estate practitioner community the nonprofit housing and counseling network, and interested mortgage lenders to create an accessible source of housing and suitable loan products for first-time homebuyers in underserved communities.
In light of data showing "minorities have shouldered the burnt of the losses in the subprime mortgage market meltdown with significant numbers of the higher cost loans to blacks and Hispanics expected to end up in foreclosure," according to New Vista, this effort is very timely.
If investors have in the past and will play an important part in bringing capital to minority neighborhoods, Mr. Park said, "We must work these communities to turn foreclosures back into the hands of families with deep roots there."
New Vista is lobbying for wider mortgage industry support.
Recent partners include the American Bankers Association and Freddie Mac, including New Vista in its alliance of preferred providers for ABA member banks.
"I believe this opportunity will give us broad exposure with banks that share our ethos and want to participate in a solution-driven community development endeavor that turns unfortunate foreclosure problems into wins for lenders, minorities and first-time homebuyers," Mr. Park said in a company release. "Done correctly, we can actually help lenders meet their CRA obligations and further enhance their supplier diversity goals."
Another REO market trend appears to be bulk provisions of affordable housing options through real estate auctions.
In June, over 200 homes were auctioned off by Hudson & Marshall of Los Angeles in the California cities of Bakersfield, San Diego, Santa Maria, Los Angeles, Victorville and West Palm Springs. Guaranteed with title insurance paid by the sellers and owned by national lenders and asset management companies, these homes sold "as is" were valued from $150,000 to nearly $700,000, adding to a total of about $65 million. The auctioneer said these homes sold at auction for significantly reduced prices. Yet many REO managers are looking into marketing this buying opportunity for both individuals and investors.
"We are truly in a buyer's market and purchasing a home through the auction process is a great way to find a deal," said Dave Webb, principal, Hudson & Marshall. These home sales, he anticipated, would sell to the highest bidders "at significantly reduced prices, because banks want to quickly move bad loans off their books."
RealtyTrac of Irvine, Calif., an online marketplace for foreclosed properties, reported that in April there were 30,505 foreclosure filings California, "the largest foreclosure total of any state for the fourth month in a row" at nearly twice the national average. So growing REO stock in one of the most expensive housing markets in the country has created resources of newly affordable housing.
Alexis McGee, president of Foreclosures.com, Sacramento, Calif., a real estate investment advisory and foreclosure monitory firm, sees the same trend elsewhere in the country.
Earlier this year she stressed in a company release how the high foreclosure rate has affected the mortgage industry and some of the nation's largest subprime lenders "in more than one way" ultimately generating tighter underwriting lender guidelines and less workout options for many homeowners in default or foreclosure.
"That means ... many more pre-foreclosure filings, more auctions and more REOs."
One example of efforts to make the best out of a bad situation, she said, was the Detroit auction of 450 REO properties in areas where housing prices were depreciating. A group of lenders with sizeable REO portfolios hired local auction experts to place bids for properties starting at only $1 with bidding deposit requirements at $3,000. Some of these properties located in dilapidated neighborhoods sold for $30,000 or less. It showed not-well-preserved properties in undesired neighborhoods can turn into an auction bargain.
"Don't expect to pick up a great deal on a great house in a great location at an REO auction," Ms. McGee said. "The well-publicized Detroit auction drew a huge audience of bidders and subsequent competitive bidding led many properties to sell at or above market value." (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com