Causes and Consequences of the Foreclosure Crisis

1
Causes and Consequences of the Foreclosure Crisis

• A look at the effects of the 2007 collapse of
  the banking and housing industries.

2
Housing or Real Estate Bubble Definition

• Real property which rapidly increases to the
  point that unsustainable debt levels are reached
  relative to expendable income as well as other
  affordability indicators within the economy

3
Housing Bubbles How They Form

• Housing bubbles are created when fast paced
  growth in the housing market goes unchecked and
  spirals out of control
•  
• Factors include lenient and predatory lending,
  extremely low adjustable interest rates and a
  blinding speculative fever
•  
• Housing bubbles are generally undetectable until
  after the burst

4
Reasons For The 2007 Burst and Recession

• Adjustable interest rates reset to higher levels
• In 2007, 1.3 million subprime borrowers defaulted
  on mortgages and were submitted through the
  foreclosure process

5
The Domino Effect

• High adjustable interest rates
• Millions of foreclosed homes
• Decline in home demand and home value
• Housing industry jobs were lost
• Jobs connected to housing industry jobs
• were lost, etc

6
The Domino Effect

• Prime mortgage holders defaulted
• Banks accumulated more foreclosures than they
  could move, compounding the mortgage crisis
• Shareholders and investors panicked
• Lending was basically brought to a standstill,
  etc

7
Government Response

• The Housing and Economic Recovery Act of 2008

8
Government Response

• The Homeowners Affordability and Stability Plan

9
Foreclosure Help

• Talk directly with the lending institution

10
Foreclosure Help

• Talk to a HUD approved foreclosure avoidance
  counselor

11
Foreclosure Help

• Seek out state and local foreclosure assistance
  resources

12
Foreclosure Help

• Contact HOPE NOW which is an alliance of HUD
  affiliated Intermediaries

13
Foreclosure Help

• Contact The Homeownership Preservation Foundation
  which is also affiliated with HUD and provides
  foreclosure counseling and help

14
Foreclosures As An Investment

• Low-cost real estate foreclosures abound
•  
• Millions of foreclosed properties sit with a
  flooded banking industry
•  

15
Foreclosures As An Investment

• Every day, tens of thousands of homes are being
  repossessed
•  
• Foreclosure properties are being sold for 50 or
  less of their actual value

16
Foreclosure Investment Opportunities

• Short Sales
• Negotiate with banks on behalf of distressed
  homeowners

17
Foreclosure Investment Opportunities

• Public Auctions
• Bid against other competitors for foreclosed
  properties

18
Foreclosure Investment Opportunities

• Foreclosure Listing Services
• Normally found online
• Get the jump on other investors

19
Foreclosure Investment Opportunities

• Browse listings, photos and info
• Resources so you can invest with confidence

20
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