So they say, equity-sharing would be a boon for everyone involved. Homeowners could stay in their houses and preserve their credit (assuming they stay current on the new loan). The neighborhood would avoid a foreclosure, which can depress property values. And the lender or investor could participate in the upside potential when the house eventually sells. Best of all, it wouldn’t cost taxpayers a dime.

A major reason the mortgage mess has gone on so long is that homeowners, lenders and investors assume their interests are at odds. An equity-sharing arrangement would bring all three onto the same side — and help solve America’s foreclosure crisis.

If you have any comments, let us know. For the full article in the New York Times, go here

http://www.nytimes.com/2011/01/06/opinion/06perriello.html?_r=1

While strapped primary-home borrowers receive more — including unsolicited loan-modification offers, lenders and government agencies have started a number of programs to make loans easier to afford. Yet every plan has the stated goal of helping just homeowners borrowing for “owner-occupied” properties.

Investors are never mentioned, but own nearly a third of homes in the foreclosure process, data on default and auction-sale notices, bank repossessions and the like suggest.

It has led some observers to question whether the foreclosure tide can really be tamed, absent some aid to investors.

Players Sidelined

Rick Sharga, senior vice president at foreclosure marketplace RealtyTrac, thinks all borrowers should be eligible for loan modifications.

“I can’t think of a single reason that you wouldn’t extend these loan-modification programs to investors,” he said. “Why not extend the net out as broadly as possible, rather than flood the market with more bank repossessions?”

The latest RealtyTrac data show that in October, U.S. foreclosure filings rose 25% from a year ago to 279,561. Of those, 86,664, about 31%, were on investor-owned properties.

But investment properties are apt to comprise more like half of home foreclosures, in the view of mortgage auditor Moe Bedard, president of Loan Safe Solutions, in Corona, Calif. That’s because, he says, many borrowers don’t tell the lender that a property is an investment.

A few lenders offer to do short sales and deeds-in-lieu (of foreclosure) for some investment-property owners, says homeowners’ loan consultant Eric Rice, chief executive of DyerBeech Enterprises, in San Diego. But he says loan modifications — such as reducing an interest rate or extending the term — have been rare and slow to proceed.

Out of 100 housing investors looking for loan modifications, he says maybe 15 will receive them and it usually takes “five to six months.”

“It’s not helping anyone by not helping everyone,” he said.

But Mark Leyes, spokesman for the California Department of Corporations, says the foreclosure problem is so large, lenders and government agencies have had to focus their approach. The department has been working with 10 California lenders to encourage loan modifications.

“It’s not escaped our notice (that investors aren’t addressed), but our focus has been on owner-occupied properties. We’re trying to preserve people’s homes,” Leyes said.

Sharga thinks some lenders have wrongly shunned investors as scapegoats for housing’s bubble and bust.

The Federal Deposit Insurance Corp.’s primary focus has been on helping borrowers who are owner-occupants, thus “stabilizing neighborhoods,” according to Andrew Gray, a spokesman for the agency.

“These loans are well-suited for a streamlined process where the borrower’s income and property value can be readily documented,” he said. Investment homes “require more attention on a loan-by-loan basis.”

Numbers Game

In the view of some loan-modification specialists, halting as many foreclosures as possible is the best way to address the slide in real estate prices, and collateral damage such as reduced property-tax rolls, underfunded schools and destroyed neighborhoods.

Rice, for instance, says when an investor loses a home to foreclosure it hurts two parties — the renter who gets evicted from it and the investor.

He suggests that lenders temporarily reduce installment amounts investor-owners pay. “A permanent change isn’t deserved, but a three- to five-year plan would make sense to get payments down to a break-even level (with rents) while we get through this crisis,” he said.

Sometimes, getting borrowers to come forward and seek a loan modification can be a problem because they don’t want to admit they’re in trouble, says Salvatore Buscemi, managing director of Dandrew Capital Partners, a distressed-real-estate investment fund in New York.

Treading Water

Buscemi buys defaulted paper and repossessed properties from lenders. He says he’ll negotiate with any owner on a mortgage he holds — an investor or primary resident. But he says investors walk away more often than owner-occupants, as “it doesn’t hurt them emotionally.”

Bedard, who has many investor clients, calls aid bias toward owner-occupants unfair. Many investors “just want to work it out to where they’re not underwater,” he said.

An investor might hold five or 50 homes, he says, so saving those can have more market impact than saving one primary residence.

Investor Jae Kim, with four Arizona homes, is working with Bedard’s firm to seek aid. Four months into negotiating with his lenders, he still can’t tell if his loans will be modified.

“I think every borrower should be treated the same,” he said. “They’ve all put their hard-earned money in, whether it’s for a retirement home, investment or primary home.”

Keeping your existing house when you buy a new one could be THE most profitable financial decision you could make. Consider the following: 1. Second stream of income: When you move to another place and keep your current house as a rental, this gives you an extra stream of income. 2. Pay less tax: Your rental property produces business income. When you have a business, you are entitled to tax write-offs.

1. Second stream of income: When you move to another place and keep your current house as a rental, this gives you an extra stream of income.

2. Pay less tax: Your rental property produces business income. When you have a business, you are entitled to tax write-offs. This could save you a lot of money that you would normally pay to CCRA (Revenue Canada).

3. Fast wealth: Tenants will pay off your mortgage in a rental property. Your net-worth will grow without you having to save out of your own income. When you have one or more tenants there is a team effort in building your wealth, fast!

4. Bargain priced: You will never again be able to buy the same type of property for the amount you paid for it originally. The value of all the other houses have gone up along with yours. You already own what an investor would consider a bargain in the current market.

5. High rate of return: The rent you can charge for your house is based on the current market. Rents have gone up but the cost of your house is still what you originally paid for it. You are getting a higher return on investment. In the current market you would have to spend a lot more to get the same rental income.

6. Guaranteed income: If you are willing to make some small changes to your house so it meets the standards required for disabled people, you will have a long list of potential tenants waiting for you. In many cases, some government agency will be paying their rent. You will get a good, stable, low-maintenance tenant. You will also be helping someone in need. If you need money for the renovations, you can re-finance as much as 90% to 100% of the market value of your house. Government grants may also be available.

7. Increased tax write-offs: In most cases, you can write off the interest paid on the mortgage of a rental property. If you keep the mortgage as high as possible, you maximize the tax write-offs.

8. Pay off your own home faster: Keep the mortgage on the rental property as high as possible by re-financing to the max as the value goes up. Use that equity to pay off the home you live in, faster.

9. Tax-free retirement income: After your house is paid off quickly by using the equity in the rental property, you may be able to use the refinanced cash as a tax-free retirement income. Borrowed money may or may not be taxable. Check with your accountant.

10. Gain freedom from the slavery of a J.O.B.: It takes far less time to maintain rental properties than the amount of time you would spend in a job. If you build up your portfolio of rental properties to 5 or 10 and pay them off (or keep refinancing), you will have as much or more income than your present job. You can be your own boss, work only a few hours, spend time with your family, and really enjoy your life.

These strategies will not work for everyone. Before you implement your plans, check with an accountant, lawyer, mortgage broker or other professional. You may need to work with someone. Use your children, parents, brothers, sisters, good friends as a co-signer or co-investor. Grow wealthy together, with the people you love.

What are tax sale properties?

What are the advantages/disadvantages?
What are the risks? How do you reduce them?
What are the steps in detail on how to approach this?

OK, if people don't pay their property taxes, then it reverts to the city. About twice a year the assessor's office publishes the delinquent taxes in the paper and there's an auction. So if you didn't pay $500 of taxes, then someone could snap up your house for $500 for a $100K home! There is a redemption period (varies state to state) where the owner can scrape together the money. If they do, you get like 18% interest on your $500 and they keep the property.

Disadvantage is (and this is the major one) if the people who lost their house are really ticked off and vandalize it or come after you for "stealing" their house.

I bought a lot once on tax sale. I just talked to the assessor and asked what all was up for sale in my town. I got a building lot for $100. They just want to get it back on the tax roll.

If you pick the "right" kind of property, it can be lucrative. I sold my lot 6 years later to a neighbor for $800. Not a bad return!