Older homeowners are now using reverse mortgages to avoid foreclosure.
A surprising number of senior citizens over 60 still owe on their homes and the numbers have risen to a whopping 22 percent.
The current downward real estate market has caught a lot of these seniors by surprise as they struggle to pay high interest rates on sub-prime loans with limited incomes.
This brings up a touchy subject with a lot of real estate investors and lenders.
When do you take a hands off approach to investing in such properties?
How to you work with these older homeowners to help them stay in their homes, rather than throwing them out?
I’m going out on a limb here but I’m going to say it, even if it might be considered a sermon. ( It will be brief)…
I don’t think old people should lose their homes. I don’t think we as investors should take advantage of older homeowners who may not have understood exactly what they were signing when they took out sub-prime loans.
Why? The Bible tells us not to take widows’ houses. I believe there will be strong repercussions for those of us who don’t heed that warning. And it might not necessarily be later…
And this may be one of the reasons why foreclosure investing and short sales may be frowned upon by many who don’t understand what we do.
But the Wall Street Journal has an interesting article on how senior homeowners in trouble can keep their homes by negotiating with loss-mitigation departments using reverse mortgages as leverage. Banks and lenders are viewing this solution more favorably.
Could one reason be they may have a lot of explaining to do on why poor people were allowed to sign loans they can not pay?
Or perhaps another reason is it will cost less to take a smaller loss now rather than a bigger loss after these properties go into foreclosure.
Housing attorneys are reporting some lenders are willing to take 60 cents on the dollar, which is not a bad compromise.
That brings up my final point. As we go into 2008 there will be plenty of investing opportunities out there for all of us. We can invest wisely, and with a clear conscience knowing we’re not taking advantage of someone’s grandmother.
Anyway banks and lenders will have more properties to dole out than they really want to acknowledge. That’s where we’ll come in for our real estate investing bonanza.