In the past two years I have focused my business on the listing and selling of distressed properties before they were to fall into foreclosure. Through my experiences I have found the following changes since the crumble of the mortgage market began.

Approximately 2 years ago I started listing and selling distressed property before they went into foreclosure. At that time the lenders were willing to review the files, had a vehicle set in place whereas you could get these properties accepted in a relatively short time and the seller's could save their credit.

I originally focused on the Fort Bend County area but the business model pushed me out into all areas around Houston. I find the hardest part about focusing on this particular sector of the market is actually finding the people in distress. I have yet to discover a good vehicle to find the homeowners to offer this service. I have written a number of articles and posted them on the internet and done some print advertising but I get the impression that people are not aware of how easy the process can be.

I have also found the following to be true:

1. Government loans such as HUD and FHA have unique guidelines and will take more time to get through the process.

2. Most homeowners are not aware of the short sale process and give up and allow their homes to be foreclosed.

3. All lenders have a department that handles short sales-loss mitigation.

4. There is a growing market place for a short sale home to be sold.

5. Most homes can garnish an offer within 30-60 days of listing the property.

6. Late 2007 a law was passed whereas the homeowner is no longer liable for the capital gains difference between the loan amount and the amount garnished through the sale.

7. The short sale process is free to the homeowner.

8. HOA's can and will put a lien on the home and that has to be paid by the buyer in order to have the short sale accepted.

100% financing was and could be a good idea however there were a number of people offered this including rolling back of closing costs who were positioned in homes that they could never afford. They were told that before the ARM and balloon payment were to kick in the house would appreciate and they would have realized equity and could go back and refinance with a 30 year fixed rate. This is an untruth in the respect that typically realized gain in most instances takes 8 to 10 years. Further with the alarming amount of homes falling into foreclosure the homes are now depreciating instead appreciating.

Most of the new homes were appraised as empty lots or construction loans and the first year the homeowner was in the home the house would reappraise at the completed construction amount and the taxes doubled. The ARM continues to adjust upward, the payments in most instances would double in just two years. From my experience that would mean a 3/2 home with a mortgage balance of 150,000.00 could conceivably cost a homeowner $2500.00 a month. To put that into perspective you should be able to buy a $300,000.00 home with a 30 year fixed mortgage for that mortgage payment.

It becomes a hopeless situation whereas the homeowner will try to list and sell their house but builders are still constructing and they are slashing their prices on new homes in the area. The homeowner is stuck upside down selling a pre-owned home with no incentives.

The second as referenced above is the new home builder who with each day has mounting expenses on the spec house. Each month that home looses value on their books and the builder is desperate in a market to move "inventory". Most new home sellers, even in the Houston area, are experiencing a 30%-40% drop in sales.

Now here comes the lender. The lender has a worthless paper in the secondary market that is crushing their bottom line. The lender wrote and sold Real Estate Investment Trusts that are continually being written off. It stretches further to the brokerage houses who when selling these "REIT's" found them to be so profitable that they elected to invest in those as well. These Real Estate Investment Trusts were shares of these mortgages that were paying 9% interest and it seemed as if everyone was getting on board. As the lenders are writing off these REIT's investors are now pulling out of the secondary market. Here in lies the problem with the mortgage market. The prime lending rate may be 2.25% however banks are cautious to lend any money at this juncture.

Typically when and if they are to lend, they are now lending at "prime" plus. Whereas about 6 months ago that represented prime plus 2 it's now reset to any arbitrary numbers creating an interest rate upwards to 13%. To coin a phrase don't believe what you read in the press. 2.25% represents a small fraction of the lending institution to institution. The little guy's interest rate is escalating.

The next culprit in the equation is the overseas investor that sees the dollar falling in value and the interest rate on their investment dollars shrinking and you have an implosion in the lending market.

One very serious cure to this problem would be to save more homes from falling into foreclosure creating a sound foundation to the real estate market. The less homes falling into foreclosure creates the following:

1. New investment dollars into a sagging market.

2. Savings of the foreclosure fees to the lender.

3. Less dollar amounts written off on the lender part.

4. Homeowners with better credit scores.

5. Homes being "placed" instead of sitting on the market for an additional 6 months as the foreclosure process proceeds.

I can not stress enough how important it is for the homeowner to find alternatives to foreclosure. How important it is for these homeowners to find a real estate agent savvy in the short sale process and how important it is to short sale a home instead of foreclosing it. The lenders have people ill versed in the importance of this process to everyone. The biggest culprit is the government. The government loans are the hardest to short sale. Everyone needs to be on board in order to save the state of the economy.

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