shortsaleil

Chicago’s Shadow Real Estate Inventory | January 24, 2012

A Wave of Foreclosure Homes to hit the Market

Remember your neighbor that lost their job 2 years or had wages reduced?  Well they have probably  missed mortgage payments too.  But that was 2 years ago.  How have they managed to stay in their home so long with out the bank foreclosing?

For a few years now there has been talk of a “shadow” real estate inventory or homes that are working their way through the foreclosure process before coming up for sale as REO or Real Estate Owned.  Roughly 15% of homes in Illinois are in some stage of the foreclosure process and this shadow inventory has been building up for over a year now and is a dam ready to burst.  In wake of the  “Robo-Signing” scandal, (fraudulent documents being signed to speed up the foreclosure process) a moratorium has been placed on foreclosures, stopping delinquent loans working their way through the foreclosure pipeline.  Since the scandal broke in the fall of 2010 many home owners haven’t made a payment in almost 2 years because the Attorneys General of all states have put a halt on many of the large banks.  The “Robo-Signing” law suit involving the 5 largest mortgage lenders ( B of A, Chase, Citi, Wells Fargo, & Ally) is about to be resolved and the foreclosure machine to start churning again.  2011 Foreclosures were down 34%  the lowest total in 4 years, now we could see them all in 1 year, the tidal wave that could be approaching.  The foreclosure crisis didn’t just disappear. Millions of home owners are still in distress, upside down, and dealing with adjusting mortgage rates.  Government backed mortgage modifications & refinances (HARP & HAMP) have been largely ineffective helping only around 1 million of our nations 30 million house holds.

So what does all this mean?  The banks and mortgage companies will start moving home owners past the delinquency state and through foreclosure again in the 1st part of the year and will come to market as REO sales in the 2nd half.  This means thousands of REO homes flooding the market.  Some estimates say that just 1 foreclosure in a neighborhood drops the entire neighborhood’s value by 30%. Think of how this will affect the you and your neighborhood.

I feel like a real Debby Downer with all these negative statistics, but there is also empowerment that comes from knowledge.  These statistics and numbers are real people and real families, they are our friends, our family, our neighbors, our community and they are in distress.  Now how can we help them through this frightening time and help yourself as well?  Everyone knows some one who was laid off during the recession and now we all know some one who is in danger of losing their home to foreclosure.  On my website www.webhomesearcher.com I have created a foreclosure prevention resource that helps guide distressed home owners through the process and all the foreclosure alternatives that exist.

Jeff Donnellan

Re/max

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