Bank Owned Foreclosures

Mary Anne from Lake Wales called with a great question. She is trying to find an investment property in Polk County. She has been looking at bank owned foreclosure properties and keeps running into the same situation. First of all, the banks are not taking care of the properties. Secondly, the banks are not willing to make any sort of deals. Mary Anne called Robert Palmer to ask him what is the real deal with these foreclosure properties?

Mary brings up a good point. As a lender this is difficult for us because if the banks would get all foreclosed homes back in shape and back on the market there are people that want to buy them. There are people like Mary who want to buy an investment property. There are also a lot of first time home buyers out there looking for a house. We are actually seeing inventory shortages in most of Central Florida. The banks are just holding these properties. I can't tell you how to fix the problem, but I can tell you why they are doing it. The way this service industry works you have a bank that is the servicer and they are the ones collecting the payments then you have someone else who owns the underlying asset. This could be Fannie Mae or Freddie Mac and the bank only makes money right up until they sell the loan. The banks play hard ball in order to not accept their losses and they are asking too much for the houses and they are not repairing the houses. Fannie Mae and Freddie Mac are starting to put rules out on this. We may start to see some changes soon. Unfortunately, a lot of the foreclosures are old subprime loans from 2005 to 2006 and there is no motivation to get the servicers to sell. In some cases the loans have been sold back and forth so many times it is hard to even figure out who owns it and who to push to get the process rolling.