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Nov 04

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Real Estate Investing – The HAMPs are Coming… ARE YOU READY?

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When the mortgage bubble burst in 2009 the government came rushing to the scene with their HAMP Program ready to modify mortgages. As of January 2014, more than 1.1 million homeowners had received a permanent modification of their mortgages through this government’s Home Affordable Modification Program (HAMP), which began in 2009. The program was intended to help homeowners avoid foreclosure as housing prices sank and unemployment soared nationally.

 

TRUTH… The government put a BIG BAND AID on a fatal wound so it wouldn’t bleed out into the real estate market. After all the Government couldn’t let all those foreclosures hit at once it would cause the Wall Street Banks to go under… so they paced them. Thus the creation of TARP and then HAMP, a scam to support the banks by FOAMING THE RUNWAY in an effort to pace foreclosures. 

THE HAMP SCAM

– Most of these HAMP modifications involve interest rate reductions, and although HAMP modifications are called “permanent,” the majority of these reduced interest rates last for only five years.

HAMP requires lenders to take a sequence of steps—called a “waterfall” and explained below—to reduce the borrowers’ monthly payments to 31 percent of their gross monthly income. One of the early steps in the process is to reduce interest rates to as low as 2 percent.2 The reduced interest rate lasts for five years, after which it resets upward by up to 1 percent a year until it reaches the primary mortgage rate in effect at the time of the modification.3 For 2009 and 2010 modifications, the maximum rate is approximately 5 percent; it is lower for mortgages modified in 2011 and later years, reflecting the decline in mortgage rates. All other terms of the modification remain unchanged when the loan resets.

 You can read more information on the Hamp Modification Scam HERE…. I need to get to the meat of this post…

WHAT DOES THIS HAVE TO DO WITH WHOLESALING? 

THE ONE, TWO PUNCH!

The terms of HAMP mods include rate resets after five years, in 100 basis point annual increments — meaning that by end of 2015, those HAMP mods from 2010 could experience the first of three annual 100-basis point resets to bring the interest rate up to 5%.
Then a HELOC rate reset could add another $100 to $300 to a borrower’s monthly mortgage obligations.

THIS IS WHERE YOU COME IN…

Most borrowers will be able to handle the first two payment jumps—it is the third increase that may prove problematic. Consequently, we expect that reset issues will begin to manifest themselves in 2016 (when the 2009 cohort experiences its third increase, with many loans resetting from 4 to 5 percent)

I have already began advertising in the local paper and on craigslist to try to reach these homeowners. With many of these homeowners unemployed or under employed they will not be able to make these new payments and will land in foreclosure again. They have been set up and are about to fall victim to allow the government to release the  remainder of the foreclosures that they paced back in 2009 with the HAMP scheme.

Lease options and taking properties subject to the existing financing are the best wholesaling strategies with these resets. This will relieve the burden of the increased payment from the homeowner and save them from living the foreclosure nightmare all over again. If wholesalers catch these resets before they fall too far behind they could end up with a pretty nice wholesale deal and help a family avoid another foreclosure blow in the process.

 THEY ARE COMING TO A MARKET NEAR YOU… ARE YOU READY?

HAPPY WHOLESALING!

You will find the wholesaling strategies referenced in this post and have instant access the real estate contracts needed to implement these strategies in my new  EVERYTHING WHOLESALING GUIDE.

About the author

cstinson

Carol Stinson is a Real Estate Mentor, Author and Entrepreneur who continues to thrive in today's real estate market. Her concept of success is to never stop learning new techniques and then put what you learn into action expecting results. She is dedicated to helping others succeed by sharing what works in today's real estate market. Her strategies are effective, her techniques work and she is always updating them to conform to the ever changing real estate market.

Carol's biggest passion is people! Her love for others and dedication to help them succeed is genuine and ongoing. She created Real Wholesaling in an effort to help others find their way to financial freedom through real estate.

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