Foreclosures on the market

July is certainly good news, it came with predictions from economists that foreclosures will likely return to the market. Economists believe the drop in foreclosures was a result of a 'market leveling effect', which happen when supply and demand for a product draw closer to each other. If they are correct we may be seeing the first signs of real estate market recovery. When real estate prices began falling last year, no one could predict how drastic the effects of foreclosure would be on the real estate market. Distressed homeowners foreclosed on their homes and property values along with consumer confidence plummeted in historic rates.

In one form or another either through free market impacts or direct subsidies from the government paid by tax dollars, these bailout plans all asked the cautious to support the reckless. Many of the early bailout plans called for changing the terms of the mortgage note. This might have been easy in the days when banks held mortgages in their own portfolios, but it was much more difficult once these mortgages were bundled together in collateralized debt obligations and sold to parties all over the world. Even if it would have been possible to easily change the terms, the resulting turmoil in the secondary mortgage market would have caused higher mortgage interest rates.

There are two reasons a bank may accept a short sale: 1) the costs of foreclosure can cost a lender up to 18% of the loan amount, and 2) lenders do not want to carry properties on their books. Not all homes qualify for a short sale, says our personal financial expert Nathan Threebes. 'There must be evidence that home values have dropped in your area, the loan must be in or near default status, and the seller must show that financial hardship and a lack of assets prevent her from making up the difference,' Threebes says. There are two major consequences to conducting a short sale.