60 Minutes Reporter Scott Pelley story on the coming second wave of mortgage defaults. “Where’s The Bottom?”

“One out of every ten Americans is behind on their mortgage.”

If you think the subprime mortgage foreclosure crisis was bad, wait until the second wave of foreclosures hits the housing market.

Alt A and Option ARM Loans that were originated in 2005-2007 are ready to reset. When the interest rate resets on an ARM, the monthly payment can go from $800 per month to $1,500 per month. This is a ticking time bomb that is now due to go off. Predatory lending practices enticed borrowers into loans with ?teaser rates?. A mortgage that has a teaser rate loan of 1% can go to 9% overnight. Some of the loans were liar loans that the home buyer could not actually afford.

The US mortgage bubble is only halfway through bursting. Things are going to be much worse that was thought.

?

?

?

As scary at this story is – there his hope. There is a company that helps troubled homeowners keep their homes. If you know someone who is worried about paying their mortgage send them to this website:

http://www.legaleagleloanmods.com

There is a free e-book that details options for distressed homeowners.

The US is in a crisis.

You can help.

Help others and make money.

http://www.legaleagleloanmod.com

Part of the economic stimulus package signed into law is a tax credit for new home buyers.

For people who have not owned a home within the last three years, the new tax credit will refund them $8000 on their 2008 or 2009 taxes if they buy a home. That money can be used to recoup the closing costs or to buy needed items for the new abode.

So, how do you qualify?

• First time buyer – no home ownership within the last three years.
• Buy the house between Jan 1, 2009 and Nov 30, 2009.
• Live in the house for at least three years – or pay the credit back.
• Income restrictions – buyers must make less than $75,000 for a single person, $150,000 for couples.
• How to apply? Do your taxes. Claim the purchase on your return. Returns can be amended for taxpayers who already filed their 08 return.

Many are hoping that the credit will have a domino effect on the market. New homeowners will need to buy furniture, lawn equipment, etc. Those retailers and manufactures will be able to pay their workers who will be able to spend money into the economy.

I see this as a real opportunity for those people who can take advantage for the situation we are facing. I attended a real estate investor meeting where they were discussing how they can take advantage of this credit. One strategy is to sell homes to people who are renting their houses now. For those folks this is a chance to get into home ownership at a time when prices are down. Once investor told me he was able to sell to a lady for a monthly payment of $200 less than her monthly rent payment. For this investor, that is a house that he no longer has to maintain as a landlord. But the seller is receiving monthly payments for the note he is holding.

References

http://money.cnn.com/2009/02/13/real_estate/homebuyer_tax_credit_finalized/index.htm