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An REO is real estate owned by the bank. The term REO can be defined as a specific type of property, but in real estate this acronym actually indicates that the property in question has been foreclosed on and has been taken back by the mortgage lender or trustee.

Over the past few years, buying REO foreclosures has gone though a dramatic change and has witnessed a steep rise in sales. In comparison to other forms of real estate investments, bank foreclosures are creating many new wealthy investors due to the potential return on investment these homes can generate. In addition, the number of bank foreclosures has increased dramatically in numbers which allows buyers to hand pick properties that meet their specific needs and investment purposes. In the marketplace today, investing in REO foreclosures has become a lucrative business for real estate investors.

Benefits of Buying REO Foreclosures

Buying REOs can be a very lucrative investment opportunity and a great way to get the best deal on a new house. There are a variety of benefits to buying REOs including:

Minimum Risk - Among the different types of bank foreclosed properties - pre-foreclosures, foreclosure at auctions or HUD foreclosures — REOs offer the buyer the least amount of investment risk. REOs are generally properties that have survived a foreclosure auction and now belong in the lender’s inventory of non-performing assets. The banks maintain these properties and generally are free of liens and other encomberances.

Availability - Compared to other foreclosure properties, REOs are easier to locate. All you need to do is to contact a mortgage company or bank. They will provide you with a list of REOs in your area. Many banks have their own REO Departments and agents that will work with you directly to find properties available.

Below Market Value - One of the prime benefits of buying a REO property is most REO properties are available at below market value. The reason for this is that the bank is liable for the taxes on the property and they generally prefer to sell it to you at below market value and get it off their books.

Great ROI-Return on Investment - Reselling a foreclosure home can provide a great return on your investment. You may not be interested in buying a foreclosure property for yourself, but you still have the option to make a profit by reselling it. After all, this has been the most frequent practice used by many real estate agents to generate income. Moreover, a little renovation work can further add to the value of the property and generate higher returns.

Buying foreclosure properties is one of the best ways to generate profit in the real estate market today. However, before you finalize your purchase, make sure you do your due diligence and research the property so you feel comfortable with the purchase. It’s important to research as much as you can about the area, current housing prices, planned developments, proximity to stores, the town, etc. This research can save you many headaches and problems down the road.

When SEG was started it had a mission of erasing retirement poverty through real estate investing. SEG has released SEG Advisors.Tv to further its vision which offers investors free access to real estate investment videos from leading advisors. Videos are being added constantly and cover Tax Strategy, Real Estate Investing, Asset Protection, and Asset Management. A forum is also available which covers similar topics in a live setting in the SEG community.

For more information on SEG Advisors.Tv.

After a flurry of foreclosures over the last 18 months the fallout from toxic subprime loans has started to wain. Foreclosure investments all the rage have impacted REO portfolios held by banks to just under 900k. This fact does not note the second wave of foreclosures to hit the market between 2009 to 2011 expected to be around 4 million.

The reason for the second waive of REO and Foreclosures is the adjustable rate prime mortgages structures on 3, 5, 7 and 10 year fixed periods after which may reset into substantially larger payments based on 1 - 2 percent rate increases or balloon forcing an accelerated payment. While mortgage backed securities typically utilized a 3% default rate for valuations some lenders are finding 12% of their portfolios in some stage of delinquency or foreclosure.

The office of the Thrift Supervision and the Controller of Currency released a 3rd quarter report putting a scare into the already fragile housing market illustrating new findings. The report, which covers the third quarter of the year, was the second such indication of the effectiveness — or lack thereof — of new efforts at foreclosure mitigation. It examined the portfolios of nine national banks and five thrifts, including JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), and First Horizon (NYSE: FHN), representing more than 60% of all U.S. mortgages outstanding.

As detailed in the report, the first since the initial tabulation was put out in June, new foreclosure initiatives actually fell by 2.6% to 281,298 in the September quarter (largely due to mortgage relief programs). But a perhaps more important metric, foreclosures completed, increased by 8%, while the total number of foreclosures in process rose by 11% to 617,642.

There was also a disturbing new trend in the report released by Comptroller of the Currency John C. Dugan: More than half of the mortgages modified in the first quarter to benefit struggling borrowers had fallen back into delinquency, once again more than 30 days past due by the end of September.

Real estate investments in the foreclosure and reo space are heating up. For more information on Foreclosure investments contact Stone Equity Group

Financially troubled homeowners will get an insight into the mortgage foreclosure process and advice on avoiding it at a workshop scheduled Saturday at Gilbert Civic Center.

The workshop, part of a Valley-wide effort by the Leadership Centre and the Arizona Foreclosure Prevention Task Force to stem the rising tide of foreclosures, is aimed at teaching families about crisis budgeting and strategies for keeping their homes.

Residents who live in neighborhoods plagued by foreclosed properties will also get information on how to maintain their own property values amid the blight that often comes with abandoned houses.

Several speakers are lined up for the event, including representatives from the Don’t Borrow Trouble Campaign and Arizona Saves. The goal is to help people before it’s too late, said Cheri Horbacz with the task force, which also plans a workshop Jan. 10 in Mesa.

Similar workshops elsewhere in the Valley have brought in crowds of 500 people; one in Glendale drew 1,800.

Participants will learn how to talk to their lenders about loan modifications because about half of homeowners facing foreclosures fail to talk with their lender during the process, said Patricia Garcia-Duarte, task force chairwoman.

“We want to make sure people feel comfortable. The bank is calling, but they may have an option,” Garcia-Duarte said.

Beleaguered owners will also learn how to save money, and maybe their homes, even when facing a foreclosure. A class will teach 90-day crisis budgeting, said Jennifer Quillin with Arizona Saves.

Quillin said many lenders require money up front if a loan modification is agreed on. Even if terms can’t be reached, homeowners should still trim their budgets to save money, she said.

“If they are not able to save their home, they’ll need that money to move out,” Quillin said. “It’s not a ‘no bill holiday’ when you can’t make a mortgage payment.”

Speakers will also touch on the tax ramifications of foreclosures and what to expect during legal proceedings.

Mark Lines, an attorney with Shaw and Lines, will speak on trustee sales and personal liabilities that could be retained after a foreclosure.

Organizers hope people will leave the workshop energized to survive the down market.

“They’ll walk out feeling like they are the CEO in charge of their company and no one cares more about their money than they do,” Quillin said.

By Dan Levy

Dec. 11 (Bloomberg) — U.S. foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said.

A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month, the seller of default data said in a report today. That’s the fewest since June. Filings fell 7 percent from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.

“We’re going to see a pretty significant storm next year,” Rick Sharga, executive vice president of marketing for Irvine, California-based RealtyTrac, said in an interview. “There are two or three clouds that suggest a pretty heavy downpour.”

Rising unemployment, expiring foreclosure moratoriums and state efforts that “run out of steam” will push monthly filings toward the record of more than 303,000 set in August, Sharga said. The number of homes that revert to lenders, the last stage of foreclosure and known as “real estate owned” or REO properties, will increase to 1 million from as many as 880,000 this year, he said.

Job Losses

“The forces leading to foreclosure are hard to offset in most cases and impossible in many,” Robert Hall, a Stanford University professor and chairman of the National Bureau of Economic Research committee that calls the beginnings and ends of recessions, wrote in an e-mail. “Job loss is a major source of defaults at all times, and job losses are running at extreme levels now.”

Initial jobless claims increased to 573,000 in the week ended Dec. 6, the highest level since November 1982, while the number of workers staying on benefit rolls reached 4.429 million, also the most since 1982, the Labor Department said today. U.S. companies slashed payrolls by 533,000 last month, the fastest pace in 34 years, for a total of 1.9 million job cuts so far this year.

“The labor market is facing its worst crisis since 1982, and it is certainly not over yet,” said Harm Bandholz, a U.S. economist at UniCredit Markets and Investment Banking in New York.

Home prices have fallen by about a fifth from the mid-2006 peak, according to the S&P/Case-Shiller home price index.

‘Devastating Consequences’

“The decline in prices and its devastating consequences” will continue next year with no indication of when they will stabilize, Hall said. Programs that modify the terms of loans, including efforts by Fannie Mae, Freddie Mac, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. can’t help thousands of borrowers, he said.

“Something like 70 percent of subprime foreclosures are beyond the reach of modification programs because the owners are investors, because the owner is in default for the second time on the property, or because the owner has disappeared,” Hall said.

The share of mortgages delinquent by 30 days or more in the third quarter rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs, the Mortgage Bankers Association said in a Dec. 5 report. The gain in delinquencies was driven by an increase in loans with payments 90 days or more overdue.

No Improvement

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group.

In November, one in every 488 U.S. households received a foreclosure filing, RealtyTrac said. Nevada had the highest rate for the 23rd straight month with one in 76 households in some stage of foreclosure, more than six times the national average. Filings more than doubled from a year earlier to 13,962.

Florida had the second-highest rate, one in 173 households, and the second-most filings at 49,190, an increase of 68 percent. Arizona had the third-highest rate, one in 198 households, and ranked fifth in total filings with 13,136, up 128 percent.

California, Michigan, Georgia, Ohio, Colorado, Utah and Idaho also ranked among the top 10 highest rates, said RealtyTrac, which collects property data from more than 2,200 U.S. counties that represent more than 90 percent of the population.

California

California had the most filings with 60,491, up 51 percent from a year earlier, and a rate of one filing for every 218 households, more than twice the national average.

Michigan ranked third in filings with 14,594, up 27 percent, and had a rate of one for every 309 households, according to RealtyTrac. Nevada, Arizona, Ohio, Georgia, Illinois, Texas, and Virginia were among the top 10 states with the most filings.

New Jersey had the 15th highest rate, one in 622 households, and had 5,582 filings, up 32 percent from a year earlier. New York had the 39th highest rate, one in 3,040 households, and had 2,601 filings, a decrease of 55 percent, RealtyTrac said.

Florida had three metropolitan areas among the top 10 highest rates, including Cape Coral-Fort Myers in first place with one in 59 households in a stage of foreclosure. Fort Lauderdale was seventh at one in 117 households, and Port Lucie- Fort Pierce was eighth at one in 118 households.

Las Vegas ranked second at one in every 61 households in a stage of foreclosure.

California had six metro areas in the top 10, led by Merced in third place with a rate of one in 76 households in a stage of foreclosure. Modesto, Stockton and Riverside-San Bernardino ranked fourth through sixth, Bakersfield was ninth and Vallejo- Fairfield was 10th, according to RealtyTrac.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net
Last Updated: December 11, 2008 12:33 EST

Reo Foreclosures and foreclosure investing are the basis for real estate investing in today’s market.

By DAVE MICHAELS / The Dallas Morning News

WASHINGTON – Even as banks streamline programs to renegotiate troubled mortgages, efforts to help Texas homeowners are being hindered by the state’s fast-track foreclosure process, according to housing counselors and government officials.

In other states, foreclosure can take as long as four months, giving the borrower more time to negotiate a better loan or catch up with missed payments. But in Texas, the process starts sooner and may take as little as 41 days to complete – the quickest in the country, according to a 2006 study by the Texas Department of Housing and Community Affairs.
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“The biggest obstacle we have in Texas is we are a very fast foreclosure process state,” said Linda Davis-Demas, assistant housing director for the Consumer Credit Counseling Service of Greater Dallas, which works with borrowers. “We are always up against the gun in regards to that.”

Texas’ foreclosure laws are so adverse to struggling homeowners that state Attorney General Greg Abbott plans to push the Legislature next month to lengthen the time homeowners have to “cure” a default, from 20 to 45 days.

Under state law, a homeowner who doesn’t catch up on payments after receiving the 20-day notice can lose his or her home.

Mr. Abbott, who obtained a predatory-lending settlement against Countrywide Financial Corp. that could lead to more affordable loans for 30,000 Texans, said the 20-day window is far too short in the current economic environment.

“Twenty days, when you count the fact that people have things going on, that is just real short notice to get anything done,” Mr. Abbott said in a phone interview. “Forty-five days more than doubles the length of time.”

Texas’ residential foreclosure laws haven’t changed since 1984, after state lawmakers decided borrowers should be given 20 days before foreclosure could start, said Judon Fambrough, a lawyer and senior lecturer at Texas A&M University’s Real Estate Center.

Texas mortgage bankers don’t think the law needs to be changed now, said Larry Temple, general counsel for the Texas Mortgage Bankers Association. Mr. Temple said mortgage servicers are “anxious” to help struggling homeowners.

“We believe the time frames now are pretty fair and reasonable,” Mr. Temple said. “It’s after the borrower is in default and has failed to make a payment or two that they are given notice and are in default. If they don’t [cure it], then comes the foreclosure.

“You put all of that together, and in most cases the borrowers are 90 or 100 days delinquent,” he said.

Housing crisis

The housing crisis has been most acute in states such as California and Nevada, where many borrowers took on exotic loans to finance homes that always seemed to appreciate in value.

The foreclosure process takes longer there than in Texas, indicating that more time doesn’t necessarily mean borrowers will find a way to save their homes.

Last week, the Mortgage Bankers Association reported that 11.5 percent of subprime loans in Texas had either started the foreclosure process or were more than 90 days behind in payments. The figure was 9 percent at the same point in 2007, according to the MBA, which says state foreclosure laws can complicate the loan-modification process.

Dallas-Fort Worth had more subprime loans than Houston and San Antonio combined, according to a study by the Federal Reserve Bank of Dallas. Many of the area’s subprime borrowers got adjustable-rate mortgages, whose interest rates reset to much higher levels after two or three years.

Forrest Brannon of Dallas was one such borrower.

Mr. Brannon, a 78-year-old veteran, is running out of time to save his home after he got behind on his monthly payments, which almost doubled in recent months, from $379 to $700.

Mr. Brannon said his finances were imperiled when he and his wife had to spend more money on health care, including a $3,000 bill for dental work. He got behind on his mortgage, then received a notice his home would be sold about a month ago.

First Franklin Loan Services, his servicer, has agreed to work with him, Mr. Brannon said. But he has less than a month to find a solution, he said.

“I can’t hardly write, and now I’ve got to send bank statements and fax forms,” said Mr. Brannon, a former postal worker who lives off disability from an injury he sustained on the job. “I feel I should have more time to get these mortgage payments together. The thing about it is, I could pay a little extra and get caught up.”

Bill Halldin, a spokesman for First Franklin, said he couldn’t discuss Mr. Brannon’s case specifically. But he said the company reaches out to borrowers “dozens of times” before initiating foreclosure. The information includes referrals to mortgage counseling services, he said.

“Unfortunately, often borrowers do not respond to our requests and in some instances [we] are unable to work out a solution,” Mr. Halldin said.

Vexing problem

Mr. Brannon’s experience illustrates a problem that is vexing lawmakers and housing experts. Despite widely publicized efforts to rescue troubled homeowners, foreclosures are rising, and experts are divided over whether loan workouts are working.

A report this week by federal regulators showed that more than half of borrowers whose loans were modified in the first half of 2008 have since fallen behind on payments.

“This raises questions … about what modifications work and what ones don’t work, and what else needs to be done,” said Bryan Hubbard, a spokesman for the Office of the Comptroller of the Currency, which regulates national banks.

Federal Deposit Insurance Corp. chairman Sheila Bair, a leading advocate of loan modifications, said many servicers still aren’t changing loans enough to make them affordable.

Sherry Randall, office director of housing for Acorn Housing in Dallas, agreed: “A lot of them are being stuck on repayment plans or given loan modifications, where there are changes but the payments are still high.”

Some are tempting foreclosure even as they wait for new loans. That’s because most servicers are modifying loans for only the most delinquent borrowers – those who are more than 90 days behind. By that time, the foreclosure process could have already started for some Texans.

JoAnn DePenning, statewide coordinator for the Texas Foreclosure Prevention Task Force, said Texas should push to include information about foreclosure-prevention resources with notices that are sent to delinquent borrowers. Mr. Abbott’s recommendation “is the first very strong push to change our process,” Ms. DePenning said. But “if you are just saying we are giving you longer and aren’t changing any other part of the process, you are delaying the inevitable.”

Staff writer Jessica Meyers in Dallas contributed to this report.

Job losses, declines in work hours, and other financial strains due to the deteriorating economy — more than risky loans — are now driving up mortgage default rates, economists say, and threatening to trigger another giant wave of foreclosures.

An estimated 1 in 14 homeowners in Rhode Island with a mortgage were at least three months behind on their payments at the end of September, according to a report released Friday by the Mortgage Bankers Association in Washington.

These “seriously delinquent” mortgage holders — on top of the more than 2,100 mortgage holders who entered foreclosure in Rhode Island during the third quarter — are largely the product of the deteriorating job market, economists say, and therefore even harder to rescue than their predecessors.

“You can do all the [loan] modifying you want, but if you lost your job, you can’t pay back any of your loan,” said Nicolas P. Retsinas, director of Harvard University’s Joint Center for Housing Studies. “In some ways, the worst is yet to come.”

Nationally, the first wave of foreclosures was driven primarily by investor speculation, followed by homeowners who faced “rate shocks” when interest rates on their mortgages reset, said the Mortgage Bankers Association’s associate vice president of economic forecasting, Orawin Velz. “Now, the problem becomes fundamental, which is that people are losing jobs.”

The U.S. economy has shed 1.9 million jobs this year, and slack labor demand has left more people working part time because they can’t land full-time jobs. The Economic Policy Institute in Washington estimates the number of unemployed or underemployed workers in the county at 19.6 million, or about one in eight workers.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkman, Mortgage Bankers’ chief economist. The increase in mortgages that are 90 days delinquent is “the highest it’s ever been,” he said.

Rhode Island has lost nearly 15,000 payroll jobs since January and the state unemployment rate as of October is 9.3 percent, tied with Michigan’s as the highest in the country.

Rhode Island also is just behind Michigan in its rate of foreclosures initiated during the third-quarter, making it sixth-highest in the country and ahead of every other state in New England. The Mortgage Bankers’ report is based on a survey of about 85 percent of all mortgage companies, commercial banks, thrifts, credit unions and other lenders

Meanwhile, the ranks of homeowners have fallen behind on their mortgages has grown. The state’s third-quarter delinquency rate (mortgages 30 days or more past due) rose to 7.3 percent, compared with 5.8 percent during the same period last year, according to he Mortgage Bankers’ report. (The delinquency rate excludes loans in foreclosure.)

“People are losing their jobs, they’ve depleted savings and 401(k)s,” said Raymond Neirinckx, of the Rhode Island Housing Resources Commission. “They’re saying, ‘What else can I do now to save my home?’ ”

Efforts by Washington lawmakers to encourage lenders to voluntarily modify mortgages “are not working,” Neirinckx said. “Tweaking interest rates or extending the terms from 30 to 40 years isn’t having a significant impact.”

Lenders are taking months to come up with modification plans, Neirinckx said, in part because the entire system is overwhelmed by the volume of work. And when they do come up with a proposal, he said, the modification is often not enough to make the mortgage affordable for the homeowner.

Federal Reserve Chairman Ben S. Bernanke last week outlined several options to help stem foreclosures, including buying delinquent mortgages and providing bigger incentives for lenders to refinance loans. He called for addressing the “apparent market failure” of lenders to modify mortgages even in cases where it was in their own economic interest to do so.

Bernanke’s proposal would go beyond the efforts announced last month by the Department of Housing and Urban Development to change the amount of the loan a lender must forgive, and allow banks to extend the mortgage’s payback period.

“The harsh reality is that many of these loans that are now in default … are outside the reach of traditional channels,” said Harvard’s Retsinas. “You’ve got to break through the thicket,” he said, by reforming bankruptcy laws and changing tax rules to create incentives for investors of mortgage-backed securities to modify loans.

—With reports from Bloomberg NewsForeclosure starts

Rhode Island ranks sixth nationwide in percentage of foreclosure actions that were initiated in the third quarter.

1. Nevada 2.47 %

2. Florida 2.31

3. Arizona 1.88

4. California 1.53

5. Michigan 1.23

6. Rhode Island 1.22

Source: Mortgage Bankers Assoc.

Call now to RSVP for the hottest REO event possibly ever……. (ok, that may be a little much)

Anyway, hundreds of properties have already been purchased through the SEG REO Program which gives small to medium investors the purchasing power to buy properties for 10 – 40 cents on the dollar. Each night learn from different SEG Advisors, industry experts and guest speakers on ways to make millions in the REO and Foreclsoure market. Dinner and refreshments will be served and seats are limited so call for availability before someone else takes your seat.

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After 5 years of record setting apreciation causing areas to increase as much as 400% between 2002 – 2006 it struck me odd at first when I put the subject line “Foreclosures for Pennies on the Dollar” on a marketing piece. At one point I remember the cavalier speculators compacent in the days of 20% appreciation counting on its buffer to marginalize negative cash flow. How were most so remiss to our boom-bust reality. In the greatest country on earth we have minimized stagnant periods but amplified volatility creating millionaires and even billionaires at every spike.
Now because of our banking relations we are picking up foreclosure and reos properties for 10 – 40 cents of current market value, which has already tumbled in most areas. I am watching the SEG REO Program make millionaires while the masses are paralyzed with fear. Why can’t we sober the sheep to opportunity knocking at the door?
The answer is we are trying every day to erase retirement proverty one client at a time. jph