A couple of weeks ago, I had a conversation with a real estate investor. She had been trying to refinance one of her investment properties for months. In the middle of the process, the FDIC had taken over her hard-money lender.
One day while looking through her paperwork to discuss her refi options she said, the FDIC rep who was handling her property noticed her business, a real estate cleanup service. He asked her how business was? She told him it was steady.
He then asked if she’d been getting a lot of foreclosure clean up jobs from banks (they do foreclosure cleaning, as well as a host of other real estate-related services). She said no, that most of her jobs had come from private owners and commercial property owners (not residential foreclosure cleaning jobs as one would expect in this economy).
An FDIC Agent Explains Why Foreclosure Clean Up & Real Estate Services Companies Should Brace Themselves for Business
FDIC Rep Explains Why Banks are So Backed Up
Then, she said, he told her, “Get ready . . . you’re going to be so busy once the banks can catch their breath.”
When she asked him to elaborate he said that the REO department of banks are simply inundated with foreclosures coming on the market. Many of them are months behind in getting even basic paperwork done. Right now, he went on to explain, they’re outsourcing jobs to large companies that they’ve been dealing with for years.
Note: At the end of this post are some definitions. They are of terms used in this article that you may not be aware of.
Foreclosure Cleaning Contracts on the Way
And, he went on to explain, these companies are behind as well. He said they NEED and will be looking to outsource jobs to smaller – qualified – foreclosure clean up and real estate cleaning companies.
BUT, he said, they are so swamped with just handling the basic paperwork on foreclosures, that they don’t haven’t had time to vet vendors and start handing out foreclosure cleaning contracts. He told her that once this happens, watch out for the phone to start ringing because she’s going to get swamped.
It’s Taking Banks Longer and Longer to Process Home Foreclosures
Note: See State-by-State Timetable of How Long It Takes Banks to Begin Formal Foreclosure Procedures
I interviewed a homeowner in the greater Atlanta area who did not want to be identified. She told me that she lives in a subdivision with almost 70 homes. Currently, 4 are empty and in foreclosure. The one right next to her, she says, has been empty about 4 months.
The house hasn’t been secured (eg, no realtors lock box) and there is no active agent or bank activity on it (eg, no agent’s “For Sale” sign or bank “Foreclosure” sign is in the yard).
Why is this? Because the bank hasn’t even gotten around to processing the property as a foreclosure. The resident said that she feels lucky to live in an HOA-controlled community because the homeowners association maintains the yards of all the foreclosures in the neighborhood.
This gives the properties a lived-in look and keeps vandals and other potentially harmful activity from taking place in/on/around the properties. She said she knows of quite a few who live in neighborhoods without an HOA and they are not so lucky. For more on this read, How Foreclosure Cleanup Companies Are Keeping Neighborhoods Safe.
Haven’t Paid the Mortgage in Almost 2 Years and STILL No Foreclosure
Yet another story comes from a homeowner who says that a close relative lives in a rather pricey neighborhood. It’s in the greater Atlanta area, not too far from where former heavyweight champ, Evander Holyfield, lives. He says they haven’t paid the mortgage in almost 19 months – and they have yet to be formally evicted or foreclosed upon. They still occupy the property.
Now everyone’s situation is different, so who knows what accounts for some people getting foreclosed on in 90 days, while others still occupy a residence after almost 2 years of not paying the mortgage.
And, therein may lie the answer, ie, we are in unusual times.
Every lender has different rules and handles home foreclosures on a case-by-case basis. But, one thing almost all lenders seem to have in common these days – they’ve never been confronted with home foreclosure numbers like these. So it’s all new to them. They don’t have the staff or other resources to handle home foreclosures in a “normal manner,” because these are not normal times.
Foreclosure Clean Up Companies are Going to Rake Up
Once the dam breaks (eg, banks get their internal structures in place), foreclosure cleaning and real estate clean up businesses are literally going to rake in the business. But you must be a legitimate operation, ie, be licensed and insured in order to get foreclosure cleanup contracts. For, that’s the only way banks do business.
Definitions of Real-Estate Terms Used in this Post
What is the REO department of banks? REO is the acronym for Real Estate Owned. It’s what banks call their foreclosure department (they don’t like to use the term foreclosure).
What is a hard money lender? Hard money lenders make loans to people (usually real estate investors) who fall outside of mainstream lending guidelines.
Hard money lenders (HMLs) are usually private individuals or small groups that make up a lending pool that lend money based on the value of the property that is being bought, not on the buyer’s credit score. These loans almost always come with a higher interest rate than a traditional investment loan from a bank; origination fees are also higher.
FDIC Rep: FDIC is the acronym for Federal Deposit Insurance Corporation. It is the US Corporation that insures deposits in the US against bank failure. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.
FDIC reps work in several capacities (eg, as bank examiners, economists, research assistants, etc.). The FDIC rep discussed here was reviewing borrower files of the hard money lender that they had taken over to see what action should be taken (eg, should the loans be refinanced, foreclosed on, etc.).
What does it mean to “vet” a company? To vet a company is simply to conduct an investigation on it. For example, if a bank was thinking of using a particular foreclosure cleaning company as an outsource option, a couple of the things they would definitely check are does it have the proper license and insurance.
P.S.: Learn how to buy foreclosures cheap — as cheap as $45/month — really!
P.P.S.: Find Foreclosure Jobs! Did you know that you can find a foreclosure job with a simple click of your mouse? You can using Foreclosure Business News’ new job search portal. It’s just to the right here. You can search by job title, category, keyword, city and/or state. Find your dream job in this exciting real estate niche today!
Copyright © 2009 Yuwanda Black for Foreclosure Business News