Sunday, March 20, 2011

Foreclosures Get Makeovers?

Are foreclosures getting makeovers? In today's market they’re getting spruced up in hopes of catching more buyer interest.

The Chicago Tribune reported earlier this month that banks are investing thousands of dollars to clean up foreclosures. The goal, of course, is to attract a broader pool of buyers.

When banks take over foreclosed homes, they’re often in bad condition and depending on how long they stay vacant, they could get even worse. Foreclosed homes are frequently vandalized. These homes can have broken windows, water damage, missing fixtures, plumbing pipes, door handles, and more. Some homes are even uninhabitable, making it nearly impossible for a buyer to secure a mortgage.

Real estate agents are reporting that they’re making suggestions to the banks and the banks are doing more than just listening; they’re taking action. The agents are identifying the target buyer for a foreclosed property. Then they address the necessary repairs which often include fixes such as paint, some remodeling, refinishing damaged floors, repairing leaky roofs, and replacing old and broken windows.

Banks are hoping that the repairs will make the properties more appealing to regular buyers instead of just investors and professional rehabbers.

As banks invest a little more “makeover” money into the foreclosed properties, there may be an overall boost in the real estate market due to greater demand and increased sales prices of these homes.

The foreclosure market is also gaining more attention from financial giant, Bank of America. Its decided to no longer offer reverse mortgages. The Wall Street Journal reported that Bank of America ranked No. 2 in reverse mortgages for 2010.

These types of mortgages were only available to seniors (62 and older). The mortgage works in reverse. It’s based on the buyer’s equity in the home. The buyer gets monthly payments from the lender instead of the reverse. So instead of having money tied up in the home in equity, the money is paid to the senior (borrower). The bank takes possession of the property when the buyer dies or moves out (often into a nursing home or with other family members). However, by eliminating reverse mortgages, the bank will focus on more traditional mortgages aimed at assisting distressed borrowers who need loan modifications in order to prevent foreclosures. The bank will create a unit to deal specifically with troubled mortgages which are facing possible foreclosure.

Reverse mortgages have come under fire frequently due to their potentially risky nature. Regulatory agencies are scrutinizing these types of loans to ensure that those taking these types of loans aren’t being forced to purchase additional products in order to receive the reverse mortgage. The Federal Housing Administration wants to make sure that borrowers completely understand the reverse mortgage and their role especially when it comes to home insurance and property taxes.

Bank of America’s focus on what it calls its “core mortgage operations” may benefit troubled homeowners. And according to a report in The Wall Street Journal, this move to end reverse mortgages may reduce the banks presence “in areas where there could be liability and exposure.”

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