According to one analyst – Anish Lohokare from BNP Paribas – “This HAMP change should have a muted impact at best”, primarily due to a failure to really address one key player left out of the change: the mortgage loan servicer.

Right now, modifications to HAMP (now called HAMP 2.0 by many) call for a 200% increase in the amount of financial incentives given to lenders who agree to reduce the principal of outstanding mortgages, thus helping stricken homeowners reduce their overall debt load and monthly mortgage payments. This in theory could help many avoid foreclosure by giving them more affordable mortgage payments – but the agreement would also cut into the profit margin for mortgage loan servicers, who typically receive a percentage of the principal as payment.

As a result, many loan servicers refuse to actively participate in the program, and currently there are few overpowering incentives to do so from the federal government (who has not yet taken the controversial step of mandating participation for lenders operating in the U.S.)

Principal reductions are widely thought to be a key component of any successful plan to reduce the number of foreclosure properties that hit the markets each year. By writing down the principal, the bank is not only reducing the monthly payment – thereby giving consumers more money to spend or save each month – but is also lowering the total cost of the home, once interest and capitalization is taken into account.

Not enough lenders are participating, though, and as a result, instead of four million Americans impacted positively by HAMP, only roughly 900,000 have qualified- and less than half have achieved a permanent modification.

The next year will be critical in determining if HAMP 2.0 succeeds and helps to reduce the national foreclosure rate – or if it fails to adequately address the foreclosure crisis on a large enough scale to make a noticeable difference, unlike its previous iteration. The program has only been extended through to 2013, which is not a lot of time to make a noticeable impact.

At some point, in order to have the full impact its designers want it to have, HAMP 2.0 will require some tweaks and adjustments to obtain full participation from all players involved – not just homeowners.

The settlement, in the works since the scandals first broke in the fall of 2010, will call for $25 billion from lenders – including Bank of America, JPMorgan Chase, Wells Fargo, Ally Financial, and Citibank – to go toward reducing the principal for nearly 1 million mortgages, paying 750,000 homeowners $1,800 a piece, and helping homeowners refinance at 5.25% for their current loans (many of which have interest rates much higher than current amounts).

There is also the possibility of mortgage processing reform to come with the package, although nothing definite is set in stone.

The settlement has been a long time in the making, but already several key players have backed away – including California’s Attorney General Kamala Harris, who unequivocally stated that her state will have no part of a deal that is “inadequate for California”. Other attorneys general across the country have issued statements along those lines in the past year, including threats of investigations into the banks and their foreclosure practices.

Most of the criticism toward the settlement revolves around the presence of some degree of civil immunity for the banks from the states – a measure that has not only served as a flashpoint for criticism against the major banks and settlement process, but also single-handedly stalled negotiations for months.

Nothing, though, provides criminal liability immunity, which could come into play with several major probes and investigations planned against certain lenders in the near future.

With nearly 11 million homeowners underwater on their homes, and hundreds of thousands of foreclosure listings on the market, a foreclosure settlement is needed to regain some sense of normalcy to a domestic real estate market weighed down by low prices and an abundance of supply. While it is still doubtful whether or not this settlement will have the impact the Obama administration desires, a solution is more likely to happen with the banks on board than in the courtrooms at this point.

There is no word yet on how many states, exactly, will sign the settlement; at least a handful, including California, New York, Delaware, and Massachusetts, have either balked or refused to sign. Some in the industry doubt the settlement can succeed even with widespread support if key states like California and New York don’t join.

For now, though, the settlement appears to be heading in the right track.

There are numerous reasons to avoid foreclosure prevention companies with scams and fees coming in at the top of the list.

Steep Fees for Sketchy Service

Many people fail to understand that the most legitimate foreclosure assistance is completely free; therefore, if someone is charging you and promising to help you keep your home from undergoing foreclosure then you should immediately be skeptical. Many foreclosure prevention companies charge ridiculously high fees, money that could be used to actually pay on your home and help reduce your chances of losing your home. Plus, most of the services offered by these companies (like foreclosure counseling) can be obtained for free.

Before giving anybody money to assist you with foreclosure, it is highly recommended that you utilize foreclosure resources and information online. In the end, if you decide to go with a foreclosure prevention company despite the risks then make sure to thoroughly research the company both online and with the Better Business Bureau.

The Risk of Scam

Along with paying a lot for services that you can normally receive for free, many foreclosure prevention companies have turned out to be scams. Imagine facing the possibility of losing your home and paying hundreds to thousands of dollars to a foreclosure prevention company that claims it will protect you from foreclosure. A few months later you are not only without your home but you also are out the money you paid the company for the services you never received.

Anytime there is a severe need that is tied to something emotional (such as losing your family’s home) there are scammers that are ready to take advantage of the situation. Unfortunately, these foreclosure prevention companies are simply trying to earn as much money as possible without much concern for your family. As a result it is pertinent that you are aware of the high possibility of being scammed when seeking a foreclosure prevention company.

In the end, facing foreclosure is a very serious process that often leads to uncertainty and fear. Do not put yourself in a worse financial situation and face the possibility of being scammed by relying on a foreclosure prevention company. Instead, find free resources online.

Those watching the domestic real estate markets for signs of any relief in the foreclosure market may have the beginnings of good news from the West Coast. According to recent reports, foreclosure starts – initial filings from lenders to jumpstart the foreclosure process against delinquent homeowners – declined in four out of five states being tracked. These four included Arizona, California, Nevada, and Washington. Oregon was the only state that reported an increase in foreclosure starts.

Additionally, foreclosure sales increased in California and Washington while dropping in the other three states. Combined, these reports indicate extensive decreases in the average foreclosure timelines in several key states in the region. California in particular experienced a dramatic 16.9% drop in its average foreclosure processing time, a combination of fewer starts and more sales. Nevada also reported a noticeable decrease in its foreclosure processing timeline.

Of course, investors and homebuyers who want to see the beginnings of a real estate market stabilization and reversal should view these numbers with caution. After all, Nevada had a 14% drop in foreclosures for the month of December, 2011 predominantly due to a new law that adds more paperwork to the foreclosure process – already stretched out to an average of 331 days. This effectively means that foreclosures are harder now to process in Nevada, which will skew the overall foreclosure rate.

It is easy to view these figures and see improvement, and indeed, some of the reduction in foreclosure starts may be systemic in nature. But, it is also likely that any reduction is a product of changes or modifications to the foreclosure process itself, which doesn’t speak of any major improvement in the economy or real estate market as a whole.

Which is closer to the truth – real improvement in the market, or skewed figures that only look positive? The truth is somewhere in the middle; after all, fewer foreclosure starts are hard to misinterpret, and that is a clear-enough sign that lenders are, at the very least, slowing down the rate at which they send new foreclosures through the pipeline.

There will have to be some underlying improvement in the system and economy before it can be said with confidence that fewer foreclosures are actually occurring – and that the decrease is not due to a skewed perspective.

For homebuyers and investors who want to break into the foreclosure market and grab a great bargain for a particular home, timing is important. Some of the best deals can be had through pre-foreclosures, or homes that are in default but have not yet been repossessed and sold at auction. In other cases, the best deals can be found with homes that have been repossessed but have not yet been sold. In either case, a homebuyer can maximize value through optimal timing by contacting the owner or trustee of the property prior to a foreclosure sale.

How and When to Contact the Owner

After a homebuyer has determined that a particular desired property is in pre-foreclosure status through property research, the next step is to contact the owner. An owner has a vested interest in selling a distressed property before foreclosure because he or she can avoid a nasty credit hit that comes with being foreclosed on (assuming the owner has equity in the home). Even if a home is underwater, meaning the owner owes more on the home than it is presently worth, a short-sale opportunity does not hurt the owner nearly as much as a foreclosure does.

For the homebuyer, the benefits – significant discounts from 10-40%, in many cases – are terrific incentives.

For these reasons, a homeowner will probably be favorable to entertaining a discussion about selling the home before the bank repossesses it. At this point, you can tender an offer, one that takes into consideration the amount of equity in the home, how much the home is worth (according to current appraisals), and how much the homeowner is looking to receive in exchange.

You will have already researched the property and know if any liens are on the title, so you can address those issues satisfactorily. If an agreement is reached, you can proceed; if negative equity is involved, you will have to have the approval of the lender.

Note that calling a homeowner or sending a written letter to the homeowner is always preferable to showing up to the homeowner’s doorstep asking about the home. Emailing is also fine. Be honest if the owner asks you how you found out about the property. Be open with the homeowner and he or she will be open with you. That is how great bargains are found.

How and When to Contact the Trustee

If foreclosure has already been initiated against the home, you will have to talk to the trustee of the property to determine the status of the auction. This opens up the possibility of working out a last-minute deal, or otherwise buying the property outright at a foreclosure auction.

If the home does not sell through foreclosure, it will become a bank-owned/real-estate owned (REO) property. REO homes are owned by the lender itself, and as such, you will need to talk to the lender to discuss possibly purchasing the home. After conducting title research, have the home’s value estimated and then contact the owner (the lender). Most financial institutions have loss control/mitigation officers who handle these types of transactions. At this juncture, in preparing and submitting an offer, it is recommended that you employ a real estate agent to help you. Also, when pricing the offer, it is best to submit a price below market value, to give yourself a solid bargaining position. It is in the interest of the bank to sell the property, in most cases; serious and reasonable offers are almost always considered.

Other specifics – such as inspection and title search contingencies in the purchase agreement – should be worked out between your agent and the owner – whether it is the original homeowner or the bank – before any agreement is finalized. In all situations, contacting the owner before foreclosure begins is highly recommended, as it gives you a better chance to obtain a good property at below-value price without the competition of an auction.

Today is no exception.

According to data released by Standard & Poor’s Case-Shiller home price index, home prices fell 3.9% year-to-year for the third quarter. Of course, while that may be “bad”, it is an improvement from the second quarter’s decline of 5.8% year-to-year drop. So that is considered “good”…until you keep in mind that this overall trend still points toward falling home prices throughout the end of the year and quite possibly through the end of 2012.

Yet at the same time, with falling prices, another report comes in today about new home sales increasing. That’s right; according to the Commerce Department, new home sales grew by 1.3% from September to October and a blistering 9% from October 2010. Granted, only 307,000 homes will be sold at this annual rate – well below the one-million benchmark that experts say denotes a healthy housing market – but an increase of 9% is pretty remarkable, all things considered.

What’s the reason why so many people are starting to purchase new homes? One major reason has a lot to do with the other report discussed above – namely, lower home prices are starting to attract new buyers to a market that has been screaming for participation for the past few years. Another reason is because builders are offering pretty nice incentives to potential buyers, like no closing costs and free upgrades.

Naturally, these lower prices are due in a large way to the massive number of foreclosures on the market and waiting in the shadow inventory. Foreclosure listings continue to depress home values and make buying homes cheaper – even new homes, which are priced according to what is on the market in the local area.

There is another wrinkle to the story, though. A good percentage of these new home buyers are electing to purchase new homes instead of buying foreclosure properties because they want to upgrade from their existing homes. Normally, in a healthy economy, you want a large number of first-time homebuyers making the new home purchases. But, in this market, any new homes that are being built are (mostly) being built by people who have already been homeowners.

This leaves foreclosures as the best option, still, for virtually any homeowner or prospective homeowner who does not want to pay a premium to construct a home, yet no longer wants to rent. And as more buying opportunities pour into the market over the next year, that group will continue to grow.

Experts actually predicted a greater fall of 610,000, which would have been a 7.3% decrease. Still, while the 0.3% drop isn’t that substantial, any decrease is not good news for a market that has faced one of the toughest years on record. An incredibly high inventory of foreclosures on the market, coupled with falling home values, have provided incentives for people to turn away from new home construction and turn toward existing single-family homes or multi-family homes – or just not buying altogether and waiting for the market to recover.

Unemployment – still around 9% nationally – still remains another driving factor behind fewer new home starts.

In good news, however, foreclosure listings, low values, and high unemployment haven’t completely choked off the market. Permits for new home construction actually rose by 11% from September to October, buoyed by apartment permits bumping up by a solid 30%. This latter statistic is no surprise; more and more Americans are opting to rent versus buying a home, primarily because many would-be homeowners cannot qualify for mortgage loans.

Existing home sales also rose from the second quarter to the third quarter, even though they are still down from 2010’s levels.

From a long-term perspective, the trend for new home construction has been rising. The final figures for 2009 were terrible, historically, coming in at 554,000 units. Last year, results rose to 587,000, and this year is on pace to exceed that mark – although not by much. The “recovery”, if one could call it that, is sluggish but is improving steadily, at least in new home construction.

The biggest roadblock still remains foreclosures and getting rid of piles of repo homes that are sitting on the sidelines, soaking up market space and weighing down home values that need to rise. New homes contribute significantly to the economy, so it is important that they are being built at paces more in line with healthy market levels. At the same time, dealing with home foreclosures and converting them into productive units in which their owners either have a mortgage or collect rent is the name of the game and the biggest single development that needs to occur.

Approximately 230,678 properties in the U.S. received a foreclosure filing in October, which represents a rate of one out of every 563 homes in the foreclosure process (consisting of being scheduled to sell at auction, being repossessed by the bank, or having a notice of default filed against the property).

All signs point to a growing upswell of foreclosure activity, like that predicted earlier in 2011 when experts warned of rising foreclosures and even more foreclosed properties for sale across the nation. The main force behind the movement is the year-long conflict involving faulty foreclosure practices, like the now-notorious practice of robo-signing mortgage documents and wrongfully or erroneously foreclosing on properties across the country.

As a result, hundreds of thousands of homes that should have faced foreclosure in 2010 or 2011 weren’t, and are expected to instead hit the market one year later, in 2012.

Additionally, the number of homes that entered the foreclosure process reached a seven-month high in October, a sign that lenders are beginning to once again initiate foreclosure proceedings against these properties in an effort to cut their losses and recoup as much as possible from a bad loan.

The uptick in foreclosures lately has touched off a new debate among experts about the proper role of the government in the market. Some hold that the government should pull back on efforts to stabilize – or interfere with – the market; others believe that only measured and responsible responses, like loan modifications and principle write-downs, will be able to slow or stop foreclosure and restore activities to a more manageable pace.

It is estimated that the uptick in foreclosures over the next year could result in price drops by 10% or more over the next 12-18 months across the country.

The federal government’s new mortgage loan refinancing initiative could help to quell new entries into the market, but the massive backlog of home foreclosures would first have to be cleared for prices to have an incentive to rise. Whether or not that will happen in the foreseeable future is still anyone’s guess, but current evidence indicates low prices and cheap interest rates will remain in place for now.

Investor confidence is pertinent to improving the current real estate market because these investors will be the ones putting money back into real estate. Despite the incredibly low interest rates and low home prices, some investors are still weary due to the instability of the United States economy. However, if these investors hold out too long they may be missing out on exceptional opportunities.

Fannie Mae and Freddie Mac Coverts Foreclosures to Rentals

Due to the high lending standards, demands for rental properties have risen in many parts of the country. Furthermore, many lenders have incredibly high foreclosure inventories and have even resulted to demolishing properties in an effort to reduce their liabilities. Now, Fannie Mae and Freddie Mac are trying to convince investors to purchase some foreclosure properties and turn them into rentals.

Between Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) over 1/3 of REO homes are part of their inventories, which is a significant burden to the lenders. Therefore, something has to be done to get these properties into the hands of investors.

Occupy Foreclosure

Furthermore, with Occupy Wall Street protesters actually encouraging homeowners who were foreclosed upon to take back their homes, many abandoned properties are being vacated. However, they are not only being vacated by the former homeowner, but also by criminals and the homeless who often vandalize the property.

As a result, it is essential for investors to act now to secure the distressed properties that are currently on the market. Now is the perfect time to invest in foreclosures as banks are willing to practically give away unwanted properties to reduce their foreclosure inventories. Plus, if you have to finance in order to purchase the investment property then interest rates are incredibly low, allowing you to save a ton of money over the years.

In the end, there are still a ton of foreclosures on the market and the investment opportunities are endless. If you are an investor that has been considering purchasing a foreclosure property or two to fill up your portfolio then take a look at the distressed properties on the market and start investing!

While nothing is fully official yet, the Obama administration wants private investors to enter into partnerships with the federal government and take over somewhere in the neighborhood of $30 billion worth of single family homes owned by the government. These repo homes are owned by Fannie Mae, Freddie Mac, and the Federal Housing Administration (HUD homes) and are weighing down federal balance books, theoretically costing taxpayers a lot of money.

When the plan was originally put forth in August, the idea was to sell off these foreclosures under the condition that private investors then convert the homes into rental properties. This would help satisfy high rental demand in most markets and also give housing options to those who lost their homes to foreclosure auctions. Furthermore, the plan would involve the participation of private lenders because it would allow them to make a profit, due to the discounted nature of foreclosure properties.

The last part of the plan is what is attracting investors. Several fund managers, particularly fixed-income funds, have shown high levels of interest in the plan and have participated in the government’s outreach program to solicit ideas for implementation of the eventual plan. The idea is that investors can use pooled capital to purchase bulk distressed properties, rehab them, and put them back on the market as income-generating rentals.

And even considering the fact that many foreclosures are run down victims of neglect and would cost tens of thousands of dollars to make livable, there are still plenty of sound homes available for investment purposes.

Questions remain, however. One major issue to be addressed is how to provide incentives to private investors to take on the risk involved in the program. Financing is one key component of this solution, and the government could offer lower interest rates or tax cuts and credits to offset some of that financial risk. Until risk is addressed, however, investors will largely stay on the sidelines.

There is more to come about this plan, and it is still in the planning phases. But there is a lot of promise to the idea and could be a pattern for more partnerships between the private sector and the government in the future.