Brokers and their agents all have web logs or websites explaining their services and opening their doors to the public. Prospective buyers or homeowners looking to refinance can gather mortgage information by a simple search. The computer and the real estate market were made for each other. A 2008 survey indicated that 70 percent of homebuyers first saw the property they acquired over the Internet.

Of course, the real estate market today is not what it was in 2007. So the industry’s use of the technology has also changed. Now, viewers can learn about foreclosure, the short sale, the REO and the distressed homeowner by using the computer as a reference center.

One way to locate investment worthy residential properties is by scouring the pre-foreclosure marketplace. There are three stages of the foreclosure process. Pre-foreclosure is the least invasive of the three.

At this stage, the homeowner has received a Notice of Default and the lender has served notice that foreclosure will take place unless the loan is brought current or retired. In pre-foreclosure, the homeowner still owns the house and has the right to sell the house.

At this point, it is to the owner’s advantage to finalize a sale. Today, there are websites that display properties in pre-foreclosure. An interested investor can locate a pre-foreclosure property on the Internet and contact the owner directly, without the use of a broker.

For a troubled homeowner, the difference between selling and not selling can often be the commission. If there is no broker, there is no commission, so the chances of a sale increase dramatically.

If you are a real estate investor, your computer can be very beneficial. Spend a little time locating relevant sites for your investment plan and you will be ahead of the game.

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The most recent report from the Mortgage Bankers Association painted a gloomy picture. Indications are that independent mortgage bankers are making far less money and that the understaffed lenders cannot keep up with the surplus of loan modification applications.

The end result is that work is not being completed in a timely manner and that the mortgage business, which relies upon volume to generate its profits, is in distress. Mortgage bankers are learning what every other American business is facing. Costs are rising and volume is diminishing. It is a viscous cycle and certainly one that the mortgage bankers have not faced in several years.

The Bankers Association report specified that, “the average production volume for each firm fell to $157.8 million in the first quarter 2010, compared to $216.5 million in the fourth quarter of 2009. In addition, production operating expenses rose from $5,147 per loan in the first quarter 2010, compared to $4,402 per loan in the fourth quarter of 2209.”

The Mortgage Bankers Association said that production profits dropped from $606 per loan in the first quarter 2010 from $890 per loan in the fourth quarter 2009 and from $1,088 in the first quarter of 2009. The lack of demand has caused most of the lenders to cut staffs and with the Obama Administration’s insistence on complete transparency throughout the lending process, each application costs more to process.

Mortgage Bankers are walking a fine line. Refinance departments are understaffed and new mortgage departments are overstaffed. There simply is not enough new mortgage demand to keep everyone busy and profitable.

Ever since the expiration of the homebuyer tax credits, the number of mortgage originations has been steadily falling. Many of the lenders describe the current market as a “double dip” for the housing market recession.

Everywhere they look, the industry has changed. There are now new appraisal practices, more stringent underwriting guidelines and more documentation in the mortgage application business than ever before.

The percentage of successfully closed new mortgage applications in the first quarter 2010 fell to 68% from 73% in the fourth quarter 2009. The good news for investors is that qualified purchasers have a distinct advantage in the new real estate market. An offer accompanied by a pre-qualified letter has great negotiating power today.

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However, the forecast is troublesome. The slowdown may be the result of a backlog in REO properties rather than a hopeful trend of fewer troubled homeowners. While foreclosures were down, a staggering 313,841 foreclosure notices were issued in June.

Banks may be slow to foreclose but even the slower pace points to a record year in 2010. Rick Sharga, a senior vice president at Realty Trac, said current data suggests a record year of 3.2 million foreclosures by the end of the year.

June marks the 16^th consecutive month that more than 300,000 foreclosures have been taken place. Sharga pointed out that in 2005, the total number of foreclosures was less than 500,000.

Last month, Realty Trac stated that 31 percent of all residential real estate sales in the first quarter 2010 were foreclosures. In June, one in every 411 homes received a foreclosure notice. Nevada had the highest rate of foreclosures and was closely followed by Florida. Vermont had the fewest foreclosures with just one in 26,051 properties receiving a foreclosure notice.

The Obama Administration has come to realize that its Home Affordable Mortgage Program is falling far short of its stated goal to keep homeowners in their homes. The Administration has shifted gears and is now reaching out to buyers and sellers to engage in short sales.

The short sale requires a willing lender, a willing seller and a willing buyer. In order to motivate the lender, the Treasury Department is offering incentive bonuses. To help the seller, the Treasury Department is offering relocation bonuses.

Qualified investors have never had it so good. Prices are down, mortgage rates are low and properties in all price ranges are available. If there was ever a buyer’s market, this is it!

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30-day delinquencies rose 5.38 percent last year. Fannie Mae insured multi-family delinquencies rose an astounding 67 percent over last year. 90-day delinquencies have increased 100 percent in one year. Banks are nervous about absorbing the losses but time is running out for the lenders.

The MBA sees no turnaround in sight until the Obama Administration does something about the unemployment rate. At the core of the delinquency problem is consumer confidence. Washington has made promises, indicated that jobs will be created with stimulus funding but the public just is not seeing or feeling any change.

Unemployment remains at 9.7 percent and higher in metropolitan areas. Some economists suggest real unemployment is in the 20 percent range. They just may be right.

High unemployment is hurting the commercial real estate market in many ways. As companies consolidate operations and operate at low employment levels, they simply do not require the space to which they were accustomed. Yet, these same scenarios give cause for hope for short sale purchasers.

Commercial short sales are unlike residential short sales. The emphasis in successful commercial short sales is for the investor to arrive at new exit strategies that will appeal to new lenders and new tenants.

For example, as companies pare down their workforces, savvy investors are contacting companies that are scaling back and positioning themselves to accommodate the changing commercial environment. Solving the exit strategy is often the key to any short sale but commercial opportunities have far more options than residential properties. Investors must be creative and develop new occupancy rates, find new tenants and understand the zoning board procedures for the community.

Commercial short sellers are more sophisticated than residential owners. There is less emotion and a more willing seller on the other end. Get your strategy in place, because 2010 is the time to capitalize on the down commercial market.

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Experienced investors perform their due diligence. Part of that due diligence should include an assessment, including as much financial background as is available, of the seller. If the short sale seller is not truly motivated, the investor and the investor’s team can go through many hours of effort for naught.

Investors can benefit from a frank interview with the seller before arriving at an agreement. Sellers can be bitter about a short sale and can sometimes actually be benefiting from their hardship. Many sellers are collecting rental income and not making mortgage payments. Be weary of these sellers as their motivation is lacking.

The ideal short seller has assets and very possibly other real estate holdings that are worth protecting or is facing an unexpected hardship such as unemployment and does not want their credit destroyed for an extended period. The investor should seek proof of the hardship.

In conventional acquisitions, the buyer is evaluated by their “ready, willing and able” disposition. This is a good formula to apply to short sellers. If the shirt seller is not ready, willing and able, you could be wasting your time.

Sellers need to know that delays and unexpected events can surround hardship sales. Sellers may need to perform repairs, pay outstanding utility bills and a host of other stressful possibilities. These sellers need to know and often be reminded that concluding the short sale is to their advantage.

To protect themselves, many investors have had their attorneys insert clauses in the contract. If the seller backs out of the agreement without just cause, they must reimburse the seller for lost time. This can raise issues but protecting one’s self is always worth a try.

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On June 24^th, Fannie Mae released a stern message with strong ramifications for borrowers who default on Fannie Mae mortgages. The announcement marks a shift from what has previously been a loose laissez-faire policy to a new, comprehensive collection policy. The new policy is strict and is the direct result of the willingness of homeowners to walk away from their mortgage obligations.

With many unemployed homeowners and with many mortgages that exceed appraised values of the homes, a high percentage of Americans are intentionally defaulting on their mortgages and forcing lenders to foreclose. This practice has cost Fannie Mae billions of dollars.

In the announcement Fannie Mae stated, “Defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.”

“Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.”

The bottom line is that Fannie Mae will now take action to try to collect money lost as a result of walk-away borrowers. The seven-year restriction is severe as the majority of housing loans in the U.S. are backed by Fannie Mae. Previously, homeowners who defaulted could apply for Fannie Mae backed mortgages within three years. Those days are now gone.

The moves by the country’s largest insurer of mortgages is designed to bring underwater homeowners together with lenders to either arrive at loan modifications or in the alternative short sales. Foreclosure is the least desired alternative.

To help the modification process, The Obama Administration has committed billions of dollars in loan reductions and incentive programs for both homeowners and lenders. Originally, lenders were not supportive of modifications because they did not want to accept the losses. What these lenders soon discovered is that the cost of foreclosures far outweighed the relatively minor losses incurred by modifications.

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In November, the number of troubled homeowners in trial modification programs rose to 697,026 from the 650,994 October level. Amazingly, only 31,382 homeowners have been converted to long-term loan modifications. At the same time, the number of failed trial programs now stands at 30,650.

Failure occur for three primary reasons:

· Failure to sustain timely payments during the trial period

· Failure to submit all necessary paperwork

· Failure to qualify as having insufficient income

These tendencies underscore an alarming fact that homeowners who are underwater are unwilling to continue to pay for properties whose debt surpasses the value. There is a strong tendency to walk away and begin to rent in another area. This drives home prices lower.

Congress is pressuring the Administration to help more homeowners. Phyllis Caldwell of Treasury’s Homeownership Preservation Office explained, “Our focus now is on working with servicers, borrowers and organizations to get as many of those eligible homeowners as possible into permanent modifications.”

The administration has been leaning on lenders to engage troubled homeowners, but the country’s biggest mortgage lenders like Bank of America and Citigroup have chosen to ramp up their foreclosure efforts. Treasury is now launching an all out campaign to intervene. Utilizing forceful oversight of loan services’ modification programs, the government expects modifications to significantly increase in the upcoming months.

Treasury is even sending out advisers to assist borrowers with completing paperwork. The current long-term conversion arte is just 4%. The Treasury would like to see 40% increases in the next tow or three months. If the goal is accomplished, there should be a very positive effect on housing prices.

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The shape of the recovery may well influence your investment strategy. The most common debate evolves around whether the recovery will be V-shaped or W-shaped. The V shape would indicate that 2009 and 2010 will be good times to invest. A W-shaped recovery suggests a prolonged period of opportunity and a buy and hold pattern of investment.

Steve Horne, CEO of the loan modification firm Wingspan Portfolio Advisors, says; “I am a firm prophet of the W-shaped recovery. Housing is going top go down again in the first quarter of 2010. The healing won’t begin until all these non-performing loans start trading in earnest, until we get borrowers back on their feet.”

Horne just may be right. “A lot depends on how long the government keeps its buying up. Rates are still at all-time lows, but once the buying stops, we’re going to come to a pretty hard stop. We are likely to see a much smaller mortgage market after the second quarter and later in 2010.”

As the economy shows signs of stabilization, the government is expected to pull back from the infusion of more funding. The continued government investment in toxic assets is considered inflationary. This will mean that banks must dispose of the assets and incur substantial losses. The result is likely to be further setbacks to market values.

Only when this shadow inventory is cleared out can investors expect to see prices begin to rise. However, equity markets have performed similarly. And, equities have surged more than 40% in 2009. Thus, the appearance of the W-shaped recovery gains credence. No one has ever doubted that successful investing includes being in the right place at the right time.

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The new program significantly reduces the paperwork, as the documentation for application is exactly what is used for the loan modification application. Too often short sales are lost because of delays by both the seller and the lender.

The program becomes active on April 5, 2010. Unfortunately many of the active listings today will not be affected, but government moves at it’s own pace. From the investor’s perspective, the enactment delay provides time to locate and research possible properties.

In addition to reducing the paperwork, lenders will need to approve the short sale price before then property is listed. This is a big step forward. Mortgage companies will receive $1000 to help defer the new administrative costs. Now, when buyers consider a short sale, they know the property is good to go.

The largest mortgage bank in the country is Bank of America, which absorbed the troubled Countrywide last year. BOA has hired 3500 new workers and upgraded their computer systems to become more efficient in processing short sales, foreclosures and REOs. The bank has 12 call centers and services 14 million loans. They have more than their share of troubled assets.

The tricky part of the short sale process is often the secondary loans. The Treasury Department estimates that approximately 50% of troubled homeowners have second loans. While $3000 is not much, it is better than nothing, which could well happen in foreclosure.

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The fact is that some real estate agents are not short sale savvy. To complicate matters further, the seller may not fully understand the process or repercussions. An experienced real estate agent can intercede and walk the inexperienced agent and the seller through the paces.

Certain short sales may not be acceptable to the lender. Meanwhile, some situations exist where a short sale might be considered even if the seller is not in default. The first step the buyer’s real estate agent needs to take is to gather facts that are a matter of public record.

The agent should gather the following information from public and real estate records:

* The property owners

· All lenders

· The mortgage amounts

· Tax records

· Zoning

· Plot plans

· Copy of deed

· All listing information

· Historical record of subject property

The experienced real estate agent can accurately assess the property and the seller’s ability to negotiate a short sale. If there exists more than one mortgage holder, the process can be slightly more complicated. However, an experienced agent can assist in building a case for the second lien holder. Often times, the agent can receive authorization from the seller to submit a short sale plan to the lenders. Unfortunately, some agents do not do this prior to listing a property as short sale.

In early 2009, with excessive short sale transactions went pending, many of the transactions failed to close because agents and sellers had not laid a proper foundation. With short sales now dominating a large sector of the marketplace, agents have gained experience, but the buyer should not underestimate the value of an experienced agent. That agent can fast become a real profit center.

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