The devastation from Hurricane Sandy and its impact on individuals’ lives should not be taken lightly, but one way or another it will permanently redefine the financial futures of many residents in the northeast and real estate investors — just not necessarily in the ways most think.
First, it is important to recognize that the current foreclosure moratorium and forbearance initiatives could end up doing a lot more harm than good to many borrowers in NY, RI, CT, and NJ.
Despite what some may be telling the press and shareholders, a very large percentage of home loan defaults will not be temporary and will eventually lead to a massive new surge in foreclosures and non-performing mortgage sales. This is especially true considering the horrible timing colliding with the holidays, state of the economy, and dramatically underestimated insurance issues many homeowners will face.
For most underwater homeowners it may be far wiser to ignore promises of temporary help and sell now while they can capitalize on the maximum amount of short-sale incentives and minimize taxes, though few will.
Let’s also be clear that rash investors who rush in with greed will go broke, too, and this will take time to play out. Many will overpay significantly for properties and get stuck with horrible choices. On the upside, they’ll become good deals for savvier investors later.
However, others will change their family wealth status for the better for generations based on making the right investment moves in the next few weeks and months.
Despite their denials banks, mortgage lenders, government agencies, and servicers know that they not only face stunted cash flow for an extended period, but huge losses over the next couple of years as a result of Hurricane Sandy. Hit them hard on non-performing mortgage sales and demand discounts on their likely performance over the next 24 months not the past.
However, do not confuse profiting with preying on those in trouble. In fact, it can be quite the opposite. We all know the banks aren’t really on the homeowners’ side and will provide very little in real help. You can actually offer more meaningful help and disaster relief than borrowers can find elsewhere. Provide much needed help to those homeowners whose mortgage notes you buy, to either help them exit the debt or get back on track and keep their homes, and you’ll find plenty of rewards for the service you deliver.