Understanding the Subprime Market and Property Foreclosures

The media has devoted a lot of attention to the subprime mortgage market and its credit crunch as a rising number of homes find themselves in foreclosure or nearing foreclosure. And there has been a lot of speculation as to what this will mean for the future of real estate and real estate investing, but to understand what may come of the crisis one first needs to understand the crisis and its underlying causes. So what is the subprime market and what is the credit crisis all about?

Simply put, a subprime mortgage is a loan for those who would not qualify for “prime” lending rates, which are commonly the average lending rates. The people that typically are included are those whose credit factors include a low income, inability to provide full documentation to meet the expectations of prime lenders, and most commonly those people whose credit scores are lower than prime lenders consider acceptable. Often this credit score is one below the 650 mark on a FICO credit score. Historically the score of 650 has been a minimum bar for home owners, with 95% of homeowners having scores above this score and thus being eligible for “prime” rates, but in recent years the subprime market grew from just 5% to 15% in a matter of a few years.

Typically these subprime borrowers are considered by the bank to be at a higher risk of defaulting on their loan, and in turn lenders charge higher interest rates for these borrowers. The higher payout for the lenders, cradled with rapidly rising home values created an environment that seemingly was a perfect investment opportunity. Many lenders seized the opportunity to charge higher interest rates on property, assuming that if the loan was defaulted on, the property would have very likely risen in value. To attract subprime borrowers and create an opportunity for them to enter the market many lenders introduced “adjustable rate mortgages” or ARMS. These “honeymoon” loans often started with a introductory period of two to three years that offered a very low interest rates, and many times the lender required the homeowner to put little to no money down on the property. However, after this introductory period of time these adjustable rate mortgages dramatically rose their interest rates to two or even three times their initial rates.

Many homeowners assumed correctly that their rates would dramatically increase, but they also assumed incorrectly that since their property value would have increased during the honeymoon period that the increased value of their home coupled with the equity they had put into their home would allow them to refinance with another lender at the “prime” rates, or at least another introductory rate. When the lending institutions found themselves with a mounting number of delinquent subprime borrowers as rates rose, and it became apparent that too many peoples’ credit has been over extended. Defaults skyrocketed, and the number of lenders willing to refinance a “high risk” loan dropped dramatically, making it harder and harder for subprime borrowers to refinance their loans causing them to add their property to the foreclosure market. This downward spiraling cycle has caused an increased number of foreclosed homes on the market, which in turn dropping home values and eliminated the short-term investment speculation that banks had been using as a safety net.

To combat this downward spiral and cycle of foreclosures, the U.S. Federal Reserve has cut interest rates several times trying to entice lenders to loan more money. And their has been numerous reforms and bills in committee to help reduce the prevalence of predatory loan practices, as well as to help the millions of homeowners that are finding themselves in the middle of the credit crunch. What this means for the short-term future of the real estate market is up for speculation, but most investors agree that in the long-term real estate will rebound and regain its reputation for being a great investment.

Foreclosure Loans – How It Works?

First off, I would like to clear one thing. This post is not for home owners i.e. people who are still living in a home, which is in a foreclosure situation.

This post is only for those foreclosure investors who are willing to invest in a home, which is in a foreclosure situation and is vacant.

It is very important to realize that foreclosure loans are not a single event but it is a whole process, which has different parameters and steps.

When you a buy a property, you need to sign two things. One is either a mortgage or a trust deed and the other is a promissory note, which is kind of a contract between the borrower who is taking a loan and assuring the other party i.e. lender that he will pay him back.

This promissory note is made against an asset i.e. your property and it means that if the borrower wouldn’t be able to pay back to the lender in time, then the lender can start the foreclosure process against that asset.

This is the main concept behind foreclosure loans.

The first step of foreclosure starts when you are due your payment and your lender sends you a notice reminding you about the promissory note.

At this point, the lenders may give you an opportunity to pay back or maybe not. It depends upon them on how they want to carry it forward.

Depending upon that particular state’s rules and regulations, the lenders can submit lis pendens or a notice of default against your property.

After this, there will be a waiting period, which varies in every state. In some states, it may take up to 60 days. Whereas, in others it may 6-9 months. You have to check the timeline in the state your property is located.

After the submission of notice of sale or default, it could be checked in a County Recorder. In some states, you will have to go to the county recorder office and check it by yourself but some of them are available online too.

Here, it is important to understand that the notice of default and notice of sale are entirely different events happening in different timeframes.

So, after the issuance of notice of default, publication of the sale of property happens in a newspaper. These are not the national newspapers but are specifically related to real estate.

After the notice of sale has been published for some time, then the actual sale of the property happens. There will be an announcement about the sale in the newspaper, which will have the time and location details.

On that particular day of sale, every real estate investor who is interested in buying the property will be there to take part in the bidding process.

The lender will start the bid and investors will be asked to bid against that. If the lender has placed a higher bid, which no one can afford, then may be there wouldn’t be any bidding and the lender will have to lower the price.

In the other scenario, different investors will bid and the one with the highest bid will win.

Now again, the situation would be different in different states. Some state will give some time before selling the property to the bidder and if the borrower can pay his loan off, then he can retain the property. Others just sell it on the spot.

There are two types of foreclosure process, one is judicial and the other is non judicial. If your property is located in a state, which follows judicial foreclosure process, then you need to go in front of a judge and everything will take place in front of him. Whereas, in non judicial foreclosure process, there is no need of a judge.

At some places, you will have to take cash with you at the foreclosure sales and at some, you need to take the cheque.

Another important thing, which you will have to do is to put some money down like between $5-10,000 and you will have to make a commitment that you will pay the rest by a particular deadline.

Before applying for foreclosure loans, one should have a detail view about how the whole foreclosure process proceeds and what are the foreclosure laws.

Most of the times, you can pay cash and then get a refinancing from your hard money lender, so the things keep moving.

One of the most risky things associated with foreclosure is that you never know that you will get the property or not. So, if you will ask your lender to send evaluators to draw comparables, which will cost you extra money.

Refinance Mortgage Loan – Should Homeowners Use Idle Home Equity to Buy Another Property?

Depends on how you look at things in life, the adversities may become opportunities. The economy may be in bad shape, unemployment may be increasing and house prices decreasing. This negative outlook may worry people. Or they may see a chance of a life time somewhere in that picture. They may have been dreaming about a second home for years.

House prices have come down considerably. This may be a very good time to buy that second home or holiday home they may have been wanting for a long time. Or the business premises they have been leasing may come up for sale at a reasonable price. Adding low refinance home mortgage loans to the equation, they may do very well when the property prices come back up. Many have seen several property booms and busts already and they know that prices will start rising eventually.

Timing is very important factor in making money from investments. Some people are better judge of situations and they may be able to pick the bottom of the housing market or interest rates. Some people do not concern themselves with bottom picking, in the knowledge that it is mostly down to luck. Who knows where things are heading and when they will make a U turn. However, they can tell when they see a good deal. They act on it while they can and wait. That is how many good investors make money. It is all about getting the timing right.

Is the time right to refinance their home mortgage loan? Can they make better use of idle home equity? Are they good at negotiating a much lower price? These are the questions and their answers will lead to a decision on their existing mortgage. If their existing home loan interest rate is considerably higher than the current rates, they may achieve several objectives at once. They can lower interest rates on their home mortgage loan, cash out some equity and invest it on another property. They may be able to get rental income to cover the loan on the new property, if they need so.

Homeowners may be able to get answers to those questions easily if they spend couple of hours online. They can find out their credit score, get several refinance loan quotes and check the properties in their chosen location. All these things only cost little bit of their time. These services are available free of charge from many different websites. They need all the information they can get to make a right decision.

Affiliate Marketing Myths

Affiliate marketing is mistakenly notorious for unethical advertising tactics that alienate consumers and often involve fraudulent activity. However, while this reputation may have stemmed from the birth of the affiliate industry when laws and best practices didn’t regulate active players, the spending growth and accountability of affiliate marketing companies speak to the lasting legitimacy of this booming industry. Thus, it’s time to dispel the rumors that tarnish the credibility of this cost-effective and resource-efficient advertising channel. Below are five common misconceptions of affiliate marketing that will help companies realize why they should be making the most of their access to the online digital marketing world.

1) Affiliate marketing is a fancy term for spam.

People often confuse banner ads and emails sent by affiliates as spam. Thanks to the FTC and IAB, affiliate partners have to follow strict guidelines and face litigation if they violate any of the industry-wide standards for best practices. Specifically, affiliates are required to own the data to which they mail and maintain a list of consumers who opt-out of further solicitation, eliminate deceptive marketing strategies, and only work with partners who uphold the regulations set in place. In contrast, actual spammers use illegal and unethical marketing tactics that typically trick the consumer into surrendering personal information without following through with the product or service promised.

2) Affiliate programs are easy to manage.

Because some companies don’t understand the complexity behind an active and well-managed affiliate program, they assume they can manage their digital marketing campaigns on their own and see the same success as their competitors. Rather, designing and maintaining a lucrative campaign takes both time and technological resources to build, test, and optimize advertisements that will gain maximum conversions. Business don’t typically have in-house access to the tools they need and should hire an experienced affiliate manager or OPM agency to handle their program. Affiliate programs don’t take off over night so the time commitment and industry know-how that an affiliate or OPM manager provides will be tantamount to a program’s long-term effectiveness.

3) Affiliate programs only work for some niche markets.

A company may avoid participating in the affiliate space because they believe their target niche is too small or specialized to appeal to a mass audience. Fortunately for them, an affiliate program will not only expand their customer base but will also expose them to new markets which translate into new sales opportunities. In addition, the results of a campaign test schedule may encourage a company to adapt their product or service to serve a universal audience and catapult sales in the long run.

4) Affiliate marketing is losing popularity and won’t be around much longer.

By 2016, spending in the affiliate marketing industry should exceed 4.5 billion dollars, more than doubling in size in just five years. The growth rate should continue to grow and shift into new channels including mobile, SEO and other emerging digital marketing platforms. Traditional venues for both advertising and sales exchanges will continue to decrease in size and the affiliate marketing space will benefit from the transferring market share. Sales generated through affiliate channels on Black Friday and Cyber Monday in 2014 solidified past speculations that consumers want to buy online and will search through their emails for advertisements and special deals that they can’t find elsewhere. Affiliate marketing is the new wave of traditional advertising and will adapt and grow with technological advances that have made other forms of marketing obsolete.

5) Affiliate programs don’t have as great of a success rate as other forms of online advertising.

Amazon’s affiliate program accounts for 40% of its revenue, a percentage rate that any company can enjoy with the right affiliate management team. Even more surprising, 50% of customers acquired through affiliate programs are considered new buyers who are responsible for the exponential growth that businesses see through this marketing platform. Affiliate programs are the best advertising option for most companies because they involve low-risk, performance-based practices that generate real results in real time from real customers. Senior executives may have had their reasons for straying from affiliate marketing during its initial inception, but studies on industry growth prove that it’s time to reconsider joining the cause or get left behind.

A Contemporary Guide to Online Marketing: The Art and Science

Online marketing is a term we hear so often nowadays. Though traditionally, marketing was all about a billboard advertisement or an ad featured in a magazine, today it’s about so much more than that and there are so many possibilities and avenues to explore.

Modern-day marketing involves a unique blend of artistry and science. In order to be successful a marketer needs to combine a number of elements, as outlined below:

The Art of Successful Online Marketing

High-Quality Content Creation

Successful marketing begins with your written content. This has become one of the most fundamental strategies for modern marketing, provided the content is packed with useful information and is very well written.


Images also play a key role in the success of your online marketing strategy as visual content captivates consumers and encourages them to stay put on your website for longer. Focus on incorporating images into your blog posts and website content in order to maintain user interest.

Email Marketing

Email marketing is another critical aspect of your online marketing strategy and is a fantastic way to reach out to thousands of people with the click of a button. By crafting interesting, resourceful and appealing email marketing campaigns you will generate a large and committed following of loyal clients.

Social Media

Social media has dramatically changed the way that businesses interact with their clients, so it’s essential that you have a solid social media marketing campaign as part of your marketing efforts. Social media provides a human element to your business and therefore enables you to truly craft your brand, interact with consumers and manage online relationships.

The Science of Successful Online Marketing

As previously mentioned, successful online marketing is as much a science as it is an art. In terms of the science of successful marketing, you need to focus on:

Analytics enable you to evaluate important trends and takeaways from one location, but you need to be able to evaluate the data independently and gauge which direction your marketing strategies should be heading in.

Performance Tracking & Campaign Performance

Every marketing activity you undertake should be carefully recorded and tracked to ensure it is as cost-effective and successful as possible. Finally, there are plenty of tools available to track the performance of your latest campaign.

As you can see there are plenty of requirements involved in the role of contemporary online marketer which is why it’s essential that you are able to quickly adapt to this ever-changing industry and excel.