Obama’s plan differs with the foreclosure schemes of the previous administration in its focus on borrowers who are updated in their mortgage payments but are in danger of default and its use of incentives to encourage mortgage lenders to work out loan modifications.

One of Obama’s schemes is targeted at about 5 million troubled borrowers classified as responsible homeowners. These borrowers are at risk of foreclosure, but they are updated in their mortgage payments.

To be able to participate in this responsible-homeowner program, borrowers’ loans must have been issued or guaranteed by Freddie Mac or Fannie Mae and they must have paid at least 20 percent of their mortgages. It is also required that the new mortgage must not exceed 105 percent of the home’s current market value. If the new mortgage totals $199,500, including refinancing costs, the home’s market value must not be less than $190,000.

This program also allows homeowners to change loan terms to 15 years or 30 years at a fixed mortgage rate, using the current home loan rate which is hovering around 5 percent during the month of February. This provision greatly benefits borrowers whose loans were taken at high interest rates or flexible-rate arrangements. However, this program does not lower the loan balance.

Another scheme, called Homeowners Stability Initiative, aims to help another 4 million borrowers. This will reduce monthly payments to not more than 31 percent of a borrower’s monthly income. This initiative is also expected to increase and maintain home prices by preventing as much as $6,000 from being lost to price declines.

To encourage mortgage lenders and services to do their best to help more borrowers avoid foreclosure, Obama’s plan will pay $1,000 for every loan modification, plus another $1,000 per year for 3 years if the homeowner is updated with payments. Additionally, lenders are given $1,500 and servicers given $500 if they restructure loans before borrowers go into foreclosure.

Borrowers will also be rewarded by the program for maintaining their monthly payments. Their loan balances will be reduced by up to $1,000 per year for up to 5 years as if they are updated in their payments. In addition to these loan modification efforts, Obama’s plan also includes the purchase of mortgage-backed securities to keep mortgage rates low and the increase of the portfolios of Fannie Mae and Freddie Mac.

First of all, where can a person find a company that is actually legitimate and accredited? Visit Hud.gov for starters, and click on the link that takes you to their list of Foreclosure Avoidance Counselors. You can search for agencies by state, and then narrow down your search by city or zip code. All the companies listed on HUD’s website have been approved by the Department for Housing and Urban Development, and offer services that are free of charge. As the site says, “There is no need to pay a private company for these services.”

One caveat is that some of the companies listed might not have staff manning the phones at all times. If you can’t get through to anyone at the first office you call, try phoning another agency that’s close to where you live. Be patient and determined, or you’ll be tempted to sign up with a company that you see on a billboard or television commercial. They’re so appealing because they promise to have operators standing by who can save your home—fast! Sadly, most of these companies’ assurances are nothing more than hot air.

If you decide that you want to try a private company anyway, there are a few critical things that you need to be aware of to keep yourself from getting taken for a very expensive ride.

First of all, if a company demands an up-front fee, walk away. Chances are good that as soon as you hand over the money, the company will vanish from your life. There are some legitimate companies that charge fees for helping homeowners get out of their foreclosure mess, but make sure that you receive some services before handing over a check.

In terms of paid services, don’t allow them to charge you hundreds of dollars for making a few phone calls and shuffling papers. There are many companies out there that will charge unreasonable amounts for doing minimal work. This is known as “phantom help,” and really does nothing of value for homeowners in trouble. If you’re going to pay someone to help you with your foreclosure, opt for a real estate lawyer instead of a mortgage modification company.

Don’t ever listen to someone who tells you to make your mortgage payments to them instead of to the bank; they’re trying to scam you. Con artists will also encourage you to sever communications with the bank, and to trust that they’ll do all the talking for you. Lenders’ loss mitigation departments are there to help. They may be difficult to get a hold of at times, but they are your best bet for turning your financial situation around.

These sharks are banking on your desperation, your fear, and your ignorance. Ask questions, get them to put each one of their promises in writing, and obtain copies of every piece of paper you sign. Verbal commitments don’t hold much weight, so make sure you have a comprehensive paper trail.

If a company asks you to sign a contract that has empty lines, don’t. They may fill in those blanks with very nasty clauses that result in you signing over the deed to your home.

Read everything the company gives you, and consult with an attorney before signing anything. These companies want you to feel pressured to sign quickly so they can take your money—don’t let them push you around. You have every right to review legal documents with a lawyer before signing. If English is not your first language, this step is vitally important. Legalese is difficult to understand for the average English-speaker, so having a language barrier only makes you more vulnerable to these types of scam artists.

Finally, never agree to transfer your deed to a mortgage modification company. They may say that they’ll buy the home and then sell it back to you on a rent-to-own basis, but in the majority of cases, homeowners who agree to this scheme get evicted and never see their homes again—yet are still held responsible for paying back the mortgage.

Don’t let these people kick you while you’re down. If you’re facing foreclosure, talk to your lender, find a real estate lawyer, and if necessary, locate a HUD-approved counseling agency in your area.

An auction on March 29, 2009, illustrates the number of foreclosed properties currently saturating the market in Minneapolis. The California-based Real Estate Disposition Corporation (REDC) sold 139 homes for an overall total of $10.8 million. This was a far cry from the over-350 homes it had expected to auction at the event.

A spokesman for REDC, Rick Weinberg, claimed that banks and lenders pulling homes from the auction at the last minute was to blame for roughly half of them going on the auction block. That may well be, but when $10,800,000 is divided by 139, the quotient is $77,697.84. The average estimated value of a home in Minneapolis in February 2009 was $261,872.

Now you can assume that these homes were all 1-bedroom condos with foundation and roof problems, or you can take REDC CEO Jeff Friedan’s statement that, “residents walked away with some incredible deals.”

According to the Minneapolis Foreclosure Recovery Plan, 3000 properties are projected to foreclose in 2009. The REDC auction is just a drop in the bucket when it comes to the amount of homes that will be coming on the market.

The “worst economic crisis since the Depression”, according to CNNMoney.com, can mean improving your economic situation by virtue of the fact that the market always turns around. Always. It may not be the same market, but it will be an improved one. The key to profiting by this is patience. Take the time to slowly improve the home and watch the statistics.

The Minneapolis Recovery Plan is another reason why you should think about buying now. Funding for Minneapolis home recovery programs is proposed at $660,000. There is a serious effort by the city to turn the Minneapolis home market around, a move that can mean fast profits by those who take advantage of foreclosure sales today. The city is moving to support home buyers and prevent foreclosures from creating urban “deserts” that are breeding grounds for crime and neighborhood degeneration.

Investing in a Minneapolis foreclosure is a way you can set your financial situation up to increase as a result of massive efforts to bring the market back up to par. Money spent now can be realized years down the road in equity if you “seize the day” and find a home you can restore to beauty and value.

It’s becoming more common to see multiple offers on the same properties as buyers zero in on the bargains offered by distressed properties. This is especially prevalent in California, Arizona, and metro Washington, D.C. and Minneapolis-St. Paul.

Even though there is a large inventory of foreclosures, the quality properties, still in relatively good condition, and in the $300,000 price range are going fast. It’s not uncommon for first time buyers to be repeatedly outbid by investors who show up with cash for these lower priced bargains.

There are still number of markets with a large excess of inventory. Areas especially struggling with empty condos and vacant homes include South Florida and New York City. In Manhattan housing inventory has increased 32.5% giving them a 14 months supply, where most other areas have finally begun declining in numbers. In addition, banks have been backlogged with unresolved foreclosures, and many of these are expected to flood the market within the next few months. Lower than normal advertised prices of these homes sets a standard for the entire market, artificially lowering the price of regular homes.

The States with the highest foreclosure levels include California, Arizona, Nevada, Florida and Michigan. Most buyers are sorting through these types of listings first, leaving owners of regular properties waiting on the sidelines, refusing to slash their prices to compete with the banks. In Sacramento, CA, alone, two-thirds of March real estate sales were foreclosures. This represents about a one month supply of inventory before delving into non-bank owned properties which are 8 times higher in availability.

Sometimes a bank has held onto a property long enough and will cut the price drastically. Such was the case with a Norwich, Conn. duplex where the price was reduced to $73,900 from $144,900, prompting five offers. How does the regular guy down the street trying to sell his home compete with that?

Cherie Hunt of Prudential California Realty cites a recent case in West Sacramento where her buyer won against two other bidders for a three-bedroom home. They agreed to pay almost $220,000, which was almost $10,000 over the asking price. The same home sold for $405,000 in 2005.

Unfortunately this type of buying is having an opposite effect on some purchasers who after being out bid after offering tens of thousands of dollars over the asking price, are now throwing up their hands in frustration – swearing off bank-owned properties. Many get caught up in the bidding and pay more than the property is worth.

Ronald Peltier, chief executive of HomeServices of America Inc. claims this type of action is a good thing, claiming “We do need to flush out the distressed inventory, before the rest of the market can stabilize.”

It seems that the real winners are those who have the patience to wait for the right deal to come along and not get sucked into the competition of bidding.

Tip 1: Routinely Analyze your Rental Portfolio
Before you can address the problem(s), you need to identify them. Look over each of your rental properties’ books, and determine which ones consistently perform well, and which ones routinely put you under water.

Tip 2: Creatively Address the Problem Rental Properties
The problems that could be plaguing your rental properties are varied, so the solutions will be equally diverse. That said, the most typical problems include tenants who fail to pay regularly or abuse your rental property, frequent vacancies and insufficient cash flow. Some solutions to these problems include helping a problem tenant to move out in order to secure a conscientious one, offering incentives for early rent and immediate eviction notices for late rent, and signing a longer term rental agreement in exchange for an incentive.

Tip 3: Creatively Increase Rental Revenue
Cash flow can be a problem, and one that’s not easily solved. However, it may be possible to divide your available rental inventory and sign a rental agreement on each piece. For example, this may include dividing a single rental unit into two rental units, or signing a rental agreement on a detached garage space separately from the rest of the property, or even renting out a valuable parking space separately. The trick is to think outside the box, and consider what can be rented separately for more money each month.

Tip 4: Find the Right Team
Every real estate investor uses a team of experts to work more efficiently, which can include property management companies, real estate attorneys, accountants, bird dogs, contractors, etc. How well do each of these people perform? What do they charge? Ask around at real estate investment clubs to get a sense of how other investors’ team members perform and charge, to better evaluate your team. It may be that you need an accountant who’s more of an expert in real estate tax law, or that your contractor overcharges, or your property management company has a poor record. Do your homework, and make educated decisions when affiliating yourself with team members.

Tip 5: Research and Strategize
The best real estate investors are intimately familiar with their real estate markets, and make informed, educated investing decisions. What are the long term demographic changes in this neighborhood? What zoning and development changes are being planned? What large employers are moving to or from the area? Once you have your facts aligned, you can create a business strategy based with multiple exit strategies. An example may be buying a shell over the winter market lull, hiring contractors desperate for work during the slow winter months, and renovating the property just in time to sell in the summer rush. If that short term exit strategy fails, and the property does not sell within your allotted three month window, perhaps the second exit strategy is to sign a rental agreement with an option to purchase, and selling the property to the tenant with the help of a seller-held second mortgage. The third exit strategy may involve simply sitting on that rental agreement for a few years, allowing the real estate market to recover and your tenants to pay down your mortgage, and then selling when the market is hot again.

Both the real estate market and the broader economy go through boom and bust cycles, which must be adjusted for as necessary. By paying closer attention to each rental agreement, and each investment, you can improve your rental properties’ performance, and by holding onto investment properties until the market improves you can elude the slow real estate market altogether.

As the economic environment continues to deteriorate, house prices in the US are expected to continue heading downwards. Within this context, a key question for property investors is how much more house prices will fall before they bottom out. This is a key question in evaluating a residential investment in today’s environment and assessing whether it will provide the minimum rate of return, required by an investor over a given holding period. This question becomes even more critical for investors with short- to medium-term horizon.

According to the Wall Street Journal’s (WSJ) latest survey of many economists and housing market experts, single-family house prices, as measured by the national HPI, are predicted to continue declining in 2009 by an additional 6.4%, following the 8.2% drop in 2008. In 2010, single-family house prices are predicted to register a minimal drop averaging 0.4%.

In terms of the economic forecast underlying this housing market forecast, the experts surveyed by the WSJ predict that GDP growth will turn positive at the minimal annualized rate of 0.4% in the third quarter of this year, after decreasing by 5.0% and 1.8% in the first and second quarters, respectively. The job market though, which has a direct impact on the demand for housing, is not expected to bottom out until after the middle of 2010. Although the survey does not address the question of what may happen to house prices in 2011, it is likely that there will be no further declines, if indeed by that time the economy and the job market are in a recovery mode.

The national forecast of house price declines provides useful clues about the direction, magnitude and the timing of housing price movements in the next 24 months, but it would be a mistake to apply the timing and magnitude of these changes to any particular local market. The reason is that there is a wide variation in house price changes across local markets. These wide variations are due to differences in the structure and dynamics of the local economies and real estate markets, as well as the different real estate market conditions that were prevailing in each locality when the crisis reached them. To get an idea of the significant variability in housing price changes across local markets consider that annual changes in the all-transactions HPI (which includes and appraisals) in 2008 ranged from -49.5% in Merced, CA, to +10.4% in Midland, TX.

In sum, according to the experts, single-family house prices at the national level are not expected to fall more than 7% on average in the next two years. However, single-family house price declines are likely to be considerably higher in many local markets. Thus, investors contemplating investing in single-family housing need to evaluate very carefully the prospects of further price declines in the specific localities they are targeting.

2. Work with a buyer’s agent. While bank owned properties are listed with real estate agents, these agents are typically just the middlemen and don’t do much negotiating. You are best off retaining your own representation with a buyer’s agent that will do the work for you.

3. Be prepared for extra pain and suffering. The bank isn’t going to pay for anything, or doing anything with the house. Make sure that you have the additional time and energy that is required to deal with a bank owned property.

4. Have some extra cash on hand. Since the bank isn’t going to pay for anything, you should be prepared to pay for some things that you normally wouldn’t have to. (i.e. If you are purchasing a home in a rural setting, you will likely pay for the septic and well to be tested on your own.)

5. Be prepared for delays. If you are going to be moving into the bank owned home after you purchase it, you need to make sure that you don’t cancel the lease on your current home. If you are selling your current home, wait until the bank owned home has closed first if it is at all possible.

6. Read the bank addendums thoroughly. Nearly all banks will require you to agree to additional language that is not part of standard purchase and sale agreements. While this language is not negotiable, you need to know exactly where you stand contractually during the entire process.

7. After you close on the sale, contact your local tax assessor. It is likely that you purchased the bank owned home under the assessed value. If you file with your local tax assessor immediately after the sale you stand a good chance of reducing your property taxes.

The median price for homes dropped to $169,000, a decrease of 14 percent from last year’s first quarter. The median price declined in 134 out of 152 metro areas, with the steepest declines in Fort Myers and Cape Coral in Florida and in San Jose and San Francisco.

Sales of foreclosed bank owned homes and other distressed homes increased in 17 states, compared to last year’s fourth quarter, as first-time home buyers and investors bought foreclosed bank owned homes and other distressed properties. NAR said that foreclosed homes are usually priced at 20 percent below the price levels of other foreclosures homes for sale.

NAR also reported that the inventory of pre-owned houses on the market declined in March to 3.7 million, compared to 3.8 million pre-owned homes in February.

According to data from the Commerce Department, the inventory of new houses for sale dropped to 311,000 units, the lowest count since January 2002.

Brian Bethune, an economist at Massachusetts-based IHS Global Insight, said there are many forces pushing the housing market in opposite directions. Rising affordability and record low mortgage rates are enticing first-time home buyers, but job losses and foreclosures are pushing down home prices to levels that are hurting the housing market.

Total sales for existing homes fell by 6.8 percent compared to last year’s first quarter to 4.59 million housing units in an adjusted yearly rate. Sales, including sales of condos, co-ops and single-family houses, declined by 3.2 percent compared to last year’s fourth quarter.

NAR’s chief economist Lawrence Yun, said that the elements and geographical areas of the housing market show different directions, with short sales, sales of new homes and sales of foreclosed bank owned homes varying in market performance.

Yun has observed that in places with the largest price declines, sales of foreclosed bank owned homes and other distressed properties are also higher, distorting market data.

NAR estimated that sales of pre-owned homes, including foreclosed bank owned homes, will increase to 4.97 million units in 2009 from a total of 4.91 million units last year.

Meanwhile, HUD Secretary Shaun Donovan reported that U.S. banks have $26.6 billion worth of foreclosed bank owned properties as of December 2008, more than twice the figures in December 2007, using data from the Federal Deposit Insurance Corp.

There are generally three types of foreclosure auctions. There is the auction with reservation which is not very common. Here the seller can reject the offer, if required, for any reason. However this case is rare because the seller does not have a choice but to auction his property. He is not in a position to reject the offer.

Then there is the absolute option. In this case the seller simply has to accept the highest bid amount. So even if you are the only bidder and you have bid for $2 the seller has to accept the amount unconditionally. These types of auctions are rare, but they are often used for property in the house such as furniture.

The last type of auction is the minimum bid auction. The seller then quotes the minimum bid after taking into account the fees and the balance of the mortgages. The auction begins from the minimum amount and the winner is the person who has bid the highest amount. The bidding procedure varies from one auction to another. There maybe some auctions that accept written bids and the highest bid mentioned wins.

You may have to verify your identity before you may be allowed to bid. This is because auction is a serious matter and no one wants to do the proceedings again. You may have to bring certified funds which can be adjusted against a 10% non refundable deposit amount. You can close the investment within 30 days of winning the auction. You may have to bring in the preliminary paper work before the auction in case of anything going wrong. However if you are unable to close your deal within 30 days of winning the auction you may lose your 10% deposit.