We all know how difficult it's been in this economy. The real estate market has taken a huge hit with record foreclosures, a failing mortgage industry and homeowners seeing their home equity disappear. Some homeowners are finding some relief by refinancing through one of the loan modification programs available for struggling homeowners. The current administration is heavily focused on keeping homeowners in their homes.
When the real estate market was good, many people were looking to get into home ownership and take advantage of the favorable lender environment. In another corner, many investors were buying up rental properties at record pace to capture the low interest rates, "zero downs", 100% financing and attractive ARM's not normally available for rental properties. And with so many baby boomers on the horizon, many were buying as second homes for their future, but using them as rentals for the short term. Of course, all assuming the market would continue to go up, equities would continue to rise and they'd have retirement funds in abundance.
Unfortunately this did not happen and many of these investors are now holding onto investment properties that have lost much of their value, have mortgages set to re-adjust at higher rates and are now becoming long term landlords.
Many have tried to apply for the same loan modification or refinance programs that are being offer to homeowners in their primary residence, only to find out that most of these programs do not apply to properties in the catagory of "investment properties", especially if the original financing terms were catogorizes as a "second home" and now the property is used as a rental.
Also if a second mortgage is attached to the rental it can almost be impossible to get the second lienholder to subordinate and allow the 1st mortgage to be modified. Nor would it be easy to get the first lienholder to consolidate 1st and 2nd mortgages together as this would most likely cause an upside down mortgage (over 100% financing).
As a result there are not many options for a property investor other than to try and stay afloat and hope their tenant never moves out. Or lose your property to a quick sell (hoping to break even), a short sale or worse foreclosure.
To me it's interesting this administration hasn't given much thought to the needs of property investors, as this group of people are not only helping the economy by offering affordable housing to many that have lost their homes, but also to the fact that these investors create many jobs in the building industry, supply income to the state and city by way of property tax revenues, banks, tradesmen, carpenters, real estate companies and property management companies.
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