The Bottom Line: During foreclosures, these brokers get busy

As many of you know, I've followed the foreclosure market in several articles here on Gather. For this week's post, I'd like to fill you in a trend I'm seeing that -- despite the unfortunate reality of foreclosures -- provides income for those who can fill certain niches. I just reported on this trend for the Pulitzer-Prize-winning Oregonian newspaper in Portland, Ore., and here are some of my findings:

DON McPHERSON MAKES HIS LIVING selling real estate for a relatively new kind of client: lenders. The Lake Oswego agent at Prudential Northwest Properties specializes in stepping in to sell homes after banks or mortgage servicers foreclose.

"There are about 12 top REO (real estate-owned) brokers in the Portland market now, with companies behind us specializing in REO foreclosures," McPherson said. "What's changed is that the banking industry now has the machinery set up with established ways to get the property out of foreclosure and back on the market."

McPherson joins a growing group of professionals tapping the foreclosure market for income. The numbers are still small however, given that analysis from the Mortgage Bankers Association shows 14 of the past 24 years had foreclosure numbers just as high or higher.

However, foreclosures still affect local business climates. According to foreclosure database RealtyTrac.com (first reported in Foreclosures pinch American dream), in 2006 1.2 million homes in the U.S. went into foreclosure, bleeding into near-term home sales and spendable income.

"As soon as someone receives a notice of default, even if the home is never foreclosed on, most lenders will consider that a foreclosure -- and then require a three-year waiting period before you'll qualify for financing again," said mortgage manager John Brookhouse at HomeStreet Bank.

Those affected not only lose their home, but also miss out on at least three years of the "tax and equity-building benefits that favor homeownership over renting."

That's why he, like other mortgage agents, now comes armed with bail-out options: "There are other loan programs available if you're currently solvent, like option adjustable-rate-mortgage programs and interest-only loans, but you may be making another trade-off," Brookhouse said. After the first few years, he said, "the payment on that can be much higher; after that initial time frame, many homeowners elect to refinance with a full 30-year mortgage."

Consequently, though mortgage brokers aren't seeing the debt-consolidation loans they once did, they may be able to augment income, either with refinancings as homebuyers adjust their payments to make it through lean times or sales to a new buyer.

That's where real estate agents like Tom Allen at Advanced Real Estate Services step in.

"I've dealt with the bank for the homeowner and, on one deal, we finally got an offer from the bank that was around $25,000 less than what was owed," Allen said. On another, "the seller was in over his head -- and $10,000 short of what the bank would take. So I found a cash buyer. We negotiated with the bank after they had issued a judgment against the homeowner, and the bank agreed to take even less. They accepted my buyer's offer at $1,000 above that, and we signed the papers at escrow today."

Along the way, the bank or mortgage-servicing company brings in someone like Christina Gibson at Advantage Realty.

"I not only do foreclosures," she said, "but also valuations on properties where banks are restructuring loans or doing something to the loan that would cause the need for a revalue. Usually that's because of a distressed loan."

Like Gibson, McPherson also handles the valuation side.

"Because we've had this shift -- an adjustment of sub prime lenders out there -- there's been a bit of a stall-out for those doing business with them," McPherson said. "But it's only temporary. The assets that have been foreclosed on with these companies will eventually get back on the market."

Editor's Note: If you're interested in reading up on job opportunities related to a late-2005 tightening of bankruptcy rules in the U.S., check out Jennifer's The Bottom Line: With more rules comes business for lawyers, credit counselors, accountants and others.

		Jennifer D. Meacham, Gather Money Correspondent
	Jennifer's column, "The Bottom Line," is published every Wednesday to Gather Essentials: Money. Jennifer also covers business/personal finance for The Oregonian newspaper and real estate news for RISMedia, and co-authored the best-selling retirement investing guide "IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment" (Square One Publishers, New York). Keep up on the latest news and analysis into how you can take control of your business and personal financial future by joining Jennifer's "Self-Directed Investing 101" network.

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