We have got to a stage of our global economy where it looks likely that there will be a recession. While no one really wants to have to face one and while some economists still argue that what will happen will be a sever economic slow down rather than a full-blown recession, I take the view that they are hair-splitting.

Whichever happens the results will be largely the same: tough times for the economy and for everyone involved in the service industry and that includes real estate. Which means that it will be harder for people to get credit (and here is already evidence of this) it will be harder for them to get mortgages and it will be harder for them to meet their payment commitments.

All of this brings us around to the ‘F’ word. Will foreclosures go up or down? Logically, you expect them to increase but logic and the economy are not always synonymous and a tough financial market may force many mortgage providers to do what they have not been doing up to date which is negotiate with some of their borrowers to arrange for better terms in repayments so they do not go into default.

This is not the same as granting a license for everyone to renegotiate their payments and some defaults will inevitably happen because this is exactly how our economic model has been set up. But it does mean that there will have to be a dialogue and a carefully worked out set of criteria to help those who may just need that little bit of a helping hand.

Naturally a recession puts everyone under pressure and foreclosures present real estate investors with a golden opportunity to set up the perfect conditions which will benefit not just themselves and the lending institution but also new home buyers who may not be able to afford to get on the housing ladder at today’s exorbitant housing prices and tough lending conditions.

An increase in foreclosures, as long as it is a natural reflection of the real estate system rather than an abnormally high number brought about by indiscriminate lending practices, is just the ‘shot in the arm’ that the economy needs in order to start reviving.

It releases ‘frozen’ properties back into the market, it helps to create new future spenders as people buy properties which then need to be upgraded, furnished and then perhaps sold on as they move on to better and bigger things and it allows the economy to start moving forward again.

An economic recession, or a slow down, is just another set of opportunities for savvy real estate investors to help create the conditions that generate wealth for everyone concerned and that is, surely, a great thing.
 

Every investor knows that nothing beats the feeling of actually doing some good. Real Estate can make you money fast, that’s a certainty but where we actually begin to get some real value is in the fact that, at the same time, real estate investors help a house owner in trouble, a money lending institution, a new home owner, the local economy and the country at large.

I know this sounds a little far-fetched right now, it puts real estate investors a couple of notches below superman so I will try to explain. If you have a house that’s locked up in the payment process because someone can no longer afford to make payments on it you have a financial black hole. Anything goes in does not come out and there is nothing coming out. It does not contribute to the economy, it does not contribute to the country, it does not help the person who is stuck in the house not knowing what to do or where to turn to and I does not even help the real estate industry in any way as nothing is happening.

Real estate investors have a way of releasing this gridlock. What usually happens is they are able to set up a win-win-win-win scenario by agreeing to help the owner stuck in the property, out. The outcome of this is that they are usually able to move on, many times with some money in their pockets, the mortgage lender has a property taken off their books which they would otherwise have to struggle to deal with and sell on, someone new comes in and acquires a property at a good price, the local economy starts to benefit again as the new property owner pumps money in, in terms of rates, DIY, home furnishings and decorating. The mortgage lending industry gets a new borrower who can afford to make their payments and the country, as a whole, sees a small, stagnant part of its economy begin to flourish once more.

I accept that here I am painting a picture in very broad strokes but you can see how it works and how real estate investors working in the foreclosure market can actually have a huge positive impact in the real estate industry, the country and the economy through their activities.

It is all too easy sometimes to focus on the negative aspects of a foreclosure so much that we overlook the fact that it also presents us with a challenge and an opportunity. Solving the challenge gives us the opportunity to change the way things are, make money and still help our society and our world move towards a better place and that is not a bad thing at all!

The U.S. mortgage industry is undergoing the most intensive restructuring it has ever been under and some of it still going on as I write this. To be sure, all this restructuring, or rather the need for it, has been self-inflicted.

It came about as a result of the legislative and non-legislative pressure being brought to bear upon the mortgage lending industry as a result of what has been widely, now, acknowledged to have been predatory lending practises by some of its proponents. While a little greed may, arguably, be a good thing helping speed things up and energizing specific situations, the moment it gets out of hand everyone gets hurt and this is exactly what’s happened now.

So we are having a shake up where mortgage lenders have come under criticism and legislature has been put in place to ensure that we now have more transparent lending practices.

This has created quite a few opportunities for those seeking new mortgages as the market itself is now gearing up to attract potential mortgage buyers through more competitive mortgage packages as well as competitive rates.

The fact that there is a more transparent process in place means that those seeking to get a mortgage now are less likely to get ripped off or find themselves in the situation of having to accept foreclosure on their home which is better for consumers and better in terms of the direction the market is shaping up in.

The better than usual terms for borrowing money does not mean it’s a borrower’s market. Quite the opposite. We may be heading towards a general economic slowdown as our institutions learn from the current crisis and try to understand what they need to do in order to get back on the financial growth path.

Every time that happens the market revamps itself, discovers new ways to grow safely and the whole cycle begins in a way that benefits not just the mortgage lending industry and real estate but also those who are looking to purchase new homes and the ones who want to sell their existing ones and either downsize or move on to something bigger and better.

This means the beginning of a new growth cycle and the presentation of a fresh batch of opportunities to all those who are looking for properties to buy. It also means, inevitably, a fresh increase in foreclosures as they are part of the natural cycle of our economic model and an inherent percentage of the properties being sold and bought. So as they go up, foreclosures, naturally increase and believe me when I say this is a good thing, but that is a different story.