What Happened?
As the real estate market boomed throughout the early part of the 2000s, mortgage companies wanted to take advantage of the bull market. One way they did so was by creating and selling exotic mortgages that virtually ignored the applicant's creditworthiness.
Opportunity
Home prices have fallen dramatically in recent years. Since peaking in 2006, home prices have declined 27% across the country. And they are still falling. With the roots of today's economic crisis firmly planted in the real estate market, it may be natural to assume the entire market is toxic and that investors should stay away.
Nothing could be further from the truth. No matter the economic conditions, irrespective of the industry, there is always lots of money to be made if you know where to look. Today's real estate investing market is no exception.
For the wholesale real estate professional, the keys to success have always been to find the right property at the right price, then have a list of buyers ready to assume the contract. The challenge today is not that there aren't enough properties (there are an ample supply that grows every day) nor pricing (banks and individuals are desperate to unload these
Why did they do this? Because these companies simply sold the mortgages to large banks, meaning that they assumed no risk. They did not care if a person was unable to make their payments because if they defaulted on the loan, it would be the problem of the bank that now owned the mortgage.
When the real estate market weakened, prices began declining. At the same time, interest rates on millions of adjustable-rate mortgages rose, and pretty soon many people, not only could not afford their payments, but often times they owed more on their homes that they were worth. People began defaulting on their loans, and because the big banks bought millions of these loans from mortgage companies, their balance sheets were suddenly in the red.
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