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Rise In Companies Buying Debt-hit Homes

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http://www.ft.com/cms/s/38545f12-1b72-11dc...0b5df10621.html

Rise in companies buying debt-hit homes

By Ellen Kelleher

Published: June 15 2007 22:03 | Last updated: June 15 2007 22:03

Dozens of fledgling property companies specialising in buying homes from homeowners struggling with mortgage repayments have started up in recent months in another sign of the growing level of indebtedness in the UK.

There are now more than 200 companies that buy houses at discounted prices from distressed homeowners. In some cases, the companies rent them back to the sellers.

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Often, these companies agree to buy homes for 70-80 per cent of their market value and pay all relevant fees and costs. In return, sellers can rent their homes for less than their previous monthly mortgage payments.

“A year ago, we had about 20-25 competitors in this sector. Now we have more than 200,” said Keith Woodward, a spokesman for Approva Homebuyers.

“There’s a growing level of debt in this country. People are using their houses like a blank cheque and we’re at the receiving end.”

However, consumer bodies are urging homeowners to view these companies with caution as standards can vary widely and customers have little protection as the sector is unregulated.

Analysts warn it is not uncommon for unscrupulous companies to establish a tenancy agreement with a client and then evict him or her if the property can be resold at a gain.

“It seems to be yet another indicator that we as a nation are becoming overstretched,” said John Howard, chairman of the Financial Services Consumer Panel.

He recommends that consumers should hire independent solicitors and surveyors and not rely on those supplied by these unregulated companies, which often offer to pay legal fees and surveying costs.

The growing popularity of companies targeting homeowners wanting to avoid repossession or bankruptcy underscores how rising interest rates are putting further pressure on people struggling to pay debts.

The number of individual insolvencies in England and Wales reached record levels in the first quarter of 2007, topping 30,000 – up 24 per cent year-on-year, according to government figures.

Copyright The Financial Times Limited 2007

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And when the company is in difficulty because house prices are dropping like a stone you can offer to buy the house back again at a further 30% discount....sounds like a plan to me. :wacko:

killerbee

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And when the company is in difficulty because house prices are dropping like a stone you can offer to buy the house back again at a further 30% discount....sounds like a plan to me. :wacko:

killerbee

There should be a competition or TV program who can get the most off the asking price. Who has the best negotiating skills with the EA etc and call their bluff etc. It has to exclude new builds and appartments as they are getting too easy now to get bargains at.

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Guest casaloco

Can anyone see this being the next big scam? FTBs who had alread been ripped off are gettin ripped off again!

I expect as more people default they'll offer 70% instead of 80%. Then 60%, then 50%....

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Looks like the Yanks are at it too.

Surely these vultures/business people (chose your adjective) aren't circling without good reason.

How America learns from the subprime crisis

By Patti Waldmeir in Washington

Published: June 15 2007 21:12 | Last updated: June 15 2007 21:12

The US subprime mortgages crisis is threatening banks, investors and homeowners – but some are looking for ways to get rich from it.

Across the US, Americans are gathering to learn how to invest in properties threatened with foreclosure.

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One such seminar was held recently outside Washington, near Prince George’s County, Maryland, the cradle of America’s black middle class and an area hard hit by mortgage foreclosures as a wave of high-interest lending collided with falling property prices.

Several hundred African Americans gathered to listen to “Master Lloyd” and “Queen Vicki” Irvin tell them how to make “life-changing money” from investing in property.

The session was long on revivalist and motivational rhetoric – lots of talk about self-esteem, conquering fear and “giving back to the community”.

“Your life will be forever changed with the power of real estate investing,” said Mr Irvin. It was sad that so many people in the area had to get out of their homes, he said, but he encouraged the crowd to “put your investor hat on” and turn the misfortune to their advantage.

The highlight of the evening consisted of testimonials from graduates of the Irvins’ property “boot camp”: the single mother who bought a customised Porsche within months of her first deal, without investing a cent of her own money, the minister who made $58,000 (€44,000, £29,000) from his first Irvin deal (so much, he said, he could take unpaid leave to build a church), and the policeman who made a fortune buying houses with what Mr Irvin calls “OPM” – other people’s money.

The Irvins’ business targets any property that can be bought cheaply – not just those marked for foreclosure. They teach pupils how to pick the right house and use “OPM” to “flip” it and sell at a large profit.

“We teach investing that is above board, the right way, under the law,” says “Queen Vicki” Irvin, adding that all transactions are approved by lawyers. “I don’t want to be grouped with people that are unscrupulous, who have people sign over their deed at the kitchen table and you never see them again,” she says, referring to recent scams where homeowners were tricked into signing over their homes, in exchange for an empty promise to keep them out of foreclosure.

The Irvins are not alone in offering such advice.

Internet sites also list properties in default and offer “how-to” guides on property short sales (deals where investors buy default properties from the lender at a deep discount and resell at a profit). Television adverts promise “win-win” schemes where families keep their homes, and investors get rich helping them. The TV series Flip this House shows how to generate equity from neg­lec­ted homes.

Many of the schemes are legal but others have raised serious concerns, and some states have passed laws to combat “foreclosure rescue fraud”. Maryland passed a law in 2005, says Scott Borison of the Legg law firm in Frederick, Maryland. He says the new law makes it harder to perpetrate a traditional foreclosure scam, which involves finding a homeowner in distress, advancing a small amount of money to pay off their arrears and tricking them into signing over the deed.

Now there is a “new improved version” of such scams, he says. This uses a straw buyer to insulate the profiteer from liability. The profiteer receives most of the money, but his name is not on the deed.

Investors involved in foreclosure rescue schemes in Maryland must comply with strict requirements to ensure homeowners understand what they are getting into, says Phillip Robinson of advice group Civil Justice.

“We’ve created a situation where con artists can come in and prey on people,” he says.

Copyright The Financial Times Limited 2007

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http://www.ft.com/cms/s/38545f12-1b72-11dc...0b5df10621.html

Rise in companies buying debt-hit homes

By Ellen Kelleher

Published: June 15 2007 22:03 | Last updated: June 15 2007 22:03

Dozens of fledgling property companies specialising in buying homes from homeowners struggling with mortgage repayments have started up in recent months in another sign of the growing level of indebtedness in the UK.

There are now more than 200 companies that buy houses at discounted prices from distressed homeowners. In some cases, the companies rent them back to the sellers.

ADVERTISEMENT

Often, these companies agree to buy homes for 70-80 per cent of their market value and pay all relevant fees and costs. In return, sellers can rent their homes for less than their previous monthly mortgage payments.

“A year ago, we had about 20-25 competitors in this sector. Now we have more than 200,” said Keith Woodward, a spokesman for Approva Homebuyers.

“There’s a growing level of debt in this country. People are using their houses like a blank cheque and we’re at the receiving end.”

However, consumer bodies are urging homeowners to view these companies with caution as standards can vary widely and customers have little protection as the sector is unregulated.

Analysts warn it is not uncommon for unscrupulous companies to establish a tenancy agreement with a client and then evict him or her if the property can be resold at a gain.

“It seems to be yet another indicator that we as a nation are becoming overstretched,” said John Howard, chairman of the Financial Services Consumer Panel.

He recommends that consumers should hire independent solicitors and surveyors and not rely on those supplied by these unregulated companies, which often offer to pay legal fees and surveying costs.

The growing popularity of companies targeting homeowners wanting to avoid repossession or bankruptcy underscores how rising interest rates are putting further pressure on people struggling to pay debts.

The number of individual insolvencies in England and Wales reached record levels in the first quarter of 2007, topping 30,000 – up 24 per cent year-on-year, according to government figures.

Copyright The Financial Times Limited 2007

Why is the sector unregulated? This is not a new concept so why isn't the government extending the FSA remit to cover these companies?

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Why is the sector unregulated? This is not a new concept so why isn't the government extending the FSA remit to cover these companies?

Now now, we (the government) don't want to spook the herd do we? <_<

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Why is the sector unregulated? This is not a new concept so why isn't the government extending the FSA remit to cover these companies?

Thing is, if the companies were regulated, and in competition with each other, they could actually perform a useful service.

While losing your house is never going to be enjoyable, getting a market price for it, and being allowed to stay in your home at a market rent has got to be better than being repossesed, made homeless, and seeing your property auctioned off at a knock down price.

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Why is the sector unregulated? This is not a new concept so why isn't the government extending the FSA remit to cover these companies?

because the government needs to see the evidence that the horse can bolt, will bolt, and has bolted, before implenting a lengthy bureaucratic process designed to ensure that stable doors will be closed in the future.

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