Foreclosure Clean Up: Why It’s One of the Best Small Business Opportunities of 2010

Home foreclosures continue to rise; however, who’s being foreclosed on is changing. What do I mean? According to housing industry experts, prime home loans are going to make up the next wave of foreclosures. This could quite possibly make foreclosure clean up the small business opportunity of the year for 2010 – and beyond. Why? Read on.

Timeline of the Home Foreclosure Crisis: Why Foreclosure Cleaning Is a Thriving Biz Opp

Remember back in 2003, 2004 and 2005 how easy it was to qualify for a home loan? Even if you had less than perfect credit, you could get a mortgage – many times a zero down home loan. I saw this first-hand. In 2005-2006, I took a course and became a mortgage consultant.

Zero Down Home Loan with a 580 Credit Score

Back then, if a prospective homeowner had a credit score of only 580, they could qualify for a mortgage without putting any money down; ie, a zero-down home loan. If I hadn’t seen it with my own eyes, I never would have believed it. And, this is exactly the kind of thing that started the whole home foreclosure crisis, leading to the explosive need for foreclosure cleaning companies.

The fall of 2007 ushered in the beginning wave of home foreclosures. Back then, most of the home foreclosures were made up of homeowners with subprime loans. These loans were given to consumers who had iffy, spotty or downright bad credit to begin with (ie, those with credit scores like 580).

According to many home loan consultants, these were homeowners who shouldn’t have qualified for a mortgage to begin with. And after looking at many of their credit reports, I wholeheartedly agree. I know of one couple who I got a loan with a credit score of 575. They got a zero down home loan and defaulted a little over a year later.

Hey, according to the guidelines at the time, they qualified – and home loan lenders were giving practically anyone with a pulse, a social security number and a FICO score (no matter what it was) a mortgage.

Hence, it was no surprise – at least to a few housing industry experts -- when many of those with subprime loans started to default – in record numbers.

Foreclosure Clean Up: Where the Industry Stands Today

Now in 2010, the foreclosure crisis is about to net a whole new group of homeowners – those with prime home loans. These are people who didn’t get caught up in the subprime loan mess. They had excellent credit, always paid their mortgage on time, may have had a little in savings and even had growing retirement accounts and steady employment.

Then, the economy went south. And, it has hit this group hard because many have lost what they thought were secure jobs, they’ve run through their savings, and the equity in their homes has disappeared.

This last part may be the hardest for prime home loan holders to swallow because many rely on home equity to pull them through in bad economic times (eg, pay off credit card debt, pay for medical bills), and to live the good life in good times (eg, remodel, go on vacation, buy new cars, etc.).

These homeowners never dreamed that they would lose their job, run through their savings, have no home equity to top and take months -- or even more than a year -- to find a new job (if they are lucky).

When you add to this the fact that many of the jobs for this type of homeowner have disappeared for good and that credit is harder than ever to come by, it makes for a perfect “home foreclosure” storm that’s hit this group hard.

Proof?

According to the January 4, 2010 BusinessWeek article, “Housing Animal Spirits to Be Banished by Prime Foreclosures” . . .

An increase in mortgage defaults among prime borrowers in 2009 is likely to accelerate this year . . . The number of prime mortgages overdue by at least 60 days more than doubled in the third quarter from a year earlier to 838,000, according to a Dec. 21 report from the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

What’s Needed to Prevent Prime Home Loan Holders from Defaulting?

In a word – jobs. Plain and simple.

Foreclosure Cleaning: Opportunity Knocks as 2 Million Foreclosed Homes Are Set to Flood the Market in 2010 and Beyond

Housing industry experts predict that upwards of 2 million foreclosed homes will hit the market in 2010 – and beyond. The December 2009 AP article, “Foreclosure backlog estimated at 1.7M,” states:

About 1.7 million homeowners were on the verge of foreclosure in the fall, a looming “shadow inventory” of homes that will be put up for sale in the coming years and weigh down prices, . . . The number, up from 1.1 million a year earlier, is likely to keep rising through the middle of next year [2010] or later.

This makes foreclosure clean up an ideal business to start this year – and beyond. Learn more in the NBC News video below.