Housing Investors fueling rising house foreclosures

Many national media reports have you to believe that recent sub prime mortgages are held by the lower class or people with faulty credit reports for the rise in foreclosures that is only half of the story. The Mortgage Association released a report that indicates the major reason to defaults in Nevada, Florida, California and Arizona are investors taking on more than they can afford. In a recent newspaper article tells the story of home investors, one in Nevada, and the other in Florida, who both bought several homes as business investments hoping to flip them quickly for more money. As the bubble busted, they can't get the properties flipped and they can't rent them for the money they pay cover the mortgage payments.

The Nevada individual is a 40-year-old real estate agent who bought 16 homes hoping to flip them to save for his retirement fund. Now he has a total of $45,000 in mortgage payments every month and can't afford them, so he stopped making payments on them and walked away.  His credit score dropped to 400. The Florida investor has not decided to walk away from his houses yet, but is planning to stop paying his mortgage payments. He is a contractor who bought four condos in a Florida condominium complex with the hopes of flipping them. His monthly mortgage payments total $4,000.

Unfortunately none of the investors want to walk away from a major investment. They'll have difficulty acquiring loans for at least seven years after foreclosure because the foreclosures will remain on their credit histories for that long. If they claim bankruptcy, that will remain on their credit report for at least 10 years.  Any portion of the loan that is forgiven might be taxed as current income. In addition, depending on the loan documents, the lending institution might be able to go after other assets owned by the defaulters in order to collect any shortfall. While I can support government help for lower to middle income people who got caught up in loan scams and mortgages schemes they didn't really understand, I certainly can't support the idea of helping investors who got greedy and made a huge mistake and now must pay the consequences.