The government has decided to start allowing real estate investors to modify the mortgages they have on investment property thru the Home Affordability Mortgage Program (HAMP). Real estate investors will be allowed to modify up to four mortgages on properties that are not their primary residence. This is a big deal.
I have followed loan modification news for years and the one rule that has held true for most of my real estate career is that banks or the government does NOT help real estate investors. The bank and the government feel that if you invested in real estate than you are financially strong enough to deal with a market downturn. They also feel that they want to help families that are losing their home much more than helping a landlord. The government has recently changed position on this issue because they feel that real estate investors can now help the economy by renting a house to a family that needs housing.
Since the real estate market has fallen in the last few years, the rental market has exploded. Many landlords have the ability to pick and choose from a large group of potential tenants because the housing market is stopping many people from buying. Therefore, the government feels that if they make these investment properties affordable, then the property owners will rent them out and further decrease the number of vacant properties in the market. As of now, the only limitation to this program that the government is talking about is the fact that the landlord must rent the property out. I don’t really see this as a restriction because in most cases and in this market, a landlord wants to rent out their property.
Overall, I am unsure how many landlords or investors will use this program. Many investors have lost a significant portion of their portfolio because they were unable to sell. In addition, many investors have been speculators. Speculators are people that buy a property with no plans to fill the property. They simply planned to own the property for a short time and resell it when the values increased. This program will be interesting to see how it takes place and if it does have any influence on the local real estate market. By the way, for those of you who think you may be able to use this information, the program starts in May 2012.
Until next week…