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Government, Bank’s Mistake your Gain (Still)

florida foreclosureAs the summer months wind down and the chillier winds roll in through the fall months and into early winter, many Americans look out their windows at their cold and dismal hometowns. Their neighborhoods, strewn with fallen leaves or dirty snow, strongly fortify dreams of a second—or a first—homes in paradise. But with Florida real estate inventory, and subsequently prices, as conducive as ever to a buyer’s market the dream is as achievable as ever.

 
We all know the story of the early-2000’s housing bubble. Inflated by banks selling to the subprime mortgage market, a brand new segment in 2002, the bubble got bigger and bigger until it finally popped in 2007. But five years was long enough to do plenty of damage to markets across the country, particularly in Sun Belt areas. And right under the bubble was southwest and the west coast of Florida.

 
A tool to increase buyer confidence, writing bad mortgages actually didn’t start with the banks. Rather it started with the administration taking initiative to combat the fallout from the 2001 terrorist attacks. And many consumers took the bait in the name of achieving the American dream. The issue with this is many didn’t have the income to support mortgage payments, nor did they have to prove it. This was thanks to a brand new tool called the ‘No Doc’ loan, short for ‘no documented proof required.’

 
Needless to say, many of these mortgages were foreclosed on, left as bank-owned properties. As a matter of fact, in 2006 right before the bubble burst, 21% of subprime mortgages went into default. This compares to the prime loan statistic of less than 1%. Of these, most were in Florida– where statewide there were nearly 325,000 subprime mortgages issued.

 
Fast forward to 2015, and Florida still has the highest rate of late mortgages. Statewide, over 18% mortgage holders are late or about to face foreclosure. And when banks foreclose, they are not looking forward to sitting on excessive supply; they want to turn and burn to the highest bidder. And with an inventory glut the highest bidder typically isn’t bidding too high lately.