Investors seen as key to stablizing housing market
A panel at the American Securitization Forum in Orlando, Fla., said that the best buyers for distressed sales are housing investors, not owner-occupants. Further, the role of the former is seen as key to keeping the economy on track, they say. Speaking on the panel, Jim Park, CEO of New Vista Asset Management, said that, "36% of all sales are now REO or short sale, and that number is not going to change anytime soon." Park said that "3 million have been sold through the pipeline so far, and we estimate there are 5 to 6 million to go. We are not even halfway there. It's sort of a mind-boggling situation." Chances are, the panelists said, that owner-occupants will not make up a huge portion of the buyers for these assets. Underwriting criteria remains too tight for many of these potential homeowners, and prices for foreclosures remain at historical highs. "The number of borrowers are few and tightening," said Jon Daurio, CEO of Kondaur Capital, speaking to investors in the room. "We recommend you rehabilitate the property to turn-key condition. Buyers should not be required to spend more. We believe this will help lead to the market stabilizing." The main fear is that, in an environment of rapidly declining prices, large holders of REO portfolios would rather sell off these properties as quickly as possible. However, this can further depress prices by injecting panic into the market. Investors should responsibly step in, resist moving quickly and work to keep up the property. This will help not only to stabilize prices, but help to preserve the community, they say. Colleen Hernandez, executive director of the Homeownership Preservation Foundation, which operates a government-sponsored national hotline for distressed borrowers, said that preserving homeownership should remain the paramount objective. Through counseling, she said, a better resolution is possible. "Distressed homeowners are either confused, angry, hostile or depressed," she said. "The borrowers are not alone, they are not stupid. " Hernandez conceded that not everyone can be helped, but investors should see the incentive to try, noting that "30% of the people we speak to can't keep their home. For every $1 spent in counseling, the investor saves $53 in foreclosure." Michele Kelaart, president of First Preston Housing Solutions, said that her firm looks at all options available, but remained clear on her business ideology. "If we can keep the borrower in the homes, we will," she said. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.