On the surface, California's foreclosure crisis is a nightmare. In Hesperia alone, notices of default jumped from 198 in early 2007 to 791 for the same three-month period this year. And the numbers have risen to 905 from April through June.

"That's a huge increase," said Robert Lee, CEO of the Huntington Beach-based Foreclosure Trackers, Inc.
But while those may be bad numbers for most people - especially for homeowners losing their homes - they are golden opportunities for those who see a half-empty glass as half-full.

"It creates opportunity for people who understand this side of the fence," said Lee, whose company provides information and statistics on foreclosures.

Understanding foreclosures

The key to succeeding in the foreclosure game, according to Lee, is understanding that while banks are keen on loaning money they are not set up to recoup bad loans.

"Banks' infrastructure is based on lending, so they don't understand collecting."

As a result, Lee's company buys mortgages - not homes - that have lower broker price opinions than their first mortgage amounts. For instance, he said, if an original home mortgage were worth $500,000 but its current value - according to its BPO - were $350,000 Lee's company could offer less and take the loan off the bank's back.

"We might want to pay $200,000 max."

And that could be good news for the struggling homeowner.

"We could do a workout with that homeowner. We'll do everything to keep people in their home."

For investors like Lee, such creative opportunities are almost everywhere. Normally, notices of default in Southern California are about 4,500 per month. Now the region has about 25,000 NODs a month.

"It's some big numbers, and it's going to increase," he said.

Helping inflame the crisis is while the two-year adjustable-rate mortgages are currently adjusting, the five-year ARMs will begin to adjust soon after.

"That's when it's going to get ugly," Lee said. "We have another five years of this mess. Nobody's going to have to interject and help out. It's going to be a slow, painful process."

Despite his prediction that foreclosures will continue for several years, Lee believes the blame game is fruitless. Creating win-win opportunities, even those who are upside down on their mortgages, is paramount.

"Who cares whose fault it is," he said. "Let's find a solution."