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Old 09-19-2011, 07:35 PM
 
26 posts, read 46,039 times
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Greetings all,

About a year ago I ran into some financial trouble and tried to sell my home. It was on the market for 5 months with lots and lots of traffic and never an offer. I lowered it as low as I could without doing a short sale yet still being able to pay the broker and lender and never got any interest. Ok fine, I'm upside down, I owe $300k on a 3500 sq ft single level home in one of the nicer subdivisions in Gilbert. Thats all fine and dandy, I'm still here and suffering through it. Lately though, I've noticed neighbors and associates that bought their homes years after me, 2007, 08, 09 that simply decide, 'we paid too much and have decided we don't want to anymore.' Then, they buy another house.... I used to think, oh wow, I feel bad for them because they can't make the payments until I found out that actually, they are buying a super nice custom down the street for the same price they paid for their 1500 ft tract home. So I'm thinking, how do they do that? They seemingly own 2 houses at the same time. I just don't see how so many people that bought at the highest prices are upgrading into fabulous foreclosures for a song. How do they do it??? Maybe they are renting but that can be verified that they are not and in fact have some kind of thing where a big bank gave them the new one or something? It is all very bizarre. Does structured asset mortgage ring a bell? What is this and how are people escaping their 1500 ft tract homes that they owe 250 on and purchasing a 4000 foot foreclosure down the street for 210k? Somehow are they getting around credit as we know it?? Thank you




Barron's Real Estate Dictionary:
Special Warranty Deed

A deed in which the grantor limits the title warranty given to the grantee to anyone claiming by, from, through, or under him, the grantor. The grantor does not warrant against title defects arising from conditions that existed before he owned the property.

Last edited by Agathis; 09-19-2011 at 08:04 PM.. Reason: typos and special warranty thing
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Old 09-19-2011, 07:56 PM
 
26 posts, read 46,039 times
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Interesting, that is plausible. But aren't banks savvy to this? It seems like with the reverse equity in the first home and no appreciable income increase, that the bank would be reluctant to hand you another equal size mortgage for a house a block away whether you can afford it or not doesn't it? I thought lending had tightened up. The people I know that have pulled this off are most certainly not making more $ than they were when they bought a couple years ago. Is curious for sure.
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Old 09-19-2011, 08:58 PM
 
26 posts, read 46,039 times
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for some reason the response in between my 2 posts was deleted.
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Old 09-19-2011, 10:00 PM
 
Location: El Dorado Hills, CA
3,724 posts, read 9,225,685 times
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I've seen it. Save a good down payment. Buy a second home (saying you will rent out the first) then walk on the old one. Banks don't like it but it still happens.
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Old 09-19-2011, 10:12 PM
 
26 posts, read 46,039 times
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So it sounds like could refi the first one with a new 125% dealie they've been begging me to take then use that stolen money as a big down payment on the new one and walk away from the albatross. Wow, yea, I guess where there's a will there's a way.
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Old 09-20-2011, 06:14 AM
 
3,584 posts, read 6,432,911 times
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Quote:
Originally Posted by NinaN View Post
I've seen it. Save a good down payment. Buy a second home (saying you will rent out the first) then walk on the old one. Banks don't like it but it still happens.
Yep, would have to agree that financially savvy people have been doing this the past 3 or so years. I live in Florida and have personally seen this one couple short sell 2 homes and somehow managed to put 20% (over $150K down) on a new construction home.

The key area is new construction homes. Builders are desperate to sell, so if you can come up with at least 20% down, they will "assist" you in the mortgage to push the sale through even with bad credit cause by short sales.
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Old 09-20-2011, 07:28 AM
 
5,077 posts, read 12,976,523 times
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It's easy, they have the income to support both mortgages. Or, one spouse qualified for the 1st house and then they use the other spouse to qualify for the new one. The sad part is when they bail on the old house (buy and bail).
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Old 09-20-2011, 07:31 AM
 
5,077 posts, read 12,976,523 times
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Quote:
Originally Posted by Agathis View Post
So it sounds like could refi the first one with a new 125% dealie they've been begging me to take then use that stolen money as a big down payment on the new one and walk away from the albatross. Wow, yea, I guess where there's a will there's a way.
You can't take cash out on the "125% dealie".
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Old 09-20-2011, 08:20 AM
 
26 posts, read 46,039 times
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Quote:
Originally Posted by TimtheGuy View Post
You can't take cash out on the "125% dealie".
So spouse a quitclaims first home to spouse b, spouse b refi's just in their name relieving spouse a of any mortgage responsibility, then spouse a is free to buy new house, spouse b walks from the new refi and a and b move into new home for a bargain. Downside is spouse b's credit is ruined I suppose but that doesn't seem to bother the financially savvy much anymore.

Perhaps an interspousal grant deed would be the route more than a quitclaim in AZ.

Last edited by Agathis; 09-20-2011 at 08:50 AM..
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Old 09-20-2011, 12:39 PM
 
Location: Lending in all 50 states
189 posts, read 757,615 times
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Quote:
Originally Posted by Agathis View Post
So spouse a quitclaims first home to spouse b, spouse b refi's just in their name relieving spouse a of any mortgage responsibility, then spouse a is free to buy new house, spouse b walks from the new refi and a and b move into new home for a bargain. Downside is spouse b's credit is ruined I suppose but that doesn't seem to bother the financially savvy much anymore.

Perhaps an interspousal grant deed would be the route more than a quitclaim in AZ.

It's actually a lot more complicated. The mortgage application asks if you've owned a home in the last 3 years. It also makes you state whether you currently rent or own at your present address. In addition to that, underwriters have access to several different resources for "background" checks that will pull up public records info. So outside of blatant mortgage fraud there is no way to circumvent the underwriting guidelines and even if you do lie on the mortgage application, the underwriter will catch it through all of the various verifications done on a file.

If you're planning on using any of the govie loans (FHA, VA or USDA) and you're in a community property state like AZ, the spouses credit report will be pulled which will show the existing mortgage.

The only feasible way for doing this is to apply for mortgage on the new home and qualifying with both mortgage payments held against your income without counting the rental income from the existing home.
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