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Old 04-19-2013, 10:43 AM
 
Location: Rural Michigan
6,341 posts, read 14,714,448 times
Reputation: 10550

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Quote:
Originally Posted by kremit View Post
At the peak of that bubble you all experienced, this was exactly the problem. People worked at walmart and took out too big of a loan. When the extra jobs dried up and people were getting laid off in mass, so followed the housing market. There shouldn't be loans because you don't make enough, that creates the problem in the first place.
Not really.. as someone who has looked over the details of hundreds, perhaps even thousands of these foreclosure properties, the guy working a low-wage job and buying *one* house wasn't the problem here.

If you qualify for an FHA loan, you *can* make the payment.

It isn't the low down payment that is the problem, it's the *non-owner occupied* part that's the problem. I'll walk away from a bad "investment" in a heartbeat, I won't give up my *home* without selling everything that isn't nailed down, emptying my retirement and selling my plasma.

I have MLS access, and I know how to look up the public records info - and have done it a lot over the past few years. My current primary residence was a foreclosure, and it was one of three "suicide loans" signed by the same guy, through the same bank, on the same day. The loan docs clearly stated that all three homes were to be "owner occupied".. These were all textbook "exploding" loans,where you make a payment that doesn't even cover the interest for a few years, then the payment "resets" and you pay significantly *more* than you would with a standard 30-yr mortgage. The deadbeat sucked off the "profit" on these loans for a couple years, then let them go when the rent would no longer cover the payment. This wasn't an FHA buyer, this was someone living in a $600k home.

The forclosure property my Bro purchased (with an FHA loan!) was purchased new in 1986 for about $80k, and went into foreclosure in 2008 with a debt owed to the bank of around $260k. If the original owner had just made the payments on the property, they would have nearly owned that property "free and clear" in 2008, except they used their "good credit" to refi and pull out over $200k to buy several other properties. Again, not an FHA buyer, a specuvestor living in a very expensive home themselves..

Indeed, only one of the foreclosure deals I've researched had a buyer who actually bought the house to live in themselves, and who didn't pull out any phantom "equity".. And that buyer didn't buy an extravagant or fancy home, they actually bought one of the "cheapest" homes in Phoenix at the time, at around $270k.. the problem was a high (adjustable) interest rate, and a job loss. Which is kind of understandable, given we had nearly 20% *real* unemployment here. They didn't do anything to bring down any banks, if they had been able to keep their employment, they would still be making payments.

By rights, I should be railing against any "low downpayment" loans, as I am a landlord - and that suits my interests fine if my tenants need to come up with 20% down.. While they're living in *my* home, I collect $1k in rent, and *my* loan payment on the same house is $273. But I can certainly see the benefit to my own Brother being able to make a $400 house payment instead of a $1k rent payment. That's a huge difference in his quality of life, and a benefit to the community - he can spend his savings at local businesses - like yours, whatever that may be.
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Old 03-05-2014, 10:02 PM
 
2,806 posts, read 3,186,880 times
Reputation: 2709
Quote:
Originally Posted by Zippyman View Post
Not really.. as someone who has looked over the details of hundreds, perhaps even thousands of these foreclosure properties, the guy working a low-wage job and buying *one* house wasn't the problem here.

If you qualify for an FHA loan, you *can* make the payment.

It isn't the low down payment that is the problem, it's the *non-owner occupied* part that's the problem. I'll walk away from a bad "investment" in a heartbeat, I won't give up my *home* without selling everything that isn't nailed down, emptying my retirement and selling my plasma.

I have MLS access, and I know how to look up the public records info - and have done it a lot over the past few years. My current primary residence was a foreclosure, and it was one of three "suicide loans" signed by the same guy, through the same bank, on the same day. The loan docs clearly stated that all three homes were to be "owner occupied".. These were all textbook "exploding" loans,where you make a payment that doesn't even cover the interest for a few years, then the payment "resets" and you pay significantly *more* than you would with a standard 30-yr mortgage. The deadbeat sucked off the "profit" on these loans for a couple years, then let them go when the rent would no longer cover the payment. This wasn't an FHA buyer, this was someone living in a $600k home.

The forclosure property my Bro purchased (with an FHA loan!) was purchased new in 1986 for about $80k, and went into foreclosure in 2008 with a debt owed to the bank of around $260k. If the original owner had just made the payments on the property, they would have nearly owned that property "free and clear" in 2008, except they used their "good credit" to refi and pull out over $200k to buy several other properties. Again, not an FHA buyer, a specuvestor living in a very expensive home themselves..
zippyman and all: why do you think Phoenix was particularly popular with these "specuvestors" during the housing boom pre-2007? The Phoenix RE market was extremely trashed in the Great Recession compared to my in-laws in New York, for example. At some point Phoenix had the biggest losses of all US cities, though we have also recovered comparatively well since. But I think it is important to understand why everybody came to Phoenix to speculate or rather gamble on RE with relatively obvious suicide "investment" loans. What do we have to look for to never repeat the disaster again? And who gave multiple "owner-occupied" loans to the same investor??? That makes no sense whatsoever.
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