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You keep saying assessed value. Do you mean appraised value? The two are not the same. The assessed value is not actually a market value. It's for tax purposes and tends to lag the appraised value by a couple years (depending on the county).
The assessed value isn't really good for anything.
People are to blame as well, but most of the blame lies in the industry. They took advantage of people. Of course people should take some blame for letting themselves be taken advantage of.
I gotta jump in: "Banks" did not put these exotic loans out. "Banks" did not create these exotics
Private Mortgage Brokers / Mortgage Bankers (these are not "banks") created these products
A point of clarification I thought was needed
I don't know if this was previously brought up already, but a lot of these mortgage bankers, and private lenders are linked to banks. Almost all the major banks, are tied to the subprime mess in some way.
You keep saying assessed value. Do you mean appraised value? The two are not the same. The assessed value is not actually a market value. It's for tax purposes and tends to lag the appraised value by a couple years (depending on the county).
The assessed value isn't really good for anything.
I meant the assessed value, as I said. Since I had no interest in turning the property around for a quick sale, I was more concerned about the taxable value (i.e., assessed value) of the property than the appraisal value.
As you noted, the assessed value is what determines the property taxes I have to pay on the property, so it is obviously good for something.
The people did NOT come up with these CREATIVE loans the banks did.
The people did not ask for ARMs and zero money down the banks and lenders pitched it to them.
When people were like 500K home I can't afford that the landers and underwriter said YES you can....here is how. Making a $4000/mo payment look like a $2500/mo payment.
If you're borrowing half a million dollars from a bank, you have to DO YOUR HOMEWORK. Read the fine print. Read it again. Ask questions. Ask about when the rate increases, and by how much.
I'm sorry, but there's no way I'm passing the blame off to the lenders. Yes, there are greedy and unscrupulous people out there, but again, this is a MORTGAGE. An enormous loan that you're taking out to purchase the place you live in. Corporate greed is absolutely no excuse for someone not to do their own thorough research before signing on the dotted line.
The people did NOT come up with these CREATIVE loans the banks did.
The people did not ask for ARMs and zero money down the banks and lenders pitched it to them.
When people were like 500K home I can't afford that the landers and underwriter said YES you can....here is how. Making a $4000/mo payment look like a $2500/mo payment.
The people were not the ones advertising I have bad crdit someone please help me. The lenders where putting these things on TV and posting them all over neighborhoods. Bad credit no problem...zero money down you can own your own home.
I can go on but please look at both sides of the coin.
You are right, people did not ask for ARMs, they were provided with that option. However, had those people applied a modicum of common sense they would have realized that if the interest rates increased, so would their mortgage payments. Since interest rates were as low as they have been in 50 years, it doesn't take a rocket scientist to understand that the interest rates are very likely to increase. Therefore, the only reason why someone would get an ARM with interest rates so low would be to turn the property around and sell it immediately for a profit before the interest rates increased. A huge gamble that obviously didn't pan out for some. That does not entitle them to a government bail-out any more than someone who buys property in a flood-plain and doesn't buy flood insurance.
I meant the assessed value, as I said. Since I had no interest in turning the property around for a quick sale, I was more concerned about the taxable value (i.e., assessed value) of the property than the appraisal value.
As you noted, the assessed value is what determines the property taxes I have to pay on the property, so it is obviously good for something.
I asked because of this...
Quote:
I paid for an independent assessment of the property just to be certain that the value wasn't being over-inflated. The property was assessed slightly higher than the asking price, so I was able to obtain a loan for the assessed value which covered my closing costs.
The local government assesses properties (for tax purposes). If it was done independently, that was either an inspection or an appraisal, not an assessment. I'm not trying to be a jerk here, it's just that the term assess has a very specific meaning when it comes to real estate. If you look up the assessed value for a property in public records, it's virtually meaningless. You're giving people advice and it's not technically correct. Here's an example:
The assessed value of that property is 498,800. That is NOT the same as the appraised value. I happen to be a commercial appraiser in this area and know that property would not even sell for the assessed value, right now (though in healthy real estate markets, the assessed value is usually lower than the appraised market value).
You also said that you got a loan for the assessed value. Again, I think you're confusing the term appraised and assessed. Banks don't take assessed value into consideration when determining LTV. What matters is market value (which is the appraised value), not taxable value (which is the assessed value).
As for the rest of your post, I very much agree. Most people made bad decisions and can only blame themselves for their own lack of knowledge.
In the sub prime arena the mortgage is an enormous loan you are financing your real estate speculation with. Where else could a less than wealth person (>100 k/y) be able to leverage a 10 grand investment into a 500 grand house that was likely to become a 600 k house in two years. That would return about 90 grand on your 10 grand investments. These were the people that were aware of what they were doing. The rest were marveling at what a fine place they thought they could afford.
This lasted for a few years until the system ran out of people that could aff0rd to speculate on the now 800 grand houses. Then the prices stopped inflating and the last in were stuck with an investment they paid 800 grand for (80 + 720) that was rapidly heading for a 700 grand selling price. The borrowers bailed and the bankers were left holding the bag. They dumped the houses for 500 grand and the fun began. The REIT backing the affair lost 90% of their value. Somebody besides the speculating borrowers is going to get burned. I expect in one way or another we all will starting with the folks that were just buying a house with no intention of speculating.
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