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Misidentification / Have Nots / Undeserving

Our on going national disgrace, disgraces (?) Disgraci, what ever, has us turning on each other. After nearly thirty years of hate mongering by politicians perhaps it's to be excepted that we can no longer identify with our fellow man. What bothers me is that other wise good people, good real estate people, good mortgage people are mislabeling other good people for political convenience!

It bothers me that so many have lumped the "have nots" with the "undesiring!" I can't define "undesiring" although I often think I know them when I see them. What I can define are the "have nots." For our purpose "have nots" are those people that don't make as much as we do, which of course means that except for Bill Gates, et. al. we are all "have nots!"

When mortgage and real estate people start talking about people with out large down payments being undeserving a home of their own, I have to wonder, did they pay cash for their home? Where do they draw the line? If people with little or no down payment are undeserving, what about those that put 20% down? What about those who put up a big down payment, but who's home has deprecated to the point they have no remaining equity? What is the difference between no original equity and no current equity?

What does a big down payment do? Does it protect the home owner? Truthfully, big down payments protect no one except the bank! Little or no down payment may even protect the home buyer, by marinating his liquidity and putting the bank mutually at risk with the home buyer.

How dare these bigots lump the "have nots" with the "undesiring!" These bigots are most often blaming low down payments for the mortgage crisis, but other than being PC to do so what proof do they offer? How do they explain the over welling masses that used these loans to successfully join the "haves!"

Bill

William J Archambault Jr

The Real Estate Investment Institute

Posted by William J Archambault Jr on 08/02/2008 02:41 PM

Comments (24)

haves, have nots, mortgage, crisis, bigots, down payments, reii, william j archambault jr, the real estate investment institute

Originally posted at: The Real Estate Sage at The Real Estate Investment Institute - REII: Misidentification / Have Nots / Undeserving

Post is included in group: Art of Professional Salesmanship
Post is included in group: Down Payment Assistance Resources Group
Post is included in group: Silent Majority
Post is included in group: The Ninety-ninth Percentile
Post is included in group: Walking By Faith In The Rain!

24 Comments on Misidentification / Have Nots / Undeserving

AUG

Bill, This is a very timely post. I have a seller right now who bought a house in late 2006 for $179,000. She's from NY and used $100,000 she received as a settlement from the wrongful death of her son as a down payment. It was all the money she had and she used every bit of it. As life does it dealt her some circumstances that have made it impossible for her to keep up with the mortgage payments on her house. She wants to sell and move back to NY. Her house is now worth about $75,000. Her mortgage balance is $78,000. After the expenses involved in selling she is in a short sale position!!! Can you believe it? I truly wish she would have kept some of that money in the bank instead of "investing" it all in Florida real estate. I wonder if her previous REALTOR(R) or mortgage broker made this suggestion? Should they have?

I'll be writing a post about this soon and will give you some link love.

Bill - I did pay cash for my current home and I have about the same equity as when I bought it (plus or minus a couple thousand). However, I have used no money down VA loans 3 times and they certainly helped me get to the point where I could pay cash.

I agree, it's not the no down payment, it's the poor job of qualifying people. Those without down payments are still deserving of home ownership if they can qualify for the loan and have a record of responsiblity.

Thanks for posting.

Bryant,

The REALTOR and Mortgage Broker, should have given better advice!
Unfortuntaly, the bigger down payment made for an easer file and suree sale!

Bill

Mike,

Congratulations!

Both the REALTOR and Mortgage Broker let Bryant's Lady down, as all to many do!

Bill

Where did you hear agents saying that buyers without large down payments are "underserving" of a home? I explain to my buyers that the bank will most likely require a larger down payment than in the past. And we all know it's because the banks want to cover their butts. But I've never heard anyone say the buyers didn't deserve a loan or a home.

BRAVO...Thanks for being so brutally honest. I have read through a lot of posts here on AR about the end of Down Payment Assistance, and some of them have been awful.. I agree with you completely... Thanks for reading my mind so eloquently LOL

AUG

Lisa,

I'm not going to name, names. It doesn't take much reading here on AR to find what all to many are saying.

The problem has risen to the point of bigotry. It's fanned by the media and individuals wanting to blame some one, any one, to avoid being the target themselves!

Thanks for responding.

Bill

Sharon,

Thank you!

Bill

Bill ~ Another great post from a man who has a heart towards the American dream and not towards the bigots who are trying to make buying a home more difficult than it needs to be.

I don't think that NOO are buying multiple homes using FHA and non profit DPA at the same pace they were back in the day. Stated income, NOO, 100% is proving to be a noxious combination in our market. Lots of people lied and showed that they were OO when they were not to get conforming rates. No one seems to check on or police that.

That doesn't make a first time home buyer undeserving of anything. I have seen what you are talking about and some of it does rise to the level of bigotry.

Renee,

Respectfully,I don't believe that you have any more facts to back up your conclusions than I do mine! One can certainly find anecdotal evidence of fraud. Stated income may be abused more often than not, but is it indeed the problem? It was and remains too easy to buy NOO, investment property to risk fraud.

You say "Lots of people lied..." I'm sure of it! But, please define "lots" does it mean or imply most or even a substantial number?

Every one wants to point their finger at someone anyone to transfer the blame! No one wants to study the problem, but every congressman wants to be seen as having a solution. With only slightly more information than the politicos we point our fingers because we're sure we aren't guilty, so it must be them!

If we're going to point fingers, at least point three of them! There are three different problems and they are only slightly related.

1. Home owners, losing their homes.

2. Small and mid size mortgage bankers.

3. Large banks and mortgage bankers

Bill.

Nicholas,

Thank you!

I have spent most of the last 40 years preaching and teaching the American Dream.

As too the bigots, we need to remember that most are unintentional bigots. Most feel wrongfully attacked themsevles so it must be someone else's fault. Most have no idea of the consequences of their action. That's an explanation not an excuse, bigotry is bigotry.

Bill

It is amazing how the government will always bail out the large institutions but not the average guy. Homeownership is good for all, even those who can afford payments and not have a large down.

Michael,

How true!

I wounder what clause of the Constitution they use to justify bail outs?

Bill

Remember, what I see and hear may be totally different than what you see and hear. It is OK to respectfully disagree with me Bill :)

I think that underwriting guidelines are a complete sign of what is going on to kind of prove what I am saying is in fact happening in droves. We see an upsurge in the default rate of 100% loans, then 80/20 piggyback programs are pulled back. We see an upsurge in the default rate of NOO properties, then buyers must go through many hoops to PROVE they are living in the home. We see an upsurge in the default rates of people who just recently went out to buy a new, second home similar to the one they had prior (which is upside down and defaulted on soon after their new purchase) and we see underwriting guideline changes with higher down payments and equity requirements.

With every BPO I perform I check tax records, recorder's office (for current liens) or past history. The recorder's office tells stories, you see two, three, four properties in default with the same lender. Tax records indicate the type of loan. MLS History shows rental history. I would say about 80-85% of the BPOs I perform would show NOO, bought in the good ole days with 100% financing. Yes I have even seen some phenomenal concessions to the buyers (10%) who obviously had no intentions of EVER paying a house payment. Maybe I am unlucky with receiving 80-85% of total BPOs showing some sort of possible fraudulent activity. Maybe I am unlucky to hear cavalier attitudes of people who lost value on their speculations because "letting it go back" is heard all to common like it is something tres chic to do.

It is extremely unfortunate in the town we live in that we lost 100% and stated programs at close to conforming rates. That helped MANY tipped income workers from our very unique economy get into homes that they otherwise could not get in to (at the moment unless they changed their compliance.)

Luckily FHA is still a miniscule 3.5% down and VA is no down. I wish non profit DPA wouldn't go away because many people do need a little extra help. Right now, good luck writing a contract w/ DPA and getting it accepted at under a possible value it can appraise for. Our market forces are barely allowing for that.

Unfortunately for the sins of the past, underwriting guidelines continue to change and get tougher because of the newest "let it go back to the bank" scams and buyers who DO deserve a low down will have to jump through more underwriting hoops to make it all happen.

I am not exactly saying there are no hard luck tales out on the streets, there sure are! They are not as common as one would think.

Renee,

You may be right, but so could I.

If you want a villain, look to North Las Vegas! They have more foreclosures in one zip code than any other zip code area in the country. They have several things in common, all most all the REOs are less than 5 years old, all most all were o/o (or said to be), and all most all were financed by the builder owned mortgage company!

Then there is the adjustable option arm! Mixing ARM's, fully amortized loans, with interest only, negative amortization loans, and sweetening the deal with teaser extremely low starting rates! Separately all of these programs are extremely useful, but combined and sold to and by the inexperienced they're a deadly prescription.

Bill

Bill: I think we both agree with your last comment :) Builder's lenders drive me nuts!

Last time I checked banks were in the business of loaning money to the homebuyers and that was a risk itself. Now you are saying that they should be mutually at risk with the homeowner (who is living in the house by the way) by not having any of the homeowner's own money tied up in the property ?Should the bank also pay for repairs if the poor seller buys a house and something breaks?

No wonder the houding market is in the current state it is in! No one expects homeowners to be responsible or accountable for anything. Let's pass all of the risk on to the big corporations and not the poor little homeowner because they can handle it. But then when we find out that the big corporations can't handle it and go bankrupt let's get mad at the government for having to bail them out.

The bottom line is that people who cannot afford to come up with even a minimum downpayment of 3% CANNOT afford to buy a home. I would guess that 99% of the time it is way cheaper to rent or live at home with mom and dad than to pay a mortgage and associated homeownership expenses so if there is no room in your budget to save there is certainly no room to buy.

Terri,

Above All Financial Services

You've added to the blog to make your point and missed mine. Most people with little or no down payment succeed, most are much more responsible than your assumption!

The VA has guaranteed no money down loans for the last 60 years, with some but not many losses.

Many with little money can afford a home and security!

I'm sorry if I offended you, but I call them as I see them!

Bill

AUG

Bill,

I'm not offended at all. I just don't understand why if people can afford to come up with a downpayment why they don't just wait and save for it instead of relying on down payment assistance programs etc. In fact, if more people had elected to wait to purchase a home while they saved for a downpayment (I'm referring now to people who have purchased in the last couple years) they would most likely be paying less for their home due to falling prices (in some cases a lot less).

Michelle (Not Terri???)

Michelle,

Sorry about the name, my mistake.

In many if not most markets, it is often possible for people with little or no down payment to buy for less than they could rent a lesser home for! This is true for all price ranges and all incomes.

A big secret is that poor people can't afford to rent! Assuming fixed rate mortgages a poor person who owns his own home only has to worry about inflation on his taxes and insurance. Renters on the hand often find the same inflation applied to the entire rent. Renters have no real security! Renters have nothing after 30 years of rent payments. Home owners will owe nothing after 30 years of mortgage payments. In a worse case scenario renters can become homeless in as little as 3 to 5 days! In a worse case sennaro home owners can become homeless in 3 to 9 months, sometimes well over a year! Home owners can deal with the bank. Renters can pay or move.

It's true many, maybe most homes cost less today than a year or two ago, but no one should buy anything if you worry like that.

There's an old poem, author unknown that says it all:

"No matter

wether you

rent or buy

you pay for

the space you

occupy!"

Bill

There you go Bill. That is the reason why we disagree. You are assuming that it is cheaper to buy than to rent and I am assuming just the opposite. To give you an example, in my area the property tax rate alone is something along the lines of $4400 for a home assessed at 100,000. Add homeowners insurance and you are looking at paying $5000 per year before you make your mortgage payment. You could probably rent a nice 2 bedroom apartment in the area for about $750. You could not find a home on the market for anywhere close to $100,000 or even assessed at that rate for tax purposes. You are also neglecting to mention the maintenance/repair costs associated with owning a home which are minimal for rentals.

I am sure in some areas of the country the difference is not so great.

Michelle,

There I am!

There I stand.

There are major differences in selected markets.

Many years ago I rented a very small $35,000.00 house in Reno for $1,400/month, 5 months later we moved to Incline Village (Lake Tahoe) rented a very large $850,00.00 house for $1,450.00, strange things do occur.

I don't know why you'd compare an apartment to a house.Empty nesttors and very young families might fit in that 2 bedroom apartment, but what happens when the second or third kid comes along? You need to compare equal needs and benefits!

Who do you think pays the taxes on o rental?

Who do you think pays maintenance/repair costs on a rental?

November will mark my 39th year in lending and real estate. Most of that time I've been teaching real estate investment none of my students would rent you an apartment or house below cost.

I also teach home ownership and I can tell you, you can't get ahead paying rent (or buying a trailer)! Young families have to accept starter homes indeed they can't afford their parents neighborhood until they have their parents income.

There are those that belive we should keep those people in their place! I don't agree, but I do say "God Bless Tenant's From Whom All Blessings Flow!"

I think we'd best agree to disagree.

Bill

AUG

Bill, worth the read and a star! I have a lot of thoughts rattling around in my head with this subject matter and some pending posts. I'll revisit with more comment.

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