Ground Zero for the Mortgage Meltdown Part III
[Click the following links for Parts I and II.]
- Credit:
-- Since I grew up here, I had the opportunity to get credit cards when I was in college and screw up my credit.
-- People like the Venezuelan couple come to the States when they are older ... their credit history is clean, and they are not likely to make the same idiotic mistakes as a teenage college freshman away from home for the first time.
-- Back in 2005, a friend at work suggested I open an AmEx account to build my credit. This, along with a line of credit at the credit union, and another Visa card, helped us get to a point where we reestablished our credit. Also, we learned that having three lines of credit for more than a year or two is a requirement for qualifying for a mortgage, according to a lender we met.
-- Credit was only one half of the equation -- the "Debt to Equity ratio" was the other side of the equals sign. Prices had to come down, or our earnings had to go up.
-- I graduated college, and found a job making only a couple grand more per year. It would be another two to four years before my earnings could put us in a position to buy a home ... and that included going back to school to get my Masters degree.
-- We moved out of the house the summer of 2006 (my wife's cousin sensed the market was going down and decided to sell the house). We moved into a small 2/2 townhouse near my job. Rent skyrocketed to $1,285 per month.
-- The electric bill went up at this time, due to the 2004 hurricane season.
-- So ... how did the Venezuelan couple qualify for those mortgages? We're still earning more money than they are.
-- A friend of mine recently informed me of a property-exchange laundering scheme he'd heard about that might explain what happened. I searched the web and found a page at the Department of State's website that describes how "some money is also laundered through the real estate market in Margarita Island." Were they also trading properties in Venezuela for houses in the U.S., as my friend described to me?
- Credit:
-- Since I grew up here, I had the opportunity to get credit cards when I was in college and screw up my credit.
-- People like the Venezuelan couple come to the States when they are older ... their credit history is clean, and they are not likely to make the same idiotic mistakes as a teenage college freshman away from home for the first time.
-- Back in 2005, a friend at work suggested I open an AmEx account to build my credit. This, along with a line of credit at the credit union, and another Visa card, helped us get to a point where we reestablished our credit. Also, we learned that having three lines of credit for more than a year or two is a requirement for qualifying for a mortgage, according to a lender we met.
-- Credit was only one half of the equation -- the "Debt to Equity ratio" was the other side of the equals sign. Prices had to come down, or our earnings had to go up.
-- I graduated college, and found a job making only a couple grand more per year. It would be another two to four years before my earnings could put us in a position to buy a home ... and that included going back to school to get my Masters degree.
-- We moved out of the house the summer of 2006 (my wife's cousin sensed the market was going down and decided to sell the house). We moved into a small 2/2 townhouse near my job. Rent skyrocketed to $1,285 per month.
-- The electric bill went up at this time, due to the 2004 hurricane season.
-- So ... how did the Venezuelan couple qualify for those mortgages? We're still earning more money than they are.
-- A friend of mine recently informed me of a property-exchange laundering scheme he'd heard about that might explain what happened. I searched the web and found a page at the Department of State's website that describes how "some money is also laundered through the real estate market in Margarita Island." Were they also trading properties in Venezuela for houses in the U.S., as my friend described to me?
Labels: credit, mortgage, mortgage crisis
posted by Skew | Tuesday, September 30, 2008
9 Comments:
The other possibility, which is more common ... is that the multiple houses owned are being rented out -- the rent collection counts as income, thus each mortgage becomes self-sustaining. Also, the longer you own a rental property under a single mortgage, the more profit you can pull without worrying about clearing the mortgage payments.
Just an illustrative example, I don't know these people.
I believe Tony's point is that it seems awfully suspicious that immigrants making equal to or less than he managed to get a house right off the boat.
he told me it was easy that i could borrow money from the same place he did, and hire the construction team to build the home from scratch just like he did.
He offered me the names and numbers of both and i said hold on, lemmie think about it because I wanted to see if he was able to make any money off of it first by selling the house to pay his creditors back,and this was before all the hurricanes and the housing bubble
I think it was a developing area because there was nothing out there which i found suspicious.
who would want to move there if there is nothing there?
especially for the money he was asking, I was very doubtful.
He told me he was hoping to find a rich retired person.
I think he finally got the house sold somehow like a couple years later but after all was said and done made no money off of it.
Hey RAW,
That was his 2nd house, though, right? How did he get the one he lives in?
I think the point Tony is trying to make is non-resident immigrants with no credit history were able to build up their credit history and own 2+ homes, while you are living in a rented trailer.
I had heard about how many of these Venezuelan, Panamanian, or Jamaican owned loan agencies need to be looked at more carefully by authorities.
I could probably get a mortgage if i wanted one, although it would be difficult now with no money coming in.
my rent is dirt cheap and i am wary of the fine print on these deals, plus I dont think i would want to live in the same place for 10-20 years anyway, so i havent really looked too deep into the whole mortgage thing.
there may be corruption within the industry that i dont know about.
considering all the other shenaningans that have gone on in the corrupt housing market it wouldnt surprise me.
Hi RAW,
To get a house you need to have thousands in the bank because you're going to need that to qualify, and to cover closing costs and a bunch of other fees.
It's preferable you put down a nice % of the total mortgage to lower your monthly payments, too.
In other words, it's ideal if you have at least $25K in the bank before you even speak to a loan officer.
You are also going to need a solid credit score.
It's also nice to be employed at a stable place.
In Broward and Dade, you're lucky to find a house or condo at $1,500 to $2,000 a month.
But before you get your loan you have to prove you make a lot more than the monthly mortgage payment. In other words, you need be generating much more than your mortgage payment per month.
It's a combo of your current monthly expensive + debts, credit score, money in da bank, and employment.
***
You obviously can rent out your home if you want to move. In fact, most people don't live in their homes for the length of the 30 year mortgage. They either rent it out or sell to try and make a profit.
Hi.
its me again,
I didnt know it was that hard or that much money was needed in order to get one.
I know a few people who have got approved for mortgages who have advised me to do the same and they say its easy, and they didnt make that much more money than me.
and thats pretty much all I know about mortgages.
But it also sounds like the price of everything is jacked up so high beyond normal people's means, that this overpriced market had to collapse.
normal people cant pay those kinds of expenses, and I dont know anyone thats got 25k in the bank.
It's not mandatory, but it helps in the long run. FYI I don't have and never will have that kind of cash.
If you put down 0, your interest rate will be high. If you put down 0, you need great credit, a steady and well paying job, not a lot of debt, etc.
I'd say you need at least 5K to 10K saved up if you put nothing down when one considers closing costs, fixing your house up, insurance, if a condo- maintenance fees, etc.
Tony's Ground Zero Meltdown posts talk all about it.
hi tony, long time no see, how's it hangin':
let's be clear on this, as it seems people haven't digested the reality of the mortgage meltdown, so like PCs tell you, pls. shut down any programs running in your brain, so that this info is properly assimilated...
some people did take interest only loans, people like my mortgage broker, who, while working on a couple of my deals, boasted about 5 or 6 properties he had "secured" with this sort of loans., properties from the $600,000 to the $1.2 million range...
i asked him if he was being reasonable in "securing" these many properties and he emphatically said yes and i understood his logic, however faulty, as he was having one of the best times in his business, having opened offices here and new york, money was literally gushing in from every deal...he figured, wrongly i guess now in hindsight, that he was just gonna hold on to these properties for a couple of years and then sell at a handsome profit....NOT.
in all truth, i haven't had contact with him since 2005 and so i don't know if he managed to keep afloat... what would you call him? an investor? a speculator? there is a very fine line between these two characters, but i would dare say he was a speculator as he was in for the short term and no, i don't think we should help him in this bind.
then there were 5 other cases, friends and acquaintances who bought and sought advice from me in doing so.
ALL had aggressively been offered adjustable rate mortgages, ARMs...mind you, a "teaser" rate, of say 3.5% for example was a true speculator dream then, even though they reset higher and faster with more pitfalls, but they were buying for the long term, yet they were still offered ARMs as a viable alternative to fixed rate mortgages even though these ARMs rates were ONLY about 1 or even half a percentage point lower than fixed, say 5.5 or 5.75% ARM versus 6, 6.25 or 6.5% fixed, a no brainer for me at least.
i told each and everyone of them to go march into their mortgage broker's offices and demand a fixed rate on the spot, as i told them it was a greedy thing for them to offer an adjustable rate to anyone whose credit was in the low 700s, that if it was me, i would even take my business elsewhere, why? because i knew that banks were doling out double the commissions for ARMs, than fixed rate mortgages.
of the five i talked to, two demanded and got fixed rate mortgages and three kept the ARMs...forward to today, the 2 that demanded the fixed rate mortgages are happily living in their houses (well, one couple in a condo and another in a house), one added a swimming pool even...of the other three, with ARMs, two i know lost their properties and the last one, i have no idea how she fared, but gauging by the other two with ARMs, i guess not too good.
so there is my experience of this whole meltdown deal, people with perfectly good credit were offered ARMs that vey quickly reset to 8 and even 9% interest...in my view ARMs should ONLY be offered to "investors" and/or speculators, willing to gamble their funds in a free market, like the best of us, never to people looking to buy their "american dream".
banks figured that people, having attained the "american dream" would take the food from their mouths if necessary to pay these exorbitant rates or risk losing the "dream"...but when it actually meant taking the food out of their KIDS mouths, people told the banks to take their "dream" and shove up their asses....literally.
banks sought to hold these people dreams hostage, but people simply told them to fuck off; now banks, mutual funds and security traders have all these worthless mortgage notes, backed by drastically devalued real estate and, they want US to bail them out? as in we, the taxpayer, should buy the now worthless "ASSets", so that they can use fresh money to, lend out again???????
i tell you, are these jerks ballsy (or crazy) asking for this bailout or what?
HAVE THE DAY OF YOUR CHOICE Y'ALL
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