Irvine Housing Blog

IR I saw an interesting question last night with no answer: “IR I have an bank sale question: If one buys a property all cash, to live in or rent out. How long until one can “extract one’s equity” and get a loan out for it? “

“you should minimize your time to payoff by optimizing ... your down payment and utilizing accelerated amortization”

Very dangerous advice, which may lead to loss of money. Whole financial situation must be analyzed and carefully planned.

For example:

1). It may be better to pay off another debt (credit cards, auto loan, credit lines or medical bills).

2). Sometimes fixed income investment may increase net wealth faster then accelerated amortization of mortgage.

3). Shortening loan term may be better then accelerated amortization of mortage.

There are a lot of other possibilities.

“Make sure your financing is fixed and assumable”

Questionable advice.

Well, if somebody takes 40 years mortgage, but expects to sell house within 3-7 years, assumability will work great.

However, not good for long term homeowner. Assumable FHA loan costs more then non-assumable conventional. Also, assumability may lose value because of appreciation, mortgage rates and accelerated payments.

Other than the FHA, who does assumable loans?  The spread on FHA loan vs. banks loan doesn’t seem very small and the extra 1.5% FHA fee seems very small comparied to other lender’s fee and only 3.5% down.

IR, A song would be “How Long?” for a blog theme.

FHA works for low down and especially raising interest rates.

FHA is the new sub-prime, low money down.  Move bankers liabilities to taxpayer laibilities.

Yesterday, BHO is saying that the stimulus package (bank bailouts) were necessary to prevent another great depression.  Why was it bad when GWB was doing it?  End welfare for the banksters. 

If the bank fails or is too unstable, nationalize them and pay them govt. salaries ( ES as the highest rate and use claw backs for fraud and neggligence).

Got the below off Wikipedia so not exact legislative history, but looks like the ultimate results to the repeal of Glass-Stegall were clear even in 1987.

In 1987 the Congressional Research Service prepared a report which explored the cases for and against preserving the Glass–Steagall act.

The argument for preserving Glass–Steagall (as written in 1987):

1. Conflicts of interest characterize the granting of credit — lending — and the use of credit — investing — by the same entity, which led to abuses that originally produced the Act.

2. Depository institutions possess enormous financial power, by virtue of their control of other people’s money; its extent must be limited to ensure soundness and competition in the market for funds, whether loans or investments.

3. Securities activities can be risky, leading to enormous losses. Such losses could threaten the integrity of deposits. In turn, the Government insures deposits and could be required to pay large sums if depository institutions were to collapse as the result of securities losses.

4. Depository institutions are supposed to be managed to limit risk. Their managers thus may not be conditioned to operate prudently in more speculative securities businesses. An example is the crash of real estate investment trusts sponsored by bank holding companies (in the 1970s and 1980s).

Year after bottom, O.C. home prices up 15%

http://lansner.freedomblogging.com/2010/02/17/a-year-after-the-bottom-o-c-home-prices-up-15/56365/

A real world FHA scenario:

Irvine purchase, 15 year FHA fixed loan with 10% down. Buyer is getting a 4.5% rate (2/17/10) paying zero Up Front Mortgage Insurance Premium (1.75%, paid by lender at 4.5% rate) and zero Monthly Mortgage Insurance (not required with 15 yr fixed loans).

The buyer has covered all of their bases:  - a sub 5% rate that is assumable, no PMI, fast pay down of debt. Yes, it’s a big nut per month, but not as big as one might think at that rate. A 30 yr fixed 5.0% rate for $417,000 with MMI is about $2,450. A 15 year 4.5% rate with no MMI is $3,190 - $740 per month more. The buyers look at it as $370 per paycheck which is manageable for them.

So in 5 years you’ve paid down your loan a bit, but want to move up. Someone wants to buy the property and assume your loan. Let’s say you have $100k equity, perhaps the buyer can put 10% down, offer to carry a $50,000 second TD at 8% providing that the buyer is well qualified. Another win IMHO.

Flexibility of options, not focusing on a low payment only, makes for a smarter buyer.

My .02c

Soylent Green Is People.

http://news.yahoo.com/s/ap/20100217/ap_on_bi_ge/us_fed_economy

“By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer – 22 mins ago
WASHINGTON – The Federal Reserve expects unemployment will stay high over the next two years because recession-scarred Americans are likely to stay cautious, making for only a moderate-paced economic recovery.”

Bad economy.. blame Joe 6-Pack.  The new media to ignore bad economic policies and support BWB/BHO bailout of the banksters at any cost.  Setting up a dip in unemployment right before the elections (in 2 years).  The moral hazard for the banks started way before BWB and will continue long after BHO.  You can fool some people all the time, you can’t fool all the people all the time, but that doesn’t matter because you only have to fool half of the people most of the time.

With continued high unemployment, how long will the banksters let people stand without paying?  How long will the market manulipation continue?

Housing appreciation IS NOT a bonus.

It is INFLATION.

If you run the numbers, you’ll find that you are better off with NO APPRECIATION.

Fuck. 

When will people get that SIMPLE FACT?

Probably never.

The banks want to foreclose on you. Why? Because it looks like they are partaking in an insurance scam with homeowners caught in the middle:
http://www.dailykos.com/storyonly/2010/2/17/837819/-Banks-Want-to-Foreclose-on-You:-Heres-Why

Really, what this constitutes is a second bailout: the first was from the government and the second is now from the insurance industry. You gotta love the banksters.