Posted on 04/28/2018 5:09:28 PM PDT by SeekAndFind
This is one of the SOBs that put our economy into bankruptcy.
Bingo.
so HERE WE GO AGAIN!
1. creating yet ANOTHER real estate economic crash, and
2. with it, likely the entire economy (like last time they did this krap to us)
bilking the poor taxpayers each and every time to “bail out the economy”.. its like milking a cow... the politicians milk us over and over and over and over and over and over and over and over and over and over again. These crooks need to be sent to Guantanamo (right after ObamaHIlLIARYSorozNazi and companny)
Jeff Daniels and Jim Carrey have jumped back into the mortgage business I see.
It worked so well for destroying The Stupid Party in 2008.
They can certainly try the same production again in 2020.
Yup! GOP making sure they defeat trump - even by destroying the USA economy to do it.
In other words, the borrowers do not have to pay the money back.
A small downturn in local house prices can place a 97% mortgage in serious trouble.
This was the start. NINJA loans and similar, along with negative amortization balloon loans of 1-5 years really detonated it, but before that came these products.
No, that can put the home upside down, but as long as borrower can easily afford the monthly payments, its not a problem. Where we/you/people run into issues with these loan down loans is they also tend to have lower credit and are not very much able to afford the payment.
Just because he's *able* to make the payments doesn't always mean he's *willing* to.
A lot of people in 2008 and above walked away from houses they could afford the payment on simply because they owed more than the House was worth. With a 97% mortgage it doesn’t take much of a downturn to put you under water.
During GW Bush’s time, believe it or not, both he and McCain tried to oppose widespread risky borrowing standards.
But pushback came from Barney Frank, who assured us it would be fine.
It will be my hope that Trump, Cruz and other responsible forces will resist repeating the cycle.
That the man keeps returning to his wife every night!
Er, sorry.
It’s NOT really a 97% mortgage.
It’s a 103% mortgage.
The transaction price has about a 6% commission embedded in it. The real estate commission does not increase the market value of the house in the event of a downturn in housing prices.
Where your reasoning falls apart is in the fact that there is a certain amount of inevitable turnover in the housing market. Job loss, illness, death in the family, divorce, etc. There are many reasons why a family may have to move and sell their house.
If they are upside down they lose everything.
A long enough period of this feeds on itself, depressing home prices for years and leading to ruin for many well-intentioned families.
3% down is ridiculous.
As a real estate investor, I have taken advantage of the dips to buy properties and can now withstand and even profit from the crashes that always follow this kind of program, but I will confess I am a fat cat getting fatter.
For example, let's say a family is currently making $75,000 a year, or $60,000 a year after taxes. They've saved up $55k and are looking to buy a home that's around $250k. They will buy about $5k worth of housing items after closing on the house.
Option 1: They put 20% down ($50k), combined with the $5k home furnishings have no savings and their monthly payment is around $1,350/mo all in assuming 4.375% 30 yr fixed, $3500 property tax and $750/yr in insurance. A big recession hits, home values drop 20% and main breadwinner losers their job so their income is $25k/yr, they have no equity and they can't afford the monthly payments.
Option 2: They put 3% down, and with PMI, their payments are about $300/month higher. Same recession hits. They are upside down and still are cash flowing negative, but they have $42,500 left, which would by itself cover around 2 years of mortgage payments, while the main breadwinner looks for a job.
I completely agree on average a low downpayment loan is more risky but there are scenarios where it makes sense.
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