patrick.net

SFBubbleBuyer Says:

J. Pake, get pre-approved through a credit union. They usually hold their mortgages instead of reselling them, and have more ‘conservative’ lending standards, consequently, they have fewer retard loans out there, so they actually have money to loan. Also, they don’t make you sign ‘exclusivity’ crap, etc.

@Randy H (and anyone else whose been through the buying process multiple times),

Do you agree with the above? Is this is the overall blog consensus on financing? Based on the innumerable crooked mortgage broker horror stories we've all read and posted about, plus, the overall blog bias against middle-men/pro-disintermediation, I would guess "old school" credit union financing would be the clear winner. Anyone happen to know what John T. Reed (who seems well respected here as the "anti-guru guy", despite not recommending using RE attorneys) has to say about it?

HelloKitty Says:

> He (the guy selling his home across the street)
> leaves a really really nasty letter at my house
> (where im renting) complaining about how this
> is their ‘prime window’ to sell and how trashy I
> make the neighborhood look by working on my
> truck and/or motorcycle where they can see out
> their kitchen window!

Then skibum Says:

> If you have a tricked-out car stereo, start
> blasting it during the guy’s open houses.

Back when I was a Senior in High School the old people that lived next to a friend died and since they were a PITA (always complaining to his parents about noise) he decided to scare away any old people that came to look at the house…

When old people came to look at the house he would open the windows and point his Dad’s big Klipsch speakers toward the neighbors and crank up the McIntosh stereo with something like Agent Orange, Circle Jerks or Black Flag on the turntable…

The plan worked and songs like “Blood Stains Speed Kills” scared away the old people and a family with cute daughters ended up moving in (when young families came by he would come over and say hi as the “charming preppy kid on his way to Stanford”)…

SFBubbleBuyer Says:

> Get pre-approved through a credit union.
> They usually hold their mortgages instead
> of reselling them, and have more ‘conservative’
> lending standards, consequently, they have fewer
> retard loans out there, so they actually have money
> to loan. Also, they don’t make you sign ‘exclusivity’
> crap, etc.

Then HARM Says:

> @Randy H (and anyone else whose been through
> the buying process multiple times),
> Do you agree with the above?

A credit union “may” have the best overall loan at any given time so I would always gat a quote from them.

> Is this is the overall blog consensus on financing?
> Based on the innumerable crooked mortgage broker
> horror stories we’ve all read and posted about, plus,
> the overall blog bias against middle-men/pro-disintermediation,
> I would guess “old school” credit union financing would
> be the clear winner.

I’m not much of an expert on home loans since I’ve only had two of them (both with Wells Fargo Bank). I did get Credit Union quotes both times and Wells Fargo had lower rates. As a rule of thumb you can almost always get a better rate working directly with a lender (vs. a Broker who needs to get paid in fee or spread)…

> Anyone happen to know what John T. Reed (who seems
> well respected here as the “anti-guru guy”, despite not
> recommending using RE attorneys) has to say about it?

Does John T. Reed have any books on home loans? I have all his apartment books on a shelf at home but can’t remember any overall financing recommendations. If anyone is looking for apartment/investment property loan advice I can point them in the right direction…

Thanks, FAB. I always figured disintermediation was the best way to go on financing --just like it is with buying/selling.

Anyone see this gem?:

Taxes rise as house prices fall

"Among the few who may benefit from falling values: People who bought recently at the market peak, only to see prices drop.

"To get a tax cut, you have to buy a home at the peak and have it lose value quickly," Assessor Dan Goodwin said. "You can't enjoy double-digit increases in your home value and then expect a tax cut when the market dips."

"Woweee!!! Marge, we just got ourselves a property TAX CUT! We've only had the place six months and it's already lost a THIRD of its value --and more to come! Yippeeee!!!!!"

J. Pake Says:

> Side question: My account on Foreclosure.com shows
> a lot of houses in California with Tax Liens on them for
> thousands of dollars. What’s up?

The people are not paying their taxes…

> Are these owners distressed?

Probably since it is usually cheaper to take a credit card cash advance than pay the late fees on your taxes (when I was a kid the late fees were real low and lots of people just let the taxes roll for years)…

> Will this muck up a sale? Some of the Liens date back
> to 2004. Does the government ever go after their money?

The Title Company will make sure the government gets their money before the property sells (so someone needs to pay the taxes prior to COE)…

Good Post on HousingPanic that Says”

“There are over 2 million vacant unwanted homes in America today. There's a 6% vacancy rate in apartments. There are millions of screwed desperate homedebtors ("Floplords" - hattip sac landing) desperately trying to find renters to cover (some of) their second home mortgages. And the housing-led economy is quickly going into the crapper. If you try to raise our rent, there's millions of other places for us to go. You have no pricing power. And you don't set the rent - the market does.”

I love the term “Floplords” but the increasing number of rental homes and condos in Sacramento at great low prices (as Flipper/Floplords wait for the “Spring Bounce” that will never come) has been keeping rents flat (even for units I’ve upgraded)…

@HelloKitty, corrected bank name.

HelloKitty Says:

> OOPS I said WaMu above I MEANT TO SAY ‘Wells Fargo’.

Year after year Home Savings and now WaMu has been the top lender (with the best rates and terms) for small MF (2-6 unit) loans in CA...

If you want to know where to get the best loans and who to deal with/not deal with talk to an escrow officer.

What's the escrow officer's role in all of this? Who does he work for?

HARM,

I'm not suggesting that you'll always get the best deal from a CU, but for the most part you CAN get a reasonable approval letter from them. And honestly, I'd probably be willing to pay an extra eight of a percent for a loan that I knew wasn't getting sold downstream. Then, if I ever DO have issues, I know who to go to talk to, and they have a reasonable chance of being able to actually discuss it with me.

I assumed the drop would be higher at the upper-middle range (1-2M) than at the lower range (0-1M).

Why? When price compression unwinds the lower range will naturally fall more than the upper-middle range.

Also, get your FICO scores yourself, so you know what's up. Banks HATE letting you get your mitts on the scores they run on you because then you can 'shop around' without massive credit checks popping up. They'll still do a credit check before the final approval, but you should get pre-approved without them having to rerun the FICOs. (Somebody correct me if I'm wrong, here.)

I think some "trophy" properties may even appreciate.

You cannot go wrong betting against the middle class. Lower to middle range may fall hard.

I don't know about credit unions. I have heard great things about them. They do tend to hold onto a lot of their loans, but that doesn't necessarily mean they're in any "better position". Most of the retail banks will hold onto their prime, low risk loans, and places like Wells Fargo will go around paying a premium to buy top tranche from other banks. I'm sure a lot of CA mortgagees have found every loan and refi they've had end up right back at Wells Fargo (or equivalent) after 6 months.

@HelloKitty,

Thanks for sharing your list --very helpful.

And honestly, I’d probably be willing to pay an extra eight of a percent for a loan that I knew wasn’t getting sold downstream.

@SFBB,

I agree, and would further ask: Is it possible to know which lenders are most/least likely to securitize and re-sell your loan downstream as MBS/CMOs? If so, that might significantly change MY list of "HARM-approved" lenders.

True story: I have a friend who had his mortgage re-sold recently and the lender never bothered to inform him of it and --importantly-- where to send the payments. So, he goes on sending his monthly mtg payments to the old address, blissfuly unaware they are no longer his lender/servicer (and them blissfully continuing to cash his checks). Until a few months later, he gets slapped with a NOD. Then the "fun" really starts, as he not only has to make good on all the "missed" payments, he also has to fight the old lender to get HIS money back.

Ahhhh... the many joys of "pass-through risk" mortgage-backed securities. Truly one of the great "inventions" of the 20th century.

In between these two ranges, he expects a solid 30-35% correction in most of the 1.0M-1.5M houses - particularly those which have quarter-acre or smaller lots.

I would think with today's prices, there aren't that many houses between 1 and 1.5M will have a lot bigger than 1/4 acre.

Here's an extreme example: http://tinyurl.com/2lmjgs
For McMansion haters, fire away :)

HARM,

If you've got the time to check with Chase, WaMu, Wells, the CU and a host of other banks (and like aggressive negotiating ala HK), I say go for it. A good mortgage broker, though, does earn their pay -- especially if you've got a second or other interesting circumstances. Like I've said before, I'd go into combat with my mortgage broker (as long as, ya know, he walked in front of me).

As far as I'm concerned, one of the key players in the home buying process is the home inspector. You don't want some dofuss that rubber stamps the deal -- you want the guy your Realtor(TM) doesn't want involved in the transaction (usually nicknamed something like "the deal breaker"). He is the one who will tell you your furnance could go up in a ball of flames -- and if you are not the panicky type, you won't let this bother you as you use the furnance the next couple of years. But it can then get you some dollar$ knocked off the price during the contingency phase. Oh, and by the way, a sweet tongued Realtor may be more effective at writing the letter to get the seller to lower the price a bit than your rent-by-the-hour lawyer. The lawyer ain't going to mince words and will tell the seller their house sucks -- which might lead to the whole deal not going through. Someone more adept and experienced in these negotiations could do better (then again, what do I know as I have not used a RE attorney). I do know that my Realtor(TM) wrote a heck of "we don't mean to nickel and dime you" letter to get the price lowered without pissing off the seller (enough) to cause the deal to go sour.

Then again, having been through the whole process, I would probably go the RE attorney route the next time and do that 6% commission jujitsu that Randy and FAB talk about :-)

HARM

The best advice I can give for finding a lawyer is referrals. Honestly, I've had the fortune of being an entrepreneur and using lawyers extensively for the past 15 years, so I have always been able to get referrals. I have a good one in Palo Alto for anyone in that area I'd be happy to refer. He still helps me with RE even while I'm up here in Marin. He also helped me extensively in a property line and easement/adverse possession issue I had on my last home's property.

I'd say for your area talk to friends who use family attorneys they like, and get referrals from them. Some family attorneys used to be commercial re lawyers too, and know enough for residential standard purchases. You can also ask around for small business attorneys who will know commercial re types also.

CB :

--Edited out rude remark involving lowballing and the listing agent--

I absolutely abhor that kind of development community. Ugh.

For McMansion haters, fire away

5 bedrooms with only 3113 sqft?

There should have more new 3 bedroom condos with 3000+ sqft if they ever want SF to become a true international city.

True story: I have a friend who had his mortgage re-sold recently and the lender never bothered to inform him of it and –importantly– where to send the payments.

Aside from problems like that - it can't be that common - I'm not sure why it would matter to you the borrower what happens to the loan. Right?

Speaking of lenders, I think I asked this the other day: has anyone heard of this ACORN program?

http://www.acornhousing.org/TEXT/services.html

I don't get what they are. They're non profit but they're in the mortgage business?

TOS

Queen of the non sequitur. What exactly does the price-weighted DOW index have to do with residential home-mortgage debt liquidity?

I anxiously await your response.

Oh, I almost forgot the signature TOS giggle:

Ho Ho Ho.

eburbed,

Say your income decreases drasticly (sick child/wife/husband/etc) and you want to proactively work to make sure you don't have mortgage problems and need to talk about some sort of plan for your mortgage. (Who knows what this might be.) If some MBS is holding your paper, the servicer can't really do a damn thing until you're delinquent. They have no "My husband can't work for 8 months, but he'll be back in his job and our income will go back up, can we work something out before hand so we don't have to go deliquent/etc" plan in their guidelines.
If you work with a bank or CU that actually holds the mortgage, they can work with you the moment you let them know there is a problem. Otherwise you have to wait until you fall into a pre-defined category of 'deadbeat' before the servicer starts trying to help you out. It's the difference between a mortgage holder and servicer.
And since CUs tend to be very local, they're more likely to be able to get you into the office of the guy you need to see than a branch bank.

If I were taking out a mortgage on a house I was sure I could virtually buy outright because I had better places to stick my money at the time, I wouldn't care where it originated and who it was sold to. That's easily containable leverage. When it's the kind of leverage that could wipe me out and then some, like a mortgage, I'd rather keep it as local as possible.

I got this recruiting email today. The housing bubble is creating more software jobs - default managment solution for mortgage servicers :)

We currently have an immediate need for an Team Lead – Applications Developer for XXX Inc.. ZZZZ has created the first on-demand default management solution for mortgage servicers, embracing rules-driven application workflow technology and meta-data elements allowing business-user configuration. We are building a world-class engineering organization, using state-of-the art technology and would like to speak with you regarding an opportunity.

I’m not aware of any other field that even comes close to RE that has more mis information, crooks, potholes, con men, lies, spin and potential legal disasters than RE.

Oh that's easy: politics.

I absolutely abhor that kind of development community. Ugh.

We actually live there in the same development, but the Cape Cod with no lot is a little too much even for me. Usually I picture that kind of house sitting on 1 acre.

eburbed Says:

I don’t get what they are. They’re non profit but they’re in the mortgage business?

Here's one I can comment on from firsthand experience:

ACORN Housing (not to be confused with just "ACORN", a political action committee/special interest group) does not make loans nor recommend/refer you to specific lenders. They are a nonprofit consumer education/advocacy group specifically designed to help first time buyers, especially low-income FTBs.

When the wife and I first started seriously looking into buying (mid-late 2003), we signed up and took their FTB education classes. I think it was 3 or 4 two-hour sessions, or close to that. Keep in mind this was long before we had even heard of the term "housing bubble", and well before Patrick.net or TheHousingBubbleBlog. In general, their information was pretty helpful and specifically geared towards steering FTBs away from predatory financing --a very good thing. They even gave us advice on how to improve our FICO scores and how to correct wrong information in our credit reports.

Of course, by the time we were pre-qualified and our FICOs/credit reports clean as a whistle, houses in decent areas of LA County were already going northwards of half a $million, so it didn't much matter.

? Do you think there is a possibility that the housing market will start going gangbusters again once the Fed cuts rates, and the 10-yr yield, which has hovered between 4.5-5% starts dropping below 4.5%?

Definitely. I think the Fed is going to cut rates to 0.5% again - that way, the median home price/median income ratio will finally reach 10x!

Heck, dare I say... 20x!

They are a nonprofit consumer education/advocacy group specifically designed to help first time buyers, especially low-income FTBs.

Do they work with lenders to get you a better rate? Or is it strictly educational?

OMG Harm, those people on the other board were snooty. I was embarrassed for them. It was awkward just reading the exchange.

I wouldn't count on the Fed cutting rates.

At some point, protecting the dollar internationally probably wins out over tweaking the economy. It's not unlikely to see further increases if the dollars keeps dropping. In case the Fed does decide it doesn't care if the dollar becomes worthless, am hedged against this with ETF in foreign currency.

TOS,

I just read your post. While I don't agree with it, I think it is good theory. I can't make the connection until I see upward pressure on interest rates.

After buying and selling real estate for the last 30 years, what seems most important in my estimation, are honest inspections on the property when you are a buyer. That way you know what you are getting into, without needing litigation. Once you have some accurate information on a property, you can choose to buy, or back out, or negotiate. Attorneys complicate the process.

Big Brother,

As I recall, you liked to use the term "gangbusters" a lot when you were posting as ConfusedRenter/MarinaPrime/FaceReality. Nice to know your limited acquisition of American colloquialisms hasn't changed.

HARM,

That Jeff guy is still being a f$cking moron! He's talking about short sales still! He has assets he can sell (at a profit) to cover the losses for selling his negative cashflow properties and yet he STILL whines about what he needs to do in order to make the banks eat the cost. Total asshole.

To continue from my last post. If you are a seller, you want to encourage your buyers to get all the inspections they want. That is a good way to prevent litigation.Attorneys complicate the process.

As long as you fully disclose all known issues with a property you are pretty much free from liability as a seller. This is at least for deals in CA. There is no implied warranty that I'm aware of on a house. In order to recover in court, a buyer would have to demonstrate that the seller withheld known material defects. Inspections are the buyer's responsibility as part of their due dilligence.