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Matthew McLeod's Advice

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Matthew McLeod wrote:

Are first-time homebuyer tax credits really a good thing?

Response
Socal, have you considered the fact that the past is just that?Times have changed.  My points sound good because they are logically sound.As I pointed out before, with regulation, we wouldn't be where we are now.  I'm hardly lobbying for exotic loan products here.  Option ARMs were a bad idea.  No Doc loans at high LTV's were a bad idea.  Stated loan with stated assets and high LTV's were a bad idea.The FHA portfolio has always funded itself.  This product offered at 100% was golden until the broader economy took a hit, and unemployment hit homeowners (which is to be expected, regardless of the LTV).  VA loans are still offered at 100%.  So are USDA loans.  Neither have funding or foreclosure issues.Again, with prudent guidelines (full doc, 620 score) a high LTV loan is perfectly fine.
May 04 2010
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Are first-time homebuyer tax credits really a good thing?

Response
I agree sunnyview, that more education must be provided to new home owners.  I'd also go a step further and lay the responsibility at the steps of the originators.  I don't think enough is done by lender, and even realtors, to ensure that buyers understand the true cost of home ownership.While I see your point about high LTV transactions, I just keep coming back to the fact that given our current situation, 20% down may not have done a thing for you.  Plus, with such a large down payment, personal funds are exhausted, and many people don't have a fall back.  I'd much rather keep the 20% in my pocket earning interest and then write a check at closing, rather than be forced to make the down payment as a preventative stop loss in case the value of my home nose dives.
May 04 2010
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Are first-time homebuyer tax credits really a good thing?

Response
Sunnyveiw, I fail to see how the emergence of the middle class is a bad thing.  I also think you should reconsider your claim that "stratifications" exist for a reason.Beyond that, why does a high LTV loan equate to a handout?  That's just silly.  I have excellent credit, a fairly decent amount of cash on hand, and would buy every single property I could with 100% financing.  It's smarter to do so.  Am I now receiving a handout?I absolutely agree with your bit about education.  However, as that is a reality, don't you think a way to manage or offset that disadvantage is with a mortgage product offered to someone who demonstrated good personal financial management but hasn't saved up 20% down for a home loan?Other than that, I agree with what you said for the most part.  I think that on the face, there's nothing wrong with being a tenant.  However, no one can deny that home ownership offers an avenue to build personal wealth while renting does not offer the same benefit.
May 04 2010
(1)

Are first-time homebuyer tax credits really a good thing?

Response
"This is the crux of our disagreement. The problem with many who were, and are, buying with little down is that they have not demonstrated an ability to manage their finances (i.e., save for a down, build up their credit history/rating, etc.). Having to take the time to save up a down payment increases the amount of personal investment in the purchase, which is good for everyone because it lessens the likelihood of what we are seeing now (i.e., jingle-keys, strategic defaults, etc.)."I take exception to this, much as I take exception to the claim that "the government forced banks to make loans".  Plainly, this is an unfair, and inaccurate assessment of home buyers.The default rate for FHA loans closed with a DPA grant was less than 3%.  The total default rate of all mortgages was less than 3.4% according to LPS' most recent data.Do you really think it's a fair statement to claim that many were not in a position to buy when less than 4% default at the peak of the foreclosure crisis?We just need common sense guidelines.  I see no problem with a full doc loan at 100% LTV with above a 620 credit score.  I see no problem with reduced doc loans, so long as the credit score is very high (720, perhaps) a and the equity is solid 90% LTV.
May 04 2010
(1)

Are first-time homebuyer tax credits really a good thing?

Response
jkonstant, it depends on how you determine detriment to the economy.  Due to lower down payment standards, more people now own homes.  This means less stratification, more wealth and social mobility, and access to personal wealth more through equity accumulation.If these things don't happen, the economy is harmed, but not in a direct manner as say, the rapid evaporation of home values combined with the simultaneous collapse of the American banking system.The transition from renter to homeowner benefits us all, so long as it's done by someone capable of handing the responsibility and the burden.I don't think it's fair to preclude so many responsible homeowners from access to mortgage products due to the actions of a few.  Plus, like I said, depending on your age and position in life, it can be really, really unwise to make a large down payment on a home when the same money could earn an actual return elsewhere.
May 04 2010
(1)

Are first-time homebuyer tax credits really a good thing?

Response
For the most part, I agree with your assessment of the situation.  I've worked in mortgage banking since 2001, and during that time, have seen quite a few "interesting" products.  However, at the same time, I'm hesitant to dismiss every single loan as "a foreclosure waiting to happen" and I'm even more hesitant to simply claim that "these people shouldn't have bought homes" as the Chris has claimed several times.The reality is that most of the loans probably shouldn't have been made.  However, as with most things pertaining to Wall Street, because there was so much money being made, things kept rolling along (remember that the first several years of the sub-prime boom were VERY lucrative to the same people that ultimately filed bankruptcy because property values were still escalating).In the end, I don't think this is an issue with equity position.  10% or even 20% down doesn't help you when 50% of your home's value evaporates overnight.  Evern without such an extreme circumstance, why would you want to tie up money in an investment with zero return?  Insisting that home buyers make large down payments does several bad things.  Namely, it pushes many people out of the market.  Why should someone full capable of making a monthly rent payment like clockwork be excluded from owning a home just because they can't save up 20% for a down payment?  That's bad for them, bad for the economy, and bad for you and me.  I believe that you are insinuating that the government forced lenders to make sub-prime loans, as many in the political realm have done.  This is nothing more than a LIE and misrepresentation of fact.  Sub-prime mortgage companies made the loans because they were able to generate ENORMOUS revenues.  Investors bought the loans because they seemed to pay ENORMOUS returns compared to other bond instruments with similar perceived risk.  On top of that, the investors were guaranteed that if the CDO failed, they'd get their money back.  It was win-win for the investors.  That created appetite.  When there's appetite for a financial instrument, there's a market.If, for instance, the insurance, called a credit default swap, was regulated as insurance, it would have never been sold (insurance companies are required to maintain a reserve requirement to pay out on policies, and the companies offering the swaps had FAR too little cash to cover their policies).  With no insurance, the appetite would have calmed a bit.  Then, if we regulated the origination side, and made sure that people offering Option Arms on a No Doc basis were actually qualified to counsel clients, and more importantly, they were made responsible for foreclosures and fraud, then we'd have avoided a significant aspect of this crash.
May 03 2010
(1)

Are first-time homebuyer tax credits really a good thing?

Response
I can see your point, but you're comparing apples to oranges.  The reality of the situation was that the economy ate itself because massive financial institutions had leveraged their CDO's in form of unbacked insurance swaps.  When the holders of the insurance tried to collect, the granting institutions couldn't pay, and we had a severe recession.We would have still seen a significant downturn due to the collapse of values, but we wouldn't have seen the same global pandemic if the banks had been better regulated (whether self or externally).In this situation, there's no looming issue directly stemming from the real estate market or the grant.  There is certainly room for discussion as to whether or not the same money could have been better spent on deficit reduction, but that's a different story, and not the topic at hand (an were it the topic at hand, I'd still support the grant).In the case of the grant, only a small percentage of buyers qualify, the impact on prices is minimal, equity is still required to close the transaction, and most importantly, the recepients of the loans are closing on paper that is MUCH better regulated and more tightly controlled.I'd agree that we don't want to artificially inflate the market if it's only coming back to eat us, but I don't believe this to be the case.
May 03 2010
(1)

Are first-time homebuyer tax credits really a good thing?

Response
Roberto, I actually have a BBA in Economics and a BBA in Finance, both from Baylor University.Everything I said is soundly based in economic principle.  Was there a particular point you disagreed with?I think it's rather difficult to claim that any stimulus targeted at a leading indictor or economic activity would do and has done "NOTHING"...
May 03 2010
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Is this home still available? If not how much did I miss it?

Answer
There are no records of that home listed in MLS.  Could it possibly be located on Estates Drive?
May 03 2010
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Heard there were MAJOR plumbing problems and pool clogging problems. Price needs adjusting.

Answer
Have you been able to review the seller's disclosure?
May 03 2010
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