I got this from my friend Neil yesterday. He's been doing loans for 20
years or so. He's done all of mine. Back when I had marginal credit and no down payment, and later when I qualified a little easier. He may not be in the Norman Vincent Peale fan club, but generally in life he is a believer in the power of positive thinking. He has done lots of ninja loans (no income, no jobs, no assets) over the years to help people get into houses.
Yep some have blown up, but many, most, haven't. Those easy to get loans really did help people get into houses. Like many people most of them put absolutely everything they had into the house to get it and were flat broke and deep in debt once they "bought" their house. That's what I did too way back when.
The other day he said business was picking up for him. I thought it was real estate vultures buying walk away houses, but he said no, it is lots of re-fi's, since rates are low, and lots and lots of young couples buying their first house, trying their hardest to get a loan, and going dead dog broke and in debt once the deal closes. And as happy as could be that they did it.
So anyway here's an email from the front lines sent by an admittedly optimistic guy in life that does real estate loans for a living in the Bay Area.
Is There a Light at the End?
I saw a joke the other day that said “Due to the severity of the economic downturn the light at the end of the tunnel has been turned off”.
I thought that was funny but not that funny. Everyone likes to think that things will get better next week next month or next year. Here is my perspective on why I think things will get better in the housing market.
I know it seems like the world is on fire right now but I don’t believe it’s as bad as it seems. For one thing the sub prime mortgage crisis that started all of this is behind us now. That was the first wave. All of those homes have been sold, foreclosed or refinanced. The next wave that we are handling now is the PRIME credit loans that are adjusting. Some of these loans are being modified so the owners can afford them. Some of the homes are being sold and some are being foreclosed. The properties that are being foreclosed (because the old owners can not afford the payments) are being bought by people who can afford the payments. There will be no third wave because all of the stated income loans are gone. All of the negative amortization adjustable loans are gone. All of the sub prime loans are gone. For now. When they come back if you have bad credit you will need 30% to 40% down. There is nothing like having some of your own money in a transaction for it to not default.
Remember the spoiled kid in high school whose dad bought him a brand new Trans Am or Z28 Camaro? Remember how he wrecked it right away because he got it for free? Now remember the other kid (probably you) who had to work two jobs just so you could drive? You probably bought a used Datsun. You probably took really good care of it too because you worked and saved to buy it yourself. The same human nature applies to home ownership. You CAN NOT give someone a house with no money down. Especially someone who has never paid a single bill on time.
We will get through this but it will be a process. All of these loans will be worked through and over time it will be okay. Just look at the entry level homes and the first time home buyers who are buying them. They are saving the down payment necessary (3% for a great FHA loan with a fixed rate) and clean entry level homes have multiple offers. A close friend of mine has a daughter who just bought in Byron. The total payment is $1057 on a fixed rate loan. Her biggest fear was that she wouldn’t get the house! She never watches the news and she doesn’t pay attention to politics. God bless young people and their optimism!
Please call me if you have any loan questions. We are also helping people with loan modifications if you think that you are getting into trouble.
Hang in there and I will talk to you soon,
Neil
http://www.neilclifton.net
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