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IndyPoolPlayer

Lending Standard to Relax for Bad Credit Borrowers

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Had not heard the term "pulse loans" before, but was very much aware of the NINJA loans during the mortgage boom/bust (No INcome, Job, Assets).  But yeah, it would seem that the cycle is coming back around and those who cannot remember the past are condemned to repeating the mistakes...

 

“New originators and issuers will enter this market,” Moody’s analysts wrote, and “transactions backed by Helocs, closed-end second liens and loans backed by manufactured homes are likely to return.”

 

Wonder how much they will be lending on tents and cardboard boxes now that some of the major cities are allowing the bums to set up on city streets.

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4 hours ago, cv91915 said:

This will be a big help for the unbanked and underserved.

With sky high home prices w/o incomes keeping up the only options lenders have is to lend at lower credit standards or go out of business.

 

Same story in 2008. It's pretty much typical of the end of a business cycle.

 

And the people that get screwed the most are the latecomers that buy high with expensive mortgages. Often with marginal credit.

 

Same old, same old. Expect lower home prices in 1 to 3 years. Probably not as big a drop as 2008-2010. Been to this dance before.

 

If I didn't already own my home I would be renting. Bad time to buy even if you can afford it.

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I absolutely agree with CashNoCredit, but it also depends on where you like to live...

 

My sister applied for and received a 15-year mortgage, a three-bedroom home in the San Francisco Bay Area that cost less than $ 200,000 in the late 1980s. Now, in the current appraisal market, the price of this home is $ 700,000.

 

By the way. The one-bedroom apartment she lives in is estimated at $ 2 to 3K per month. She also remodeled her garage space in the basement (street level), building three cubicles compartments in a large garage, which were rented to foreign students for $ 800 per room per month. So they say that an inch of land is worth an inch of gold. True? If the rent is too expensive, I would rather apply for a mortgage than rent. It is cheaper to own than to rent. make sense?

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1 hour ago, MP80 said:

I absolutely agree with CashNoCredit, but it also depends on where you like to live...

 

My sister applied for and received a 15-year mortgage, a three-bedroom home in the San Francisco Bay Area that cost less than $ 200,000 in the late 1980s. Now, in the current appraisal market, the price of this home is $ 700,000.

 

By the way. The one-bedroom apartment she lives in is estimated at $ 2 to 3K per month. She also remodeled her garage space in the basement (street level), building three cubicles compartments in a large garage, which were rented to foreign students for $ 800 per room per month. So they say that an inch of land is worth an inch of gold. True? If the rent is too expensive, I would rather apply for a mortgage than rent. It is cheaper to own than to rent. make sense?


Try Beijing.  You can't buy a 700 square foot crappy shoebox apartment for under US$1,000,000.  The rent on that shoebox is around $2,000 per month.  Yet you'd be crazy not to buy.  Owning your home is an investment.  A very good investment.  

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3 hours ago, cashnocredit said:

With sky high home prices w/o incomes keeping up the only options lenders have is to lend at lower credit standards or go out of business.

 

Same story in 2008. It's pretty much typical of the end of a business cycle.

 

And the people that get screwed the most are the latecomers that buy high with expensive mortgages. Often with marginal credit.

 

Same old, same old. Expect lower home prices in 1 to 3 years. Probably not as big a drop as 2008-2010. Been to this dance before.

 

If I didn't already own my home I would be renting. Bad time to buy even if you can afford it.


But if not for those lovely latecomers, folks like us would lose out on the bargains after they fold.  

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39 minutes ago, PotO said:


But if not for those lovely latecomers, folks like us would lose out on the bargains after they fold.  

Ain't that the truth!

 

Live and learn. But lots of folks don't.

 

That said there are usually places that fly under the radar and can be good deals. But a lot fewer of them currently.

 

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47 minutes ago, PotO said:


But if not for those lovely latecomers, folks like us would lose out on the bargains after they fold.  

That’s how I got started with my business. After the last crash I bought a bunch of foreclosed properties that are now producing great rental income. I stopped buying a few years ago because prices had more than doubled. Most of my rentals are now worth nearly 4x what I have invested. 
If there’s another crash and bank fire sale I’d gladly add to my portfolio. 

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1 hour ago, PotO said:


Try Beijing.  You can't buy a 700 square foot crappy shoebox apartment for under US$1,000,000.  The rent on that shoebox is around $2,000 per month.  Yet you'd be crazy not to buy.  Owning your home is an investment.  A very good investment.  

Multi-generational mortgages have been a thing in Japan for a decades now.

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50 minutes ago, Burdell said:

Multi-generational mortgages have been a thing in Japan for a decades now.

 

In a way it's kind of sad, but there are positive aspects.  

 

I'm just waiting to see how people in the US adjust when that becomes the new reality.  

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5 hours ago, PotO said:

Try Beijing.  You can't buy a 700 square foot crappy shoebox apartment for under US$1,000,000.

Beijing's skyscraper apartments are not cheap, in fact, it is the most expensive place to live in China. My brother-in-law's three-bedroom, two-bath apartment, although it was in RMB, cost $6 million.

 

Floor space is everywhere, and the price per square foot is largely determined by the popularity of the location. He also owns another skyscraper apartment in Zhongshan, which is half the price of his Beijing apartment.

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29 minutes ago, MP80 said:

Beijing's skyscraper apartments are not cheap, in fact, it is the most expensive place to live in China. My brother-in-law's three-bedroom, two-bath apartment, although it was in RMB, cost $6 million.

 

Floor space is everywhere, and the price per square foot is largely determined by the popularity of the location. He also owns another skyscraper apartment in Zhongshan, which is half the price of his Beijing apartment.

 

$1m is about the cheapest you'd get in Beijing for 100 m2. Shanghai is even worse and Guangzhou / Shenzhen just as bad as Beijing.  And even more amazing is that $6m doesn't get you in the best buildings or the best locations.  

 

Over the years we've made an absolute killing with real estate in China.  With the last one we bought two years ago, we now have 14, but only 4 in Beijing.  The latest one cost $2m and it is in an older residential area.  The second to last was recently at $6m, but since they just started to build a subway station within a 5 minute walk, it has jumped to $10m.  For the last 25 years real estate in China has been a fantastic investment.  Even after the government tried to implement control and restrictions several years ago, it did nothing but reduce returns from 20%+ per year to 15%.  

 

Rents, though, are super cheap compared to housing prices.  I rent ours out, but most of my friends don't bother.  It is often simply not worth the hassle.  You end up having to pump that money back into upkeep and repairs.  Your profit is next to nothing.  I do it a different way, though.  I'm sort of a high-class slumlord.  I put practically nothing back into the property and since I put the rents very low, I make tenants pay for any needed repairs.  Keeping the property in a high-state of repair and optimal condition is just plain dumb.  You know, in the US when we want to sell a house we have to get it in spic & span condition and have everything just perfect.  Even then it takes a month of bullish!t to sell.    In Beijing, you have your house sold within hours of it first going on the market.  

 

My sister-in-law sold her house last year after we decided to let her "rent" one of ours.  We were at her house when she put it on the market with the real estate company and within an hour there were 3 or 4 people at the door wanting to look.  Within a few minutes three of them were fighting amongst themselves to determine who had arrived first and had first shot at buying the house.  Two of them got into a shoving match and started throwing cash at my wife thinking she was the owner.  Then they started a bidding war.  At the time, I was in shock. But looking back and thinking about it, I can only ROTFLMFAO.   Anyhow, nobody ever cares about the condition of the apartment.  100% of buyers will take even the nicest house and then completely rebuild it to their own liking.  

 

Time frame to close on the purchase is about 5 working days.  7 if there is a mortgage involved.  Mortgages are super easy to get unless your credit file is blacklisted.  Assuming it isn't, as long as you earn double your mortgage payment and have 30% down, you will be instantly approved.  If you don't, your chances are almost 0.  That's on your first house.  Second homes require 50% down.There are restrictions now on buying a third house, but there are ways around it.  One way, is by getting a divorce.  The 2-per-family rule allows one of the divorced spouses to keep both houses in the divorce agreement.  The one left with no house can buy another.  Divorce in China takes all of an hour to accomplish and the fee is around $10.  Marriage is 30 minutes and a $5 fee.  People get divorced, buy a house the next day and the following day get married again.  That's why the divorce rate seems to be skyrocketing.  😂  Say what you want about Chinese people, but if anything they are extremely resourceful.  They will find a way around any obstacle that confronts them if they want to.    

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Oddly enough, I am kind of looking forward to the next meltdown. I have about 2 more years until all of my debts are paid off, then I will be in the position to purchase a first home or investment property. I was struggling during the economic boom, but will be on cycle to succeed when the economy goes down the toilet again. Here in Austin, Texas the home prices are currently peaking and frankly just ridiculous. In my neighborhood, 1,500 to 2,000 SQFT homes are going for about $400k. And if you want to talk about living downtown, then fuggettaboutit. The average condo down there is 700 SQFT, goes for $250-$300k, and has HOA fees that rival the monthly mortgage payment, with some being $1,600 a month. 

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32 minutes ago, RehabbingANDBlabbing said:

Oddly enough, I am kind of looking forward to the next meltdown. I have about 2 more years until all of my debts are paid off, then I will be in the position to purchase a first home or investment property. I was struggling during the economic boom, but will be on cycle to succeed when the economy goes down the toilet again. Here in Austin, Texas the home prices are currently peaking and frankly just ridiculous. In my neighborhood, 1,500 to 2,000 SQFT homes are going for about $400k. And if you want to talk about living downtown, then fuggettaboutit. The average condo down there is 700 SQFT, goes for $250-$300k, and has HOA fees that rival the monthly mortgage payment, with some being $1,600 a month. 

The costs of buying downtown are on par with what I was seeing when I was contemplating a purchase near The Strip in Vegas across the past few years.  Of course, there was ALSO some spiking because of VGK and also the incoming Raiders...

 

The increases close to downtown Austin are hardly new though.  Even post-2008, there were bidding wars in the West Lake Hills and Rollingwood areas.  One house not far from mine hit the market at something like $750K and sold the following week for more than $100K above the ask.  Meanwhile, my ex's house had remained stagnant (north of 183 near Braker and Lamar).  I did notice that the valuation has spiked this year, so either there is a tax grab or the current owner made some substantial improvements...it definitely was not a $300K home (we had bought it for about $100K slightly over 20 years ago). 

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4 hours ago, centex said:

I did notice that the valuation has spiked this year, so either there is a tax grab or the current owner made some substantial improvements...it definitely was not a $300K home (we had bought it for about $100K slightly over 20 years ago). 

 

I'll assume that statement reflects something other than a doubt that the value could have tripled in that time.  You're talking about something like 5% annual price appreciation (compounded). 

 

In fact, our downtown Philly home was purchased for $125k in 1991 and sold for $375k in 2011.  Were it not for the 2008 meltdown, we might have realized a peak value of about $435k.

 

( FWIW:  We more than recovered that decline from peak with our suburban Atlanta purchase:  we scooped up a home that sold for $605k in 2004 for $440k in 2011.  It'll go on the market next month for approx $700k, with strong prospects for sale at $650k (current Zillow $705).)

 

 

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On 12/11/2019 at 7:56 PM, PotO said:

Try Beijing

Not being political just a query on method and system of governance ......

 

Is there only a small number of privately owned residences in China where the overall majority is state owned housing? Or is it all state owned you're just buying the right to rent that property and you're paying rent to the Government?

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27 minutes ago, IndyPoolPlayer said:

Not being political just a query on method and system of governance ......

 

Is there only a small number of privately owned residences in China where the overall majority is state owned housing? Or is it all state owned you're just buying the right to rent that property and you're paying rent to the Government?

 

That's a good question!  There is a lot of misunderstanding and misconceptions even amongst Chinese citizens about how the real estate process works in China.  I'll try to clear it up ...

 

First of all. all land (the soil, not the structures built upon the land, is owned by the "people" (i.e. government).  The structures built upon the land are owned by the individuals who have built / purchased the structures (i.e. house, apartments, buildings, etc ... ).

 

To clarify, I will use the term "house" or "home" and that means residential dwellings.  Most residential housing is not generally what we would consider a "house", but actually apartment buildings and the individuals buy their apartment (condo) or else rent one.  With 1.4+ billion people living in an area roughly the size of the USA, individual one-family structures are few and far between in major cities -- even in 2nd tier cities.

 

Ok, so the land itself is owned by the government, but the house is owned by the individual purchaser (owner).  There was a time up until recently that the owner had 70 years of usage rights to the home after which time the government could force a relocation after the government paid compensation and / or provided a replacement house.  That has changed.  Now you own the same house forever, but after 70 years the building must still meet code.  If it does not meet code, the owner committee (condo association) can either bring the building up to code or relinquish the property to the government who will, in turn compensate each individual owner and / or provide comparable new housing.  Historically, when the government has provided compensation, it was decent -- usually fair market value if not even a bit higher.

 

The above is for land / houses zoned residential.  There are some developers who build commercial buildings which have a few top floors of apartments.  If you buy that, all bets are off.  The commercially zoned property still has a 30 - 50 year ownership rights restriction and after that you "may" lose the property or significant value.  There is no security.  Buying a residence in a building zoned commercial is extremely risky and a very bad investment.

 

Ok, now back to residentially zoned property.  At one time all commercial enterprises were owned by the government. You either worked directly for a government agency or a government-owned commercial enterprise.  And example would be school / university teachers.  As part of their employment (usually for life, but now somewhat rare), the government would give you a house to live in.  After about 20 years of seniority, you could keep that house forever.  That type of program ended around a decade ago.  There is no no more free government housing for 97% of those who are employed by the government.  In return, the employee is paid an extra housing allowance and buys their home on the open market.  There is an exception for career military personnel who are given government homes.

 

Now, let's look at the related issue of home purchase and, specifically, pricing.  Pricing is all supply & demand.  With a population approximately 5 times larger than we have in the US, demand is a given.  Supply does not meet demand.  Especially in the large four top-tier cities, demand far outweighs supply.  That is precisely why your average small, old apartment costs around US$1,000,000.  In Beijing price is determined not by how new the apartment is, but it's location.  In the outer perimeter of Beijing, a 100m2 house is about $1m.  In the center of Beijing, the same 100m2 home is double or triple.  If the house is located in an area which guarantees access to a top notch middle & high school, that same house can cost $15m+.  If the house is also located near a subway station, add another $1m+ to the price.  

 

When it's time to buy a house, forget about negotiating.  It is a seller's market and has been that way for decades.  In the top-tier cities, the time from market listing to actual sale is around 30 minutes.  Think of it something like dropping a $100 bill in the center of a crowded homeless shelter.  People would be all over it like stink on poop brawling and fighting all over the poor to get at it.  It really is the same way buying a house here.

 

I never really understood this and doubted what my wife kept telling me until having obtained first-hand experience.  We got married about 30 years ago and bought our first house -- a 120m2 house -- in Guangzhou to live in when we visited twice a year.  We paid something like $1k per m2 and I thought that was very expensive, but my wife and her family assured me the price was very good, considering it was on the 18th floor.  (Chinese have this fixation on the numbers 8 and 9).  And after that every single year the house price would go up about 20%.  Right now it would sell in 1/2 hour at $2.5m.   A few years later when she had the idea of buying another, the same routine.  Now we are on #14 and have stopped.  Policy restrictions which have been implemented trying to control increasing house prices -- which have pretty much failed -- make it extremely difficult for us to buy more so my wife has calmed down and focused on other investment opportunities.  

 

So, with housing prices so high, how do people afford to live?  First, to buy a house it is a "community" effort.  You either have the cash yourself, but most people get money from their parents and in-laws as a hefty downpayment and then get a 30-year mortgage.  In the vast majority of urban Chinese families, both the husband and wife work full time and can afford to pay the mortgage -- if little else.  When it comes to saving money and making it stretch, Chinese people as a whole are tighter than a gnat's azz in a windstorm.   Surprisingly enough, though, in spite of sky-high property purchase prices, rents are very low.  

 

Most people who own multiple properties do not rent them out, but some do.  We rent ours out, but there's a strategy to doing so.  A $1m 120m2 apartment in the outskirts of the city will rent for about $2,000 per month.  I rent it out for about $1,500 or even $1,300.  First of all, I make the tenant pay a year in advance.  Also, I make them understand that any needed upkeep or minor repairs are their responsibility. Even then, $1,500 is a bargain.  By lowering the price, you can get tenants that stay several years renting while they save money to buy their own house.  When you have to change tenants every year, you end up losing two month's rent or even three.  It takes you a month to find a new tenant and you have to spend money waiting or making minor repairs.  The real estate company that helps you find and screen tenants also charges you a month's rent.  Renting to a tenant that only stays a year is a sure way to lose money.  We have been lucky in that all of ours have stayed five or even 15 years.  And even then, you don't really profit as much as you'd expect. And it's time consuming to manage.  It's no wonder most landlords don't rent out their properties.  

 

Anyhow, as crazy as the system is, once you understand it and get used to it, there's serious money to be made.  

 

    

 

 

 

 

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14 hours ago, hdporter said:

 

I'll assume that statement reflects something other than a doubt that the value could have tripled in that time.  You're talking about something like 5% annual price appreciation (compounded). 

 

In fact, our downtown Philly home was purchased for $125k in 1991 and sold for $375k in 2011.  Were it not for the 2008 meltdown, we might have realized a peak value of about $435k.

 

( FWIW:  We more than recovered that decline from peak with our suburban Atlanta purchase:  we scooped up a home that sold for $605k in 2004 for $440k in 2011.  It'll go on the market next month for approx $700k, with strong prospects for sale at $650k (current Zillow $705).)

In the 20 years after we had purchased, and about 18 after we split up, the home was valued at barely $30K more than we had paid at the time of purchase.  There were some not-so-good elements that were not-far-enough away...we didn't realize that at the time of purchase since, during the day, it was not something that was noticeable. 

 

Meanwhile, the home I had in the WLH area spiraled upwards...even though it was actually in unincorporated Travis County (we were ringed by WLH, who did not want to annex us since it would have required a lot of sewer upgrades in a very rocky area).  But I digress...

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4 hours ago, centex said:

In the 20 years after we had purchased, and about 18 after we split up, the home was valued at barely $30K more than we had paid at the time of purchase.  There were some not-so-good elements that were not-far-enough away...we didn't realize that at the time of purchase since, during the day, it was not something that was noticeable. 

 

Meanwhile, the home I had in the WLH area spiraled upwards...even though it was actually in unincorporated Travis County (we were ringed by WLH, who did not want to annex us since it would have required a lot of sewer upgrades in a very rocky area).  But I digress...

 

Yeah ... the street walkers only come out at night.

 

Frankly, we were pleased that the X-rated theater on Market St in Philly, just 5 blocks from our home, never proved a drag on the property value.  The guy that owned it kept it open through the 20+ years we were there, despite one after another high rise going up around it.  No doubt the guy was waiting for his ship to come in (in the form of a developer who had to have his space).

 

Just did a catch up:  8 mo after we sold our house in 2012, the owner closed the theater after seeking a permit for a live show venue and being denied.  Paved it over for parking.

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22 minutes ago, hdporter said:

 

Yeah ... the street walkers only come out at night.

 

Frankly, we were pleased that the X-rated theater on Market St in Philly, just 5 blocks from our home, never proved a drag on the property value.  The guy that owned it kept it open through the 20+ years we were there, despite one after another high rise going up around it.  No doubt the guy was waiting for his ship to come in (in the form of a developer who had to have his space).

 

Just did a catch up:  8 mo after we sold our house in 2012, the owner closed the theater after seeking a permit for a live show venue and being denied.  Paved it over for parking.

Wasn't quite THAT bad...but we discovered that a lot of the duplexes were occupied by persons on various forms of supervision at the county and State levels.  The actual volume of such occupants became more clear when I was handling the warrant withdrawals and saw the addresses...and then muttered to self "Oh sh*t" upon realizing JUST how close they were. 

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23 minutes ago, centex said:

Wasn't quite THAT bad...but we discovered that a lot of the duplexes were occupied by persons on various forms of supervision at the county and State levels.  The actual volume of such occupants became more clear when I was handling the warrant withdrawals and saw the addresses...and then muttered to self "Oh sh*t" upon realizing JUST how close they were. 

 

I got a friend who can dearly emphasize (indirectly).  She bought into a decent condo in the Princeton, NJ area in the mid-80's.   Well, the economy hit recession around 90/91 and to make matters worse, that area was awash in condo construction (complex every 1/4 mil down the rd).

 

The real kick in the pants came when the county bought up an unsold condo unit in her development and proceeded to fill it with Section 8 housing tenants.  I can't blame her for doing a HUGE "NIMBY!!!".

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On 12/17/2019 at 3:09 PM, hdporter said:

 

I got a friend who can dearly emphasize (indirectly).  She bought into a decent condo in the Princeton, NJ area in the mid-80's.   Well, the economy hit recession around 90/91 and to make matters worse, that area was awash in condo construction (complex every 1/4 mil down the rd).

 

The real kick in the pants came when the county bought up an unsold condo unit in her development and proceeded to fill it with Section 8 housing tenants.  I can't blame her for doing a HUGE "NIMBY!!!".

LOL someone has been brushing up on their George Carlin.

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