E-trade Mortage On The Move.

[Mountain Man]

Just heard about this on the radio. E-Trade is offering a portable mortgage for a limited time while interest rates are soooo low. Sell your home, keep the interest rate for your next home.

https://mortgage.etrade.com/promos/jp_motmIndex.asp

 

[Austin]

I heard that too. That should make things interesting. What kind of adjustment do you make when interest rates are 8% and the purchaser brings his won 4% mortgage with him? What is the cash equivalent price?

 

[Farm Gal]

Hmmm I will have to think on that a bit Austin...

But my from the hip answer is that the subsequent purchase/selling price would be more controlled by the "willing seller" than the fortitious buyer who (admittedly) might have a tad more leeway in terms of actual sale price/repayment ability in terms of monthly payment...

My inital response is this: how likely is e-Trade to up the ante in terms of actual $$ loaned if the 'new market rate' is higher than that locked portable rate?...

Probably not, right? so the buyer if purchasing a more expensive home is going to have to seek additional financing OR pony up the difference: at which point s/he is using what we wish ALL buyers used: his/her own money...

So unless the lucky buyer is selling out of a more expensive market OR downsizing... they probably are going to have to buy a second purchase money mortgage (bet me e-trade will offer this service) at or ABOVE the then current rate!

So it sounds to me more like a clever marketing ploy than a danger to appraisers sanity!

~~~~~~~~~

any other thoughts?

 

[Mountain Man]

So it sounds to me more like a clever marketing ploy than a danger to appraisers sanity!

Maybe, and I have thought about it both ways. But I do remember in the late 80's, back in my RE sales days, when you still could find a rare assumable FHA. I could sell those all day long..... definitely had a marketing advantage. As it got into the early and mid 90's, the equity portion become larger, thus lost it's appeal to the market. I would think that this would be somewhat similar. The buyer would hold a stronger position early on, in that they could afford more house with the luxury home market being a bit strained, while they can could still afford to pay some down. But the appeal and advantage would wear off as the equity becomes so great, that they would need an additional loan anyway.

Don't have any data to prove any effect, but I would bet the Realtors will use this to get the seller and buyer to sign. If I were still real active in sales, I know I'd use it.

 

[Farm Gal]

Appars the wonder loan is NOT unlimited in portability: It move exactly ONCE move - thus the probable scenario I sketched above would definitely apply!

SF Examiner opined that the loan would be avoided by most real-i-tors, and since mortageg brokers aren't E-trade AND since it is "only A+paper need apply" AND at .25 point above 'market' to be ehld in-house by e-trade...

walll I am thinking this is pretty much a non-issue in MOST markets at least for the foreseeable future!!!

 

[Mountain Man]

Ah, it's all in the mice type.
Thanks Lee Ann, it only looks good on their web site.

 

[Austin]

Back in the olden days when I was a wee lad in this business, 70’s, when interest rates when up like a rocket, wrap-around mortgages came into being. Like most scam deals they originated in CA. Why is it that all scam operators are either in CA, NJ, or FL? Wrap-arounds wouldn’t fly in Virginia, so a hot shot Realtor lady from CA was going around giving seminars on how to do wrap-around mortgages and essentially told us that under the constitution there was nothing any one could do to stop us and the lenders had no choice because a court in CA has so ruled.
Still full of the pee and vinegar of my youth I came home and talked with our Realtor Firms attorney. The lawyer discussed the legal precedent with a retired judge in chambers associated with their firm and he reported back the results of that conservation with the judge. The judge said the following: “CA legal precedents are like everything else from CA, a freak to be laughed at and enjoyed for the moment.” The more things change the more they stay the same. Except it gets worse over time.

A funny thing happened at that seminar. Seven Realtor birds were there with their lawyer. I got to talking with one of the Realtors and he explained to me some mortgage scam they had working. I replied: “But that is mortgage fraud,” to which he replied: “I ain’t got nothing to do with it. Go talk to our lawyer, he is the one that done it, I didn’t have anything to do with it.”