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More "Creative Financing"

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Ray Ohler

Sophomore Member
Joined
Jan 15, 2002
it'll ALL come tumbling down in quick order. OK. I may not be the "eternal optimist", in fact I really am starting to believe that my brain has totally vacated my cranial cavity but, if they do what they want to do, it'll be AMERICAN service personnel begging for food in the streets just like Russia. Better KEEP that "mothball" fleet in Philly for a new round of scavenging.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
And thanks to federal tax law, the interest you pay on the activated line would be tax-deductible, as long as the total mortgage debt on the house did not exceed the property’s full market value.

Here's one of the main reasons this has happened. And just how do they know the mtg. debt doesn't exceed the full market value?????? Yeah, right.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
It would seem to me that this is going to put quite a few mortgage brokers out of work, at least in the refi end of business. Why would a homeowner want to deal with a commissioned broker if they have their own mortgage company ready to hand it over, and probably at decent interest rates?

The big lenders are finding new ways to herd the masses directly to them, cutting out any middle men and thus allowing them to boost their profits.
The behavior patterns of homeowners is already in place....many are going to milk their equity any way they can. This type of 'creative financing' will appeal to them in many ways. Home equity loans are already becoming more and more popular, this method ony streamlines the process.

Those of us who get a good portion of our work from mortgage brokers had better take a close look at how this might impact our businesses.

What confuses me is the last paragraph, that states:
"Unlike traditional underwriting, the new zero-down plan counts "secondary incomes received in cash"--seasonal work income, child care payments, cleaning service income--to qualify applicants for a mortgage."

Huh? 8O
Isn't that considered untaxed income made "under the table"?
Seems to me that there was a time when you could get into trouble for that sort of behavior, but now it apparently is rewarded with homeownership. Am I missing something here????? :?
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
<span style='color:brown'>Dee Dee, your last comment is interesting. If the loans are based, in part, on "unreported income" which, by law is required to be reported to the IRS, and the loan defaults, and the loan documents are reviewed and disclosed to the courts or FHA/FNMA/FMLC, wouldn't that place them in public domain? Once they are in public domain, what would prevent the IRS from going back and assessing taxes, penalties and interest or such income? Imagine coming out of bankruptcy court with everything discharged and you are ready for a fresh start.......then BOOM, the IRS levies a $50,000 judgement against you.........</span>
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado

Imagine coming out of bankruptcy court with everything discharged and you are ready for a fresh start.......then BOOM, the IRS levies a $50,000 judgement against you.........


If it were ME, knowing full well that I'd scammed the IRS and was able to buy a house by doing so, I'd feel as if I got what I deserved.
But unfortunately those who would take advantage of such a program would be flopping all over the place claiming they were unfairly victimized and set up by the government.

A little help here and there for someone who needs it is one thing, but giving a green light to evading taxes and then rewards for doing so is wrong.

I can't make sense of this at all.
 

Austin

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Virginia
Sad but timely story about creative financing: About 20 years ago at our church we had an assistant pastor who was attending college and working at the church. He was an exceptional young pastor and when the regular pastor had a stroke he took over the church for over a year at age 22 and did a first rate job. He was married and had three kids.
After graduation from college he was accepted at seminary and resigned at our church. At the time my father and I were in the brokerage business and we got a call from him saying that his house had been on the market for about six months and he couldn’t sell it or even get an offer and he ask for our help and advice. Problem was, he had a Century 21 creative financing loan and owned about $10,000 more than the house was worth. Actually, his loan balance was higher than when he started. Had to move his family because school was starting and he had no funds.
Things fell apart. As a result of this turmoil his wife left him and the three kids and bailed out. No life of poverty for her. He was determined to make it as a preacher. He found a church job and worked his way through seminary and married a woman at the church. They raised his three kids and had another kid out of that marriage. He had been pastor at a local Methodists church for 7 years and was loved by all.
Last Sunday at 3:30PM he was killed on a four-wheeler motorcycle. He was riding with some of the kids from his church. “Creative Financing” turned around his whole life and career. I read his obiturary and this creative financing chapter of his life was not suprisingly left out of the saga. That is one reason I take this business very serious.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Austin,

Sorry to hear about what happened to your friend.
It can drive a person crazy trying to figure out why someone who is just getting their life together could have it cut short. I've learned not to try.
The creative financing didn't cost him nearly as much as marrying someone who didn't take their vows, "for richer or poorer" more seriously.

Dee Dee
 

Em Tee

Senior Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
California
And what happens if the equity line is maxed out and then property values decline? :roll:
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
And what happens if the equity line is maxed out and then property values decline? :roll:

The same thing that would happen to them under any current refinancing program. The gravy train will end, so they'll either figure out a way to tighten their belt or they'll belly up.
 
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