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EXCLUSIVE: The OUTRAGEOUS story behind H.R. 600… Why Democrats are Supporting a Bill that Allows People to Get FHA-Insured Mortgages Without Down Payments.

Sun Mar 8, 2009 7:20 AM EDT
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By Mandelman
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This article is the second in a series of investigative reports related to a bill now in committee in the U.S. House of Representatives. At least eleven prominent Democrats and one Republican are supporting H.R. 600, which if passed, would restore a practice that was banned just last year when congress passed the Housing and Economic Recovery Act of 2008.

It is a story that needs to be told… because H.R. 600 has to be STOPPED. Seller funded down payment assistance is harmful to homebuyers… harmful to taxpayers… and harmful to our nation's economy. The only people H.R. 600 helps are those that profit enormously from its passage, and a significant portion of those profits will assuredly come at the expense of the American taxpayer.

This is also a story that illustrates how corporations with deep pockets and lobbyists can spin facts, manipulate the media and intimidate bloggers. This part of the story is disturbing to say the least.

Mandelman

Our story begins with a wonderful sounding phrase… down payment assistance. It conjures up images of young, hardworking couples getting help when buying their first home. And that's precisely what down payment assistance programs are for. No one is suggesting that there's anything wrong with such programs… and no one is trying to change them.

Many government agencies, both state and federal, offer down payment assistance to qualified individuals under various circumstances, the Department of Housing & Urban Development, for example, offers dozens of them. And in addition, some nonprofit organizations, such as charities and churches also offer down payment assistance programs. The Federal Housing Administration, HUD, and the Internal Revenue Service all have rules that allow for such programs, and no one is trying to change those rules.

According to an article that appeared in Forbes Magazine on August 7, 2008:

Under present HUD rules, a home buyer can get help with the requisite 3% down payment from friends, relatives, a union, a charity or a government entity. But the money isn't supposed to come from anyone with an economic stake in the transaction. When it does, the stated transaction price is something of a fiction, and the requirement that buyers start out with positive equity is evaded. No-equity loans are a source of trouble. That's what the trillion-dollar mortgage crisis is all about.

In this country, however, there are always those looking to take advantage of loopholes in the rules especially when doing so presents an opportunity for profits… and that's where our story begins.

Roughly a decade ago, several companies decided that, since borrowers with FHA-insured loans were able to get down payment assistance from family, employers, government entities or charitable organizations, they would enter the down payment assistance market by becoming nonprofit "charitable" organizations.

The difference between these organizations and the rest, however, was that they had a plan to accept so-called "donations" from the seller of a property, and then turn around and provide a "grant" to the buyer of that property, who would use the funds to satisfy the down payment requirement on a FHA insured mortgage. For handling that transaction, these charitable organizations would receive a fee… roughly $400 -$800, according to various published sources.

Thus was born a new industry, referred to as Seller Funded Down Payment Assistance, or SFDPA.

With the housing market heating up in 2003, there were millions of people who wanted to buy homes or condos that didn't have the money to satisfy the 3% down payment requirement imposed under FHA rules. And, a seller funded down payment assistance program seemed a perfect fit.

Sellers liked SFDPA because in reality, it would cost the sellers nothing. As an example, a seller would "DONATE" $5,000 to one of the nonprofit charities offering seller funded down payment assistance, and that company would keep several hundred dollars for their trouble and give the rest to the buyer who would then use the funds to make his or her down payment. It could cost a seller nothing because he or she could simply mark up the sales price of the property by the same $5,000 and in that way recoup the "donation" that was made to the nonprofit.

Developers, who built hundreds or thousands of homes, wanted to sell them as quickly as possible, and through these types of schemes, they could be marketed as being available with "No Money Down".

Some of the nonprofit companies that offered seller financed down payment assistance became very successful, earning tens, if not hundreds of millions of dollars as a result of the fees earned for handling these transactions.

Then in 2005, the General Accounting Office, or GAO, conducted a study on the loans that were initiated with seller funded down payment assistance and found that buyers who received such assistance were twice as likely to default on their loans. FHA, who insured these loans against losses, was understandably concerned and began working on a rule that would put a stop to the practice.

Additionally, the Internal Revenue Service had some questions about these nonprofit "charities" that existed to provide down payment assistance grants to home buyers, and on May 4th, 2006, the IRS released their ruling, which stated that seller funded down payment assistance providers would no longer be qualified as tax-exempt charities.

That might have been the end of the story, but the people behind these programs were not about to let a little thing like an IRS ruling stop them from operating. Some had found a loophole and were about to slip right through it.

Under FHA rules, nonprofit charities and government entities are permitted to offer down payment assistance programs. Since the seller funded down payment assistance companies could no longer operate as nonprofit charities, maybe they could become government entities? But, how? HOW, indeed.

If you look up the definition of a "government entity," you'll find that it includes:
1. Federal, state, and local governments.
2. Indian Tribal Governments.
(You can find the official definition here: http://www.irs.gov/govt/index.html)

Indian Tribal Governments are classified as "government entities," and they have all of the rights of other government entities, with the exception of three. They cannot make war. They cannot coin money. And they cannot engage in foreign relations. Other than that, they are government entities and as such are free to govern themselves.

With Native American Tribes being considered "government entities," one of the providers of seller funded down payment assistance, seeing that they could no longer operate as a nonprofit charity as a result of the IRS ruling, decided to align itself with the Penobscot Tribe of Maine. On March 6th, 2007, a company calling itself Global Direct Sales presented the Penobscot Tribe with a check for $5,000 to establish the "Fair Housing Administration," in which Global Direct Sales was the Managing Partner.

This "Fair Housing Administration," as a result of the Tribe's involvement, was considered a Government Agency and thus was allowed to provide seller funded down payment assistance grants through something called the "Grant America" program. (www.fha.dpa.com)

The Grant America Program, not being a charity, had a new scheme for providing seller funded down payment assistance.

According to their Website, the buyer would "sell" the seller on purchasing a membership in something called "The Owner's Alliance". How much would such a membership cost? Well, between 3% and 20% of the price of the seller's property, of course. Assuming the seller's property was selling for $200,000, that would make the membership in The Owner's Alliance sell for somewhere between $6,000 and $40,000.

"Wow… that must be some membership," I thought to myself. So, I went to the new government agency's Website to see what some of the benefits of The Owner's Alliance membership might be… just to see what I was missing by not being a member. The list of benefits was quite long, and included such valuable benefits as:

•Discounts at Theme Parks.
•A Directory of Contractors for Home Repair.
•50-75% savings on local newspapers, "delivered right to your door!"
•Free Dial-up Internet Access.
•Access to News, Traffic, Weather and More on the Owners Alliance Website.
•A One-Week Introductory Trial Membership to the International Fitness Club Network and "the privilege of paying the club's lowest membership rate for the type of membership selected."
•Local Grocery Coupons – That may be printed out as needed,
•A Pet Assure Benefit that offers discounts on pet products.
•Access to a network of dental providers offering discounts of 15% to 50% off of certain dental services (discounts, however, depend on the individual dental provider).
•The Dining Program – Offers discounts of up to 50% at 20,000 restaurants.
•Auto Pricing & Maintenance – A 10% savings on maintenance & new car pricing.
•A Voice in Washington through The Owners Alliance, which claims to represent property owners across America.
•A VIP Health & Wellness Benefit – Offers one-stop shopping for "top brand vitamins".
•Discounts at certain chiropractors, nurse hotlines, and telephone counseling.
•And much, much more!

Well, that certainly is some membership, especially when you consider that it only sells for $6,000 - $40,000, assuming, of course, you're selling your home for $200k. It takes real hubris to create a "membership" like that. It's the sign of someone who thinks they are, if not above the law… then certainly beyond scrutiny.

Meanwhile, in response to the GAO study that showed the relatively higher default rates of seller funded down payment assistance loans, HUD and the Federal Housing Administration (the real FHA) had continued their work on a rule change that would ban seller funded down payment assistance altogether.

On May 11, 2007, FHA issued a proposed rule that terminated seller funded down payment assistance. The rule became final on October 1, 2007, was scheduled to take effect on October 31, 2007. And the story might have ended there, but again, it didn't.

The country's largest providers of seller funded down payment assistance grants, including Global Direct Sales, the Genesis Program, Ameridream and the Nehemiah Corporation, all filed lawsuits against the FHA, and they were subsequently combined into a single action by the court.

As amazing as it might seem, the suit filed by the seller funded down payment assistance companies against the FHA prevailed due to procedural issues (something about FHA not having allowed for sufficient time for public debate), and on April 3, 2008 FHA's rule was vacated and remanded back to HUD.

Not to be dissuaded by the court's decision, on June 11, 2008, HUD published a new proposed rule on seller funded down payment assistance that again terminated the practice and this time the rule incorporated the concerns of the court in the FHA case.

Finalization of the new HUD rule, however, was rendered moot when the U.S. Senate got involved and included the termination of down payment grants in H. R. 3221, The Housing and Economic Recovery Act of 2008, which was signed into law by President Bush on July 30, 2008 and took effect on October 1, 2008.

And the story certainly might have ended there… but incredibly, once again it did not.

On July 31, 2008, ONE DAY after the seller funded grants were banned by congress, a new bill, H. R. 6694 was introduced into the House of Representatives by Rep. Al Green (D-TX), in an effort to reinstate seller funded down payment assistance.

With the 2008 presidential election in full swing, a mortgage industry expert and Blogger, by the name of Krista Railey, who had been following the seller funded down payment assistance companies for many years, and who was shocked by their apparent resilience, decided to write an article on her Blog, the FHA Whistleblower, which is found on the mortgage industry "insider" Website, ML-Implode.com.

ML-Implode is a site that was set-up on December 31, 2006, to keep track of mortgage lenders in the US that had started, as the site puts it, "going bust". The individuals behind ML-Implode came out of the technology and mortgage industries. They saw what was happening in the housing market and recognized what would soon follow much earlier than many others.

The ML-Implode.com site soon became one of the highest trafficked sites for information on the housing and mortgage meltdown. ML-Implode became so well known and so highly trafficked, that by 2008, many members of congress were turning to it for information on the crisis.

Railey is a mortgage industry expert who closely followed the collapse of the housing market since its beginnings. She saw seller funded down payment assistance as being harmful to borrowers, and with the housing market in free fall as of last September, she set out to write an expose intended to draw attention to the practice and she mentioned the leading providers of such programs: Nehemiah Corporation, AmeriDream, and Global Direct Sales, specifically.

Global Direct Sales was founded by Christopher Russell and Ryan Hill, who together own 64% of the "agency". These are same two gentlemen that founded AmeriDream about a decade ago, another seller funded down payment assistance company that operated under the nonprofit/charity business model eliminated by the IRS ruling issued in May of 2006.

Again, according to the Forbes article:

Russell got rich off this racket once before. A decade ago Russell and Ryan Hill, a former mortgage loan officer now acting as Global Direct's financial officer, created a tax-exempt charity called AmeriDream that would help home buyers come up with down payments. This outfit teamed up with a for-profit firm called Synergistic Marketing. From the seller AmeriDream got, besides reimbursement of its down payments, a fee averaging $800. It kicked 40% of that fee over to Synergistic, in which Russell and Hill were minority investors. By 2002, Russell's last year as chief executive, the charity called AmeriDream cleared $6 million on $182 million in revenues. When he cashed out of Synergistic that year he collected $3 million. Hill, who left AmeriDream with Russell, made $11 million off his Synergistic stake, which he sold in 2004.

All of this came to light in 2004, when the Senate Finance Committee held the Congressional Hearing on Charity and Oversight Reform, which Russel referred to as "a joke of a hearing," in a letter to Railey last September. Russel and Hill left Ameridream between 2003-2004 when the scandal became public. The arbitration decision states that Russell's non-compete agreement with Ameridream ended on March 30th, 2006, just before he and Hill made their deal with the Penobscot Tribal Council.

According to AmeriDream's 990 tax filings, between 2000-2004, Synergistic Marketing received $26,483,916 in marketing fees from AmeriDream. The tax returns contain disclosures that the two officers of Ameridream were Members in the Synergistic Marketing LLC.

All of this and more was chronicled by Railey in her article that first appeared on the ML-Implode Website on September 9, 2008. In her article, she referred to the Global Direct Sales' practices as being a "scam". Within a few hours, ML-Implode's management saw the "scam" reference and asked Railey to remove it from the article and republish it, which she did. The article was republished on September 15, 2008.

But, it was too late. Christopher Russell, who was watching the site carefully, saw the article posted, downloaded a copy and within a few days ML-Implode was notified that Global Direct Sales had filed for an injunction attempting to "restrain and enjoin defendants from disseminating untrue, false, and/or misleading statement regarding plaintiff's, their business, and their business dealings". Russell was seeking an injunction in Maryland courts, and ML-Implode was being sued by Global Direct Sales for defamation.

Why did Russell care so much what some Blogger on some Website had to say about Global Direct Sales LLC? Because with the economic meltdown now dominating the discussions in congress and all across America, members of congress were reading the Bloggers on the ML-Implode.com site, and they weren't saying positive things about seller funded down payment assistance.

In his letter threatening legal action written to Krista Railey on September 10, 2008 as a result of her article on ML-Implode.com:

"Spend the money for a good lawyer because I use the best and I am coming after you hard."

Mr. Christopher Russell

It is obvious that Russell filed the lawsuit alleging defamation in an attempt to silence or at least intimidate Railey and others on the ML-Implode site… and it worked, to at least some degree. Under the advice of counsel, they removed any references that used such words as "scam," and although the court did not grant Russell's injunction, to this day ML-Implode is cautious as to what they publish. Russell has deep pockets… ML-Implode does not, and win, lose or draw… it costs money to defend yourself in court.

Russell and others in the industry, were working behind the scenes to garner support for the H.R. 6694 bill that was seeking to bring back the seller funded down payment assistance programs that congress had banned a few months earlier on July 30, 2008. Railey and other industry Bloggers were trying to get the message out that seller funded down payment assistance programs, especially in today's housing market, were harmful in far too many cases. The battle ended, however, when the 110th Session of Congress ended in December 2008, and the H.R. 6694 bill was closed.

The end of the story… come on… you know better than that by now…

Predictably, the legislation allowing reinstatement of seller funded down payment assistance reemerged with the new congress this year, albeit with minor changes, as H. R. 600. It was introduced by Rep. Al Green (D-TX) and is supported by 14 Democratic congressional representatives and one Republican, which has allowed its supporters to slap the ever-popular "bipartisan" label on the proposed bill.

Backers of the bill also include the National Associations of Realtors, Homebuilders, and Mortgage Bankers… three associations that would clearly benefit from being able to sell homes without down payments using FHA insured loans. (At this time, there are no organizations opposing the bill's passage, although I was thinking of starting one. I might call it: "The Fellowship of Future Foreclosure Victims".)

H.R. 600 has been positioned by those in the seller funded down payment assistance industry as being an important component of the economic stimulus sorely needed by our nation in these difficult times. It is also described by its backers in congress as being critical to many first time homebuyers and minorities who would not be able to buy homes without it. Supporters in congress say that the HUD and GAO reports that show these loans as having a default rate three times higher than other loans are wrong and should not be trusted.

In fact, the lobbying efforts to get this new bill passed are obviously as well organized, as they are insidious. As an example, Railey and other Bloggers, publishing articles in opposition to H.R. 600's passage, quickly find numerous comments appearing on their Blogs that are very much in favor of H.R. 600. When the IP addresses of these comments have been researched, however, it has been easily ascertained that the comments are often being made by employees of seller funded down payment assistance companies, most notably the Nehemiah Corporation.

Of course, proponents of H.R. 600 say only positive things about the bill's impact, but The Washington Post, on January 8, 2008, reported the following:

For years, the FHA has tried to eliminate these programs, without success. Now it is attempting once more to write rules that would ban this funding. But those rules would be moot if the House provision survives, creating unprecedented financial problems for the agency, argued Preston, who was joined by FHA Commissioner Brian Montgomery.

By law, the FHA must break even each year, meaning it must collect as much in premiums as it pays to cover foreclosure-related losses. If at the start of a fiscal year the FHA estimates it cannot do that, the Senate and House appropriations panels make up the shortfall using taxpayer money.

Because of the poor performance of seller-funded down-payment loans, the FHA may ask for $1.4 billion in appropriations for the fiscal year beginning Oct. 1 -- the first such appropriation in its history.

In truth, the only people that benefit from seller funded down payment assistance programs are the realtors, the mortgage companies, and the homebuilders who all profit from a sales commission or a closed deal that otherwise never would have happened.

The GAO, the IRS, FHA and HUD have all completed studies that show clearly that the default rates on these loans are every bit as bad as the worst of the sub-prime mortgages. Of course, since Realtors, mortgage companies and home builders are all in trouble this year, they see the banning of seller funded down payment assistance programs as detracting from their incomes, and they've pointed their lobbyists on every Congressional Representative that will listen.

It would seem that anyone who takes the time to understand the ramifications of H.R. 600's passage would stand on a chair and scream at the top of their lungs: NO!

Providing mortgages to people who cannot save enough to satisfy a 3% down payment requirement is a bad idea, but putting people into homes that are underwater from the day they move in is even worse… especially in today's declining market.

Margaret Burns Director, Office of Single Family Program Development for HUD, in her written statement before the Committee on Financial Services Subcommittee on Housing and Community Opportunity in the United States House of Representatives:

While well intended, the programs have had a significant negative impact on FHA's business for the last several years. Loans made to borrowers who rely on these types of seller-funded gifts perform very poorly. The foreclosure rates on these loans are more than twice those of all other home purchase loans insured by FHA.

Moreover, FHA experiences higher loss rates from the sale of the properties associated with these particular foreclosures, a reflection of the overvaluation that occurs with these programs. The higher foreclosure rates represent a financial burden for FHA and taxpayers, but of greater concern, they hurt the families who lose their homes and the neighborhoods in which those homes are located.

The core problem with these programs is not that the borrowers they serve are riskier or less credit-worthy; it's that the programs disrupt the natural negotiations between buyers and sellers in a way that results in inflated sales prices and thus higher mortgage amounts.

Seller-funded downpayment assistance programs flourish in weak real estate markets. In weak markets, low buyer demand means that sellers are less likely to get full asking price for their homes and are therefore willing to participate in programs that will help them sell for a higher price. As such, the property overvaluation associated with seller-funded gift programs occurs in markets that are least able to adjust to and accommodate pricing variations.

For example, in fiscal year 2006, more than 50 percent of FHA's purchase mortgage business in both Ohio and Indiana was for borrowers who relied on nonprofit seller-funded gifts. In these states, home values have been stagnant or declining. In soft housing markets, borrowers with no or negative equity who face any kind of financial hardship have fewer options to recover and can slip into foreclosure fairly quickly, despite the best efforts of FHA's loss mitigation programs. High foreclosure rates in these communities contribute to additional deterioration in home values and a vicious cycle of property depreciation.

Haven't we, as a nation learned that providing a home mortgage to someone who can barely afford it does not help that individual, to the contrary, it puts that person at tremendous risk, and it is the root cause of the economic meltdown from which we may not recover for a very long time.

Yet the 15 Democrats and one Republican continue to champion the legislation as being important to our nation's economic recovery? I can see how it might help lead to the economic recovery of some realtors, mortgage brokers, and builders, but beyond that, how can people being put into underwater mortgages be seen as being helpful to anyone else?

Already, far too many people who did nothing wrong are being swept under as a result of these types of lending practices. It is inconceivable that the American people would stand by while congress passes into law a practice that would assure our nation of further pain in the future, to say nothing of the borrowers duped into such a high-risk arrangement in these troubled times.

I urge you to tell your representatives: Absolutely NO on H.R. 600!

Because the only people that it stimulates are those that profit from its passage.

LINKS TO RELATED SOURCES AND EXHIBITS:

Prohibition of Seller Funded Down Payment Assistance
Questions and Answers from Federal Housing Administration Website:
http://portal.hud.gov/portal/page?_pageid=73,7597819&_dad=portal&_schema=PORTAL

Housing Secretary Expresses Concerns With Mortgage Bill
http://www.washingtonpost.com/wp-dyn/content/article/2008/07/08/AR2008070802683.html?hpid=sec-business

Testimony Before the Subcommittee on Housing and Community Opportunity, Committee on Financial Services, House of Representatives Seller-Funded Down-Payment Assistance Changes the Structure of the Purchase Transaction
and Negatively Affects Loan Performance Statement of William B. Shear, Director Financial Markets and Community Investment
http://www.gao.gov/new.items/d071033t.pdf

AN EXAMINATION OF DOWNPAYMENT GIFT PROGRAMS ADMINISTERED BY
NON-PROFIT ORGANIZATIONS
http://www.hud.gov/offices/hsg/comp/rpts/dpassist/dpa2.pdf

WRITTEN STATEMENT OF MARGARET BURNS Director, Office of Single Family Program Development, Office of Housing, U.S. Department of Housing and Urban Development Hearing before the Committee on Financial ServicesSubcommittee on Housing & Community Opportunity, United States House of Representatives "Homeowner Down Payment Assistance Programs and Related Issues" June 22, 2007
http://www.hud.gov/offices/cir/test062207.cfm

IRS Targets Down-Payment Assistance Scams; Seller-Funded
http://www.irs.gov/newsroom/article/0,,id=156675,00.html

FHA Program Key in Surge of Foreclosures, Denver Post
http://www.denverpost.com/ci_4228048

Going Tribal
The government keeps trying to crack down on down-payment assistance programs. But Christopher Russell is one step ahead of the law.
http://www.forbes.com/forbes/2008/0901/042.html

The Article by Krista Railey that Started the Law Suit Against ML-Implode: http://whistleblower.ml-implode.com/?p=142

Letter from Christopher Russell Threatening Legal Action over Railey's Article:
http://whistleblower.ml-implode.com/wp-content/uploads/2008/09/christopher-russell-wb-comment.pdf

Krista Railey's Declaration Filed in UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND in Response to Injunction:
http://s3.amazonaws.com/iehi-img-mli/article/penobscot-20081008/railey_declaration.pdf

Defendant's Exhibits Used to Defend Injunction:
http://s3.amazonaws.com/iehi-img-mli/article/penobscot-20081008/railey_exhibits.pdf

Railey Article Documents Penobscot Indian Tribe Down Payment Grant Program:
http://whistleblower.ml-implode.com/?page_id=122

Article Documents Judge Denies Injunction:
http://ml-implode.com/viewnews/2008-11-07_PreliminaryInjunctionAgainstMLImplodeDenied.html

Krista Railey's Blog, FHA Whistleblower on the ML-Implode Website:
http://whistleblower.ml-implode.com/

Congressman Al Green's Statement on H.R. 600 and Reinstating Seller Funded Down Payment Assistance:
http://www.house.gov/apps/list/press/tx09_green/pr080108dpabill.html

Major Seller-Funded Down Payment Company Sinks to New Low – Comments on Blogs Come From Backers of Bill.
http://whistleblower.ml-implode.com/

Wall Street Journal on Nehemiah's Online Campaign
http://blogs.wsj.com/developments/2008/08/14/nehemiah-hits-web-to-save-downpayment-assistance/

IRS Status of Charitable Organizations (from HUD Website)
FHA approved mortgagees that seek FHA mortgage insurance on loans secured by single-family houses, on which down payment assistance has been provided to the borrower in the form of gifts, are required to determine that the gifts are from sources acceptable to FHA. http://www.hud.gov/offices/hsg/sfh/np/irstatus.cfm

September 29, 2008, Washington Post Article: FHA Down Payment Rule To Ban Seller Financing
http://www.washingtonpost.com/wp-dyn/content/article/2007/09/28/AR2007092801828.html

Down Payment Assistance Programs Outlawed
http://themortgageinsider.net/mortgage/down-payment-assistance-programs-outlawed/

LIST OF CONGRESSIONAL REPRESENTATIVES CURRENTLY LISTED AS SPONSORS OF H.R. 600:

Rep. Charles Wilson (D-OH)
Rep. Al Green (D-TX)
Rep. Gary Miller (R-CA)
Rep. Gerald Connolly (D-VA)
Rep. Henry Johnson (D-GA)
Rep. Barton Gordon (D-TN)
Rep. Jim Costa (D-CA)
Rep. Barbara Lee (D-CA)
Rep. Yvette Clarke (D-NY)
Rep. Maxine Waters (D-CA)
Rep. Debbie Wasserman Schultz (D-FL)
Rep. Robert Wexler (D-FL)
Rep. Albio Sires (D-NJ)
Rep. Eddie Johnson (D-TX)
Rep. Sanford Bishop (D-GA)
Rep. Bennie Thompson (D-MS)

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Mandelman

I have to tell you, this was a lot of work. Like forty hours of work. I hope everyone finds it... something.

I want everyone to know that I am not making a perjoritive statement about the Democrats in support of this legislation. In my view, they have been unduly influenced by the monied interests and lobbyists that surround this legislation... all of whom are on one side... as you'll read, there are no organizations opposed to H.R. 600.

This legislation, in my view, really has to be stopped. If for no other reason than because it is cruel and unusual punishment to put someone who can't come up with a 3% down payment into a house with a mortgage that's underwater from day one in this declining market. It's eminently conceivable that one could start on day one being just 5% underwater, and find out by year's end, you're 15% under. By next year, who knows? 20%? 25%? Then what happens when you get transferred? Or laid off? Or become ill or injured, God forbid?

I just don't see how doing that to someone who wants to buy a house so badly that they'd walk willingly into that type of arrangement can possibly help anyone...

  • 23 votes
#1 - Sun Mar 8, 2009 8:04 AM EDT
RuthyJObservations

Mandelman, thanks for this info! Dejavu? Isn't this the very thing that got people into this foreclosure mess in the first place? Good grief! Yes, stop the madness! GG

  • 19 votes
#1.1 - Sun Mar 8, 2009 9:30 AM EDT
CL1

OMG-- This is no different than what caused all of the credit default previously. How can we stop it? Actually, I'm worried that any of the recent help given by Obama (the 9 billion was it) will result in the same, as many may be in a position to lose jobs resulting in forclosure down the road. The last I read, was a prediction of job loss through 2010.

When will our leaders see that the only way out of this mess is to create jobs in the business sector, and not just go around cleaning up personal debt.

  • 12 votes
#1.2 - Sun Mar 8, 2009 10:51 AM EDT
Eric AlbertDeleted
The Observer

Thanks for your hard work, Mandelman!

There should be a law requiring all homebuyers to put up at least 5% of their own funds as a down payment.

  • 12 votes
#1.4 - Sun Mar 8, 2009 1:27 PM EDT
Lisa Schneider

Yet the 15 Democrats and one Republican continue to champion the legislation as being important to our nation's economic recovery? I can see how it might help lead to the economic recovery of some realtors, mortgage brokers, and builders, but beyond that, how can people being put into underwater mortgages be seen as being helpful to anyone else?

I hope some realtors and mortage brokers read this and are drinking their coffee this morning with a shaky hand. I am trying to picture the snake oil salesmen...."working" the program on unsuspecting persons. Or how any of these Representatives can put their stamp of approval on this. Maybe they too are being offered something like the "Owners Alliance Memeberships?!" Gee, who could say "no" to that bag of goodies?!

  • 9 votes
#1.5 - Sun Mar 8, 2009 2:01 PM EDT
Mandelman

I know... that's some membership, isn't it? What bothers me is that it's so flagrantly transparent that it's like the guy is just saying I can do whatever I want... it's incredible...

  • 10 votes
#1.6 - Sun Mar 8, 2009 2:34 PM EDT
Mandelman

If anyone wants to help stop this, I'll be posting a letter to your congressional representative later today...

  • 11 votes
#1.7 - Sun Mar 8, 2009 2:36 PM EDT
Raymond Max

Good Morning Martin. One hell of a story.

If in fact H.R.600 supports the misleading practice of baiting one into a Mortgage that they can't afford ? I am behind you 100% . Kill the Bill.

Enticements is illegal in Calif, Oregon and Washington.

In fact, I have not encountered the practice described in your article on the West Coast. I'm going to make a couple of phone calls this A.M. and drop back by. R.max

  • 9 votes
#1.8 - Sun Mar 8, 2009 2:52 PM EDT
Mandelman

Thanks Ray... I'll look forward to you returning... but reach out when you're free... I need your help with the effort.

  • 6 votes
#1.9 - Sun Mar 8, 2009 5:29 PM EDT
Laura-400055

Mandelman: As I said in my previous post....the programs to which you are referring are not new; they have been around for at least 10 years. The housing market and credit market are at a near standstill right now; there are a glut of homes on the market. While this program sounds disturbing in light of our current economic situation, I think it does little good to alarm people about this. I would be nothing less than astounded if this made it through and passed. In this morning's paper, there was another measure that failed to pass through Senate, that would have allowed the banking industry to profit from restructuring of loans. Many years ago, when I applied for an FHA loan and was approved, I given information about this program you are referring to. It requires the SELLER to participate in the process....I was informed that few sellers opt for this type of participation. I agree with your posting this, but I think we could just use a little less gasoline around an already angry American population.

  • 5 votes
#1.10 - Sun Mar 8, 2009 5:53 PM EDT
Brian-657672

The whole economic crisis was caused by the housing market. All I need to know is on this youtube video. http://www.youtube.com/watch?v=_MGT_cSi7Rs

I am more than mad at congress. It is not term limits to me, but I would hope to have no incumbent on the ballot except the president. This is why I want less government. There is no reason for me to trust congress, and I now believe that they have no clue as to how the country is operating. The country is in a mess.

Out here in California when the housing crisis was going through the roof and the legislature made it illegal to drive around with an unrestrained dog in your car! What about your cat? Politicians need to be put in prison for malpractice.

  • 2 votes
#1.11 - Sun Mar 8, 2009 6:20 PM EDT
Bill Harrison

Mandelman

Absolutely superlative piece of real reporting here. The current default problems at FHA, which has been the "go-to" lender of late, call into question the wisdom of this new legislation and bank nationalization generally on which I will have more to say in a similar piece tomorrow.

  • 7 votes
#1.12 - Sun Mar 8, 2009 6:25 PM EDT
Mandelman

Okay Laura, but wait a second here, because several of your assumptions are incorrect:

1. I say in my article, this practice is not new... it's been stopped or tried to be stopped several times over the past 2-3 years, including last July by legislation, so with H.R. 600 they're trying to bring it back. Understand, the idea of buying a house with no money down and with negative equity wasn't always viewed as being such a problem... I would think that today the nature of that problem should be understood by all.

2. As it stands today, the bill is being supported by 16 in congress and the National Associations of Realtors, Homebuilders, and Mortgage Brokers... it faces NO organized opposition. As of today, odds are it will pass. It is being "sold" as economic stimulus that doesn't cost the taxpayer money, which is a lie, but lobbyists lie, in case you weren't aware (kidding).

3. I don't know which program you were offered years ago, but this program doesn't cost sellers a dime. They simply mark the sales price up to cover the seller funded down payment amount, which is why the buyer ends up, not just with no equity, but with negative equity from day one. Additionally, it has been abused on countless occasions, such as when a builder wants to get rid of a bunch of homes and hires realtors and mortgage brokers to sell the property as being available with "no money down" to renters.

4. Statistically, this program is responsible for 50% of all FHA loans made in 2006. Even the backers of the bill claim that it's passage will result in over a million sales in year one.

Laura... This seems to me to be a case of powerful and well-funded lobbyists positioning a bill as being good for the country when it simply isn't. It will harm our economy, harm FHA/HUD, has already been stopped twice by the IRS and by congress, and now we're going to bring it back because some in congress say we need to in order to get our economy moving again?

Let me ask you a question:

If I had a company that operated as a nonprofit charity, and what my company did was accept "donations" from the seller of a home in order to turn around and give the money to the buyer of that seller's home, minus a fee of course... and then the seller got their "donation" back by marking up the price of the home, which was made possible by a government insured loan... would you say that sounds like a charity to you... or would you call it money laundering?

And please... I am not trying to be a jerk in any way... I just think you're not thinking about this right. Think of the people who will absolutely lose homes as a result of the practice. The pain of losing a home is not something one forgets. If we need to get our economy moving again... fine. But to suggest doing that on the backs of those that can't save up enough to make a 3% down payment is criminal, in my view.

Because if you're someone who can't save up enough to cover a 3% down payment, you have enough problems in life. You certainly don't need some slick salesperson loading you into an underwater mortgage in a declining market such that we have today and will have for some time.

You disagree?

  • 8 votes
#1.13 - Sun Mar 8, 2009 6:29 PM EDT
Mandelman

Thanks Bill... That means a lot coming from you... and I considered you as I was pouring through the documents trying to make sense of them, which was no piece of cake for me as I'm not in the biz, as it were.

This thing really is outrageous and I'm working on a letter that people can send to their representatives if they so choose. I'll look for your banking piece tomorrow...

  • 9 votes
#1.14 - Sun Mar 8, 2009 6:36 PM EDT
Mandelman

And Brian... I'm in CA too, and have noticed the growing problem of unrestrained cats. LOL

Friend request coming... hope you'll accept.

  • 5 votes
#1.15 - Sun Mar 8, 2009 6:40 PM EDT
Bill Harrison

Well, as you know, when you combine politicians with access to the Fed balance sheet, mix with rent-seeking from favored interests the resulting cocktail is likely to be less than appealing. I believe the garnish and mixer is referred to as OPM (Other People's Money).

  • 9 votes
#1.16 - Sun Mar 8, 2009 6:42 PM EDT
Mandelman

Yummy. Could I have the dressing on the side, please.

  • 5 votes
#1.17 - Sun Mar 8, 2009 7:11 PM EDT
tom sevigny

Eric Albert,

Sam Webb couldn't have said it better, but isn't he a Communist?

  • 3 votes
#1.18 - Sun Mar 8, 2009 7:59 PM EDT
Bill Harrison

One other thing that I noticed on perusing the sponsors list is that many of them hail from the hardhit states of FL and CA and Gerry Connolly here in Fairfax Co. whose western half has seen some declines in house value although not to the extent of Prince William and Loudoun Counties.

  • 6 votes
#1.19 - Sun Mar 8, 2009 8:01 PM EDT
Mandelman

That's right. That's how the companies behind this bill are selling it. It's a necessary component of economic stimulus... needed to get the housing markets moving again... blah, blah, blah... and apparently, some representatives are buying it. Over $1 million has been spent by the down payment assistance companies on lobbyists, and there are no organizations opposed, which is why I got involved in the first place. I guess, if you think about it, which organized group would naturally oppose such a bill?

On a very serious related note... if anyone can think of an organization that would be likely to oppose such a bill, let me know so I can contact them. Otherwise, my strategy is to get the message out to the conservative media... I've got the WSJ waiting for it tonight... I also want to send to FNC, and even Rush. I need someone with a voice to say... wait a minute here. Otherwise this thing will pass...

  • 7 votes
#1.20 - Sun Mar 8, 2009 8:56 PM EDT
EllieP

Great piece here, Mandelman. Very impressive. You are exactly right about it not being kind or helpful to "assist" those who cannot afford it into a mortgage. Our nation cannot afford it either, and these representatives know better.

Easy way to contact your representatives: ProjectVoteSmart

Thank you for all your hard work in bringing this to our attention.

  • 8 votes
#1.21 - Sun Mar 8, 2009 11:10 PM EDT
Mandelman

No, thank you for appreciating it. And for providing the link for representatives. This bill will pass if people don't do anything about it. It will pass because the people behind it stand to make hundreds of millions of dollars as a result. And, perhaps in some small way it will stimulate some small percentage of the economy for a short period of time, but it will do so on the backs of people with very little money... it will do so by hurting people.

It really must be stopped. Especially now. With housing still in a free fall, it is suicide to put someone into a negative equity position from day one today. Especially someone who can't save 3% to put down. That's not someone who is resilient enough to withstand change. They lose one job, get injured or become ill... get transferred... and that's all she wrote.

Even if we were just talking about a $100,000 home. If you began by owing $105,000... six months from now that home could appraise for $90,000. A year from now it could be $80,000. You could be 25% underwater within 12 months... and with the recession certain to last longer than that... if anything changes in your life... you just lost your home... and the tax payer is paying that bill.

HR600 will only deepen what's we're already experiencing. It can't help anyone.

  • 5 votes
#1.22 - Mon Mar 9, 2009 12:36 AM EDT
Raymond Max

http://www.ameridream.org/SupportUs/HR600/ Read it Mandelman.. With out a doubt , I find this open letter to Obama full of fluff and puff.

You and I have talked at length about this issue. I agree with you, We do not need to entice folks into debt that they can't maintain for the long run. That's a given.

Where I am having a tough time comprehending your message is this.

If the F.H.A guidelines are modified to allow seller contribution to the down payment not to exceed 3% of the appraised value of the property, making that contribution LEGAL. Doesn't that effectively put the offshore as well as the GOVERNMENT ( Indian nation) scam out of business?..

Talk to me buddy, I want to understand this.

In your own statement, you have told us that there is not 1 group or organization coming out against H.R. 600. How can that be? Everyone from the Black Caucus to the National builders assoc, have come out in support for H.R.600.

Yes these groups would directly benefit in home sales, and low cost housing assistance. Is that a bad thing?

Lets take a look at the other safeguards built into F.H.A. qualifications before we panic. F.I.C.O. score requirement 680. Debt to income ratio, 43% or less. Closing cost on your average 30 year fixed loan, including impounds , loan generation fee's etc: 4%. on a modest home of $200,000 = $ 8000.00. Where does that come from? These cost and loan guide lines do not go away. bottom line. Even with the 3% contribution, MOST folks with low to moderate income levels WILL NOT qualify for todays F.H.A. Home loan.

This of course does not dismiss the actions of the con men in your article or your expressed concern. I am just not as convinced as you are that this is of major concern. I am aware that influence on the hill can and does swing votes. I do however question the ability of a large wallet to swing the entire general consensus of the house.

Let's move away from the comspiracy theory for a moment. Can you shed some light on the general acceptance of H.R.600. And why we should kill the Bill based on it's nuts and bolts

  • 3 votes
#1.23 - Mon Mar 9, 2009 1:26 AM EDT
Raymond Max

Clarification: I am not for supporting a Bill that allows non profit, or pay for membership schemes, to back door good intent, subsequently lining the pockets of flim flam men with FFederal money ,while enticing under qualified individuals to move into un afordable home ownership.

If that is the case, as underlined with unequivocal fact, than I stand behind Mandelman in the movement to defeat H.R. 600.

My comment above is presented in an attempt to dig up some nuts and bolts evidence to support the defeat of the proposal. I

n the up with America open letter to president Obama,(read it) , sponge Bob and the Blue notes, claim that the past sellers contribution program prior to 2007, put no less than250,000 folks into homes. Could be,

We need some information to debunk these claims. I am asking for your help so that I may approach the national committee of the N.R.A., and ask them, based on fact, to pull the support out from under H.R. 600.

Thank You. Raymond

  • 1 vote
#1.24 - Mon Mar 9, 2009 2:49 AM EDT
Mandelman

RayMax... You asked:

Let me respectfully ask you a question. If language was included in H.R.600 to exclude OUTSIDE sources of contribution to the buyers down payment, and I mean by that, anyone other than the seller should not be allowed to contribute towards the buyers down payment . Would H.R. 600 be an acceptable initiative?

F.H.A. stated that the down payment assistant progrm inflated the value of housing. WRONG, and here is why. Certified property appraisers adjust any seller contributions out of the gross sales price of a subject property, when used as a comp. That'ss correct, Ant and all seller contributions are deducted from the appraised value of the subject property.

Your assertion of added debt loan however is correct. although in todays market, I must tell you that it is the norm for Mortgage brokers as well as Real Estate Agents to offset the sellers contribution by reducing mortgage cost, Points charged, Closing fees, as well as reduced sales commisions on both the Buyer and the sellers side of the deal. Something to think about..

Let me know if this answers your questions:

FHA allows borrowers to obtain funds from the down payment from their employer, family, church or community group, government agency, charity, or to borrow the funds from their own assets. I am not sure what you are asking, but the only acceptable sources for down payment funds are already allowable so further legislation to permit contributions from existing permissible sources would be a moot point.

FHA is correct that SFDPA inflates prices and here is why. The rule requiring the SFDPA contribution to be deducted from the sales price only applied to grants from non permissible sources. Because of the law suits and the Penobscot settlement and the fact that FHA was allowing SFDPA, the contribution was never deducted from the sales price as was recommended by the OIG and GAO.

Unfortunately, the SFDPA contribution is not deducted from the sale amount of comps that is shown on public records or the MLS. Hence, there is no way to determine that a transaction included SFDPA or any concessions at all. The only way to verify concessions is usually through direct communication and the honesty of the agents which isn't always feasible. The reality of appraisal and valuation is that gross sales price and not net sales price is what is shown on public records. As a result result, gross sales prices and not sales prices are used by appraisers to determine value. In areas where SFDPA is prevalent, prices are impacted. No matter how you slice it, at the end of the day the contribution is a deductible sale expense.

I must tell you as a mortgage broker, ex-processor, ex-funder, and ex-QC person that whereas some brokers and agents would lower their fees to offset excessive contributions, its not the norm. While it makes a nice sound-byte, at the end of the day, many brokers and agents would sell their mother for a deal. Look around at what has been going on. NAMB doesn't fight vehemently to preserve YSP for nothing.

6% commission is typical for RE agents and 2-4% is typical for brokers. Think about it.

  • 2 votes
#1.25 - Tue Mar 10, 2009 12:34 AM EDT
Raymond Max

Check, Check Mate. Let me put it to you this way. I am aware and respectful of your legitimate concerns. They are admirable and more than justified. Here is where our views differ.

I do not feel protective nor responsible for the ineptitude of the general public. Nor the underhanded dealings of a very small percentage of mortgage brokers, and Real Estate proffesional.

I can personally assure you that Real Estate as well as the Mortgage industry has fallen under the hammer of State and Federal regulation.

The High time years of the dissipated BULL Reall Estate market and its cause and effect of the down Housing market has not been over looked by the regulators. That said, I would like to inform you of a major change in the property appraisal process.

As of April Irst, the appraisal report can only be ordered by the Lender.

Get it? The possibility of loan manipulation by Builders as well as Realtors has been effectively eliminated. Grandparents and Parents are the only people outside of the Seller that is allowed to GIFT a down payment in an F.H.A. Transaction.

Mandelman, I had no idea that you had hands on experience in the mortgage industry. Interesting. So you are reflecting on personal experience when writing on the current condition of the Real Estate market. Cool ... So let's boogie.

The Real Estate market today is tanked , Thanks to the financial condition touted by the media and the FEAR that it has instilled in the public.. Most buyers are firmly planted on the fence. That has been the greatest cause of depreciation in your home as well as mine.

The inability to secure financing is the second greatest cause. And finally the majority of houses available in today's market are picked over crap.. Well I am drifting off topic..

Oh here we go. You are unequivocally wrong in your appraisal assessment. The appraisal industry is heavily regulated. And as of next month, will be effectively controlled by lenders that must comply to F.H.A. Guidelines. And Federal auditors. The Pie in the sky days of unlimited point and ad on costs are gone..

  • 2 votes
#1.26 - Tue Mar 10, 2009 2:36 AM EDT
Mandelman

No, silly... I didn't write that answer and I don't have any personal experience in the mortgage market, well... except I have three of them... but that's more like experience signing stuff. I'm one of the idiots that never reads the stuff because I just trust that it'll be right.

I couldn't even understand your questions, so I sent them to Krista, the woman who wrote the article on HR600 and got sued. She sent those answers back and I cut and pasted them here.

You (and Robin) are assuming I know way more about this stuff than I do. You're assuming I understand stuff I have no idea what you're talking about... I just researched the stuff I needed for the article, nothing more. And it was heavy lifting for me, and I wanted to quit like a hundred times while I was doing it.

So, now I'm going to pass along your response to her and then get back to you in the morning. I really need to know why you think it's okay and she doesn't... and I don't have time to attend real estate school, nor would I be interested in doing so. You can be my Realtor... I'm not looking for a second job or new career.. I'm busy enough as it is. (LOL)

  • 3 votes
#1.27 - Tue Mar 10, 2009 4:54 AM EDT
Raymond Max

Well put Mandelman.. The murky swamp that is today's housing market. A point to you for creative buck passing.

  • 2 votes
#1.28 - Tue Mar 10, 2009 1:45 PM EDT
CL1

R.M. -- From your 1.26, it sounds like you think we can't count on the Californians to come up to the Pacific NW and inflate our housing values anymore, darn. (joking)

  • 2 votes
#1.29 - Tue Mar 10, 2009 4:12 PM EDT
Raymond Max

No joke.. If you can't rent or sell your home in So Cal, You sure as hell arn't going to be moving up to the trees. Our infight market is set on tricle.

  • 2 votes
#1.30 - Tue Mar 10, 2009 5:30 PM EDT
CL1

Several others here are saying have we seen some of the other bills being proposed. Do you know where I would look to see others? I doubt there is much we can do to stop any of this, but it is good to stay informed on what is in progress.

  • 2 votes
#1.31 - Tue Mar 10, 2009 7:56 PM EDT
Mandelman

We have a lot more power in Washington than you might think. And no, I haven't looked at other bills at this point.

  • 3 votes
#1.32 - Wed Mar 11, 2009 11:30 AM EDT
space guy

Mandelman, you da man!

  • 4 votes
#1.33 - Sat Mar 14, 2009 4:36 PM EDT
Mandelman

Thanks Space... Why aren't we friends?

  • 4 votes
#1.34 - Sat Mar 14, 2009 6:55 PM EDT
Gina M. Knight

NOOOO! This is ALL VERY WRONG! I work with a non-profit that has been doing these types of Down Payment Assistance since 2000 and our default rate is ZERO! That- is CORRECT! GET the TRUTH! Ask these other companies what their default rate is and you WILL find similar info- These programs are NOT in ANY way contributory to the foreclosure mess. We have helped MANY hard working families with GOOD credit scores get into a home and own a part of "The American Dream"

How can you be SOO educated and be SOO one sided and ignorant- I can't believe my eyes. WOW -this is amaing.

The second part is that we are located in a rural area with very low incomes and the money this program generated provided Substance Abuse Education for the elementary schools in this area utilizing a #1 SAMSHA rated program called Lifeskills by Sandy Botvin at NO CHARGE to the schools- which we can no longer fund.

It also funded Second Harvest Food Trucks to this area and money to revitalize and provide job training and mentoring support.

ALL LOST TO THIS REDICULOUS FEAR BASED UNEDUACTED ONE SIDED TYPE OF REPORTING.---VOTE YES! FOR hr600.

  • 1 vote
#1.35 - Fri Aug 14, 2009 12:37 PM EDT
EllieP

No.

  • 2 votes
#1.36 - Fri Aug 14, 2009 4:11 PM EDT
WILDWONDERFUL

Anyone who tells you a home is a good investment has never owned one.

  • 1 vote
#1.37 - Wed Aug 19, 2009 7:30 AM EDT
Jay Butler

Anyone who tells you a home is a good investment has never owned one.

It's certainly better than the alternative.

  • 2 votes
#1.38 - Wed Aug 19, 2009 9:49 AM EDT
WILDWONDERFUL

The alternative being ?

  • 1 vote
#1.39 - Wed Aug 19, 2009 4:42 PM EDT
Lampell

The alternative being ?

Having been in finance for 35 years I will take a stab at this one. First of all homes dont usually go up 10pct per annum as they did from 2001 to 2006. What many people dont realize is that buying a home involves a lot of leverage, if you bought a house for cash and normally house prices went up 3 pct, as they did for years and years that appreciation isnt really that big a deal. If you put down 10 pct and house prices go up 3 pct , the leverage factor makes it seem like a good deal, unfortunately most of the buying public never saw that in reverse. Gold goes up and down and most of the time is really isnt that volatile, buy gold on the futures exchange with 5 pct, nother ball game. Tax breaks also make homes a somewhat attractive investment. But speculating on homes takes some of the breaks away, making it a gamble just like the stock market, up and down, and in 35 years I have seen most everything. The govt along with corporations, banks can also be held somewhat responsible for the myth that house buying is the thing to do. So whats the magic formula? If I told you you would have to pay me, I only have 2 clients for the past 20 years after I sold my share of the investment bank I started, my clients always listen to me, me and my wife:)

  • 1 vote
#1.40 - Wed Aug 19, 2009 6:43 PM EDT
Reply
LM-601014

I don't understand the downpayment issue. If you truly want to purchase a home, save, save, save. If homeowners, barring unemployment, etc, have no vested interest in a home it is easier to walk away.

  • 7 votes
Reply#2 - Sun Mar 8, 2009 8:52 AM EDT
Mandelman

Ya think? It seems so incredibly silly to me...

  • 4 votes
#2.1 - Sun Mar 8, 2009 2:32 PM EDT
ftmackinc

The worst mortgage to invest in period is a zero down anything.

No skin in the game is always a bad idea. But how we are going to get out from under all that zero down fiction that is out there? I have no idea....

40 hours ya say? for that kinda work I woulda expected some sex at the least... Maybe one hooker with a heart of gold Bj halfway through.......around paragraph 9,871 maybe...woulda spiced it up a bit ;)

And lets see I have seen billy and A/P disagree and now billy and you agree all in a matter of days...thats it we are all goin to die...

  • 3 votes
#2.2 - Sun Mar 8, 2009 8:29 PM EDT
Reply
Marilyn L

So, Mandelman, this bill is separate from the overall real-estate legislation coming from the Obama Administration? Do you have any idea of the admin's response to the bill?

Thanks for the heads-up. One point I'm stuck on is how many people not able to come up with the minimal 3% downpayment are still in the market for a house? I sure wouldn't be, not with the market still in freefall...

It will be interesting to see if you receive any comments from Nehemiah...

  • 9 votes
#3 - Sun Mar 8, 2009 9:33 AM EDT
Mandelman

Marilyn... You would think that people without the 3% down would not be in the market, and that's really the point. These companies, if allowed again, go out and find people... you can picture it... I'm a developer with some condos I can't sell, so I find some realtors and mortgage people looking to make a buck and they go out and find a bunch of renters who didn't realize they could "own" instead of rent... "with no money down". See the problem...

  • 10 votes
#3.1 - Sun Mar 8, 2009 2:20 PM EDT
Laura-400055

FHA has been offering low down payment options on mortgages for at least the past 10-15 years.....my brother purchased a home with only 3% down....he is neither a deadbeat, nor did he default on his loan. Again, it seems like we are trying to make this program into something BAD...????

  • 2 votes
#3.2 - Sun Mar 8, 2009 5:54 PM EDT
Mandelman

Laura... I'm starting to wonder if you read the article. I'm not saying anything about people making the 3% down payment required by FHA! I'm talking about a program that allows people to NOT make the 3% down payment.

  • 8 votes
#3.3 - Sun Mar 8, 2009 6:52 PM EDT
Laura-400055

You are talking about the Nehemiah and AmeriDream mortgage programs...typically, these programs are geared toward people applying for loans through the FHA. I DID read the article....I am familiar with these programs because I have looked into them in the past. These are programs that ask the seller to contribute a percentage of the home sale, then turn around and give it to the buyer as a downpayment...effectively a no downpayment purchase. I get it...I just don't get your outrage....care to explain that?

  • 2 votes
#3.4 - Sun Mar 8, 2009 7:36 PM EDT
Raymond Max

Hello Laura, You hit the nail on the head. There is NO VIABLE market for housing.

Housing is a supply and demand market.

Value in Real Estate is in direct relationship to S.Ft price, Location, School district, Neighborhoods, as well as cost of living index for that given market..

Anyone that buys a home today should be taking a long position in the ownership of that home.

In a down trending market that has not hit bottom, it is essential to have an equity stake in a property to create a buffer against the unknown.

Job layoff, sickness, divorce etc. Every day occurrences that require equity to offset loss in a refinance situation..

Hud low income, low cost housing programs are available for the purchase of stress properties, and should be utilized for the purchase of low cost housing. Kill the Bill... R.Max

  • 2 votes
#3.5 - Sun Mar 8, 2009 9:50 PM EDT
Mandelman

Laura... Okay, here goes... as simply and as straightforward as I can... really... ready?

1. To begin with, federal regulations make it illegal for a seller to give a buyer the money for a down payment on a house the seller is selling. You see why, right? Because otherwise a seller could entice a buyer into buying his or her property by offering money. As in: Buy my house and I'll give you five grand.

2. Let's say I was a developer and I had some condos or homes on the outskirts of town that I couldn't sell in this market. I probably shouldn't have even built them, but during the boom, it was so easy to get the money to build them and I was making so much money building houses that I just kept going. Then the bubble popped and I got stuck with 500 homes that I couldn't sell. If I, as the seller could give people money to buy them, I could hire a real estate agent and mortgage broker and they could go into town... find an apartment complex of low income folks... and tell them that I'll give them $5,000 if they'll buy one of my houses, and that $5,000 is all they'll need to buy the house.

3. It would be tempting to a lot of people, because if you're renting an apartment and someone offers to put you in a home with absolutely no money down, it might seem like a pretty good thing. You don't even need first and last months rent to move in, as you would in another apartment. Just sign the papers and you're in. You're a homeowner.

4. Now, as the developer, I'm thrilled. I just dumped my previously un-sellable houses on a bunch of people who weren't in the market, and don't make much money. As the real estate agent, I'm thrilled, because I just earned a bunch of commissions as a result of putting these people into their own homes. As the mortgage broker, I'm thrilled because I just made a bundle off of doing the paperwork on the loans involved. And, perhaps for a short time, even the local economy is thrilled because it appears that real estate is moving once again.

5. The mortgages these people got were easy to qualify for, because they're FHA insured, which means the government guarantees them. So, the banks were eager to make the loans because if they default, it's the government that gets stuck with the loss, not the bank.

6. The problem is that I, as the developer, didn't really "give" the people the $5,000 they needed to put down at all. It looked like I did, but I didn't. I just marked up my houses by $5,000 more than they would have sold for otherwise, and when the loans funded, I got my $5,000 back. The people who bought these homes, now owe $105,000 on homes that appraise for $100,000. They are in a negative equity position. They owe more than the house is worth.

7. Today, housing prices are in a free fall... so, six months from now those same houses are worth $90,000... a year goes by and they're worth $85,000. And the recession we're in has worsened six months or a year from now... and one of our "new" homeowners gets laid off... or is injured in a car accident... or is diagnosed with breast cancer... or gets transferred by his or her employer... anything happens that makes it harder than expected to make the mortgage payment... but now that new "homeowner" can't sell their home because they owe more than it's worth. If they were renting... they could have moved to a less expensive place, or maybe even moved in with a family member or close friend, but not now... now they own a home.

8. Remember, these are people who couldn't save enough to make a down payment in the first place... people that were working hard, struggling along to get by. They don't have much resilience when things change. These are the people that are harmed the most as the economy slips deeper into recession, because they don't have the reserves to make it through tough times. These are the people that, no matter what... are just a paycheck or two away from being homeless under the BEST of circumstances. How do you think they're going to fare as we continue to slide into the worst economic situation since the Great Depression?

9. But at least they don't have to be tied to a mortgage... an debt obligation for $105,000, in our example... which in real life might realistically be twice that much! You want to know what happens to people in these type of situations Lisa... what happens to fathers who have wives and children... when they feel they can't provide for the people they love more than anything in the world? Do you know?

First they try EVERYTHING to keep the house. They work around the clock, seven days a week. They try to borrow whatever they can from friends and family, hoping that things will turn around soon enough to repay them... and when they can't their relationships sour... they feel guilty... they become more isolated... they drink... they use drugs... some become violent... some commit crimes because they'll do anything to provide for their families. Women... just like you... who would never have considered it, give blow jobs for $20... so they can make a mortgage payment... so they won't have to tell their children that they have to move and leave the safety of their own rooms.

God damn it, Lisa.

Some end up in jail. Some end up dead. Some finally come to terms with it... they lose the homes they were so proud to have bought. They move back into that apartment... but you know what... it's never the same... they are NEVER the same.

Have you read anything about The Great Depression, Lisa? Did you know anyone that went through it? Ask around. It won't be hard to find someone to explain it to you. Ask a father how he felt when he couldn't provide for his family. How he felt to look in the eyes of a little girl named Lisa who he loved more than anything.

And, so that you don't sit there reading this thinking that I'm being too dramatic or alarmist, as you put it... it doesn't have to be about The Great Depression...

I grew up in Pittsburgh, PA. When the steel mills closed in the 1970s it might as well have been The Great Depression. People who had worked in those mills for generations all of a sudden had no jobs, and no prospects... they couldn't just move... their lives were there... they owned homes they couldn't sell. It was the 1970s, Lisa. Not that long ago, to those of us over 45.

When I tried to get a job at Macdonald's in 1977, I was told by the manager: "I'm sorry son, those jobs are for people with families to feed." And I understood.

Losing a home is a traumatic thing. A terrible thing. And it's happening to roughly 6,000 people EVERY SINGLE DAY in this country. Some people, including my best friend for 40 years, take shot guns, put them into their own mouths, they fashion pieces of wood that will allow them to reach the trigger and they blow their own God damn heads off, Lisa.

The last thing he did before he left... he bought his 16 year-old daughter a four year-old car.

We are NOT HELPING someone by putting them into an underwater water mortgage today, Lisa. And to do so under the guise that we NEED to in order to stimulate our economy... while we pump untold billions into banks so they can pay their executives untold billions in bonuses... well, Lisa... it's HORRIBLE on a scale that I cannot adequately describe no matter what I say.

And it's not an argument that has two sides. I'm not interested in yours or anyone else's response to what I've said. It God damn has to stop. And if it can't be stopped... at least it should not be started again for one more family!

H.R. 600 is a BAD BILL. It will only deepen what's we're already experiencing. It can't help anyone. It can only cause more pain. It is being backed by companies who make hundreds of millions of dollars because they've come up with a way to skirt the law that says that sellers can't give down payments to the buyers of the homes they are selling.

There are plenty of down payment assistance programs out there. As I said in my article, HUD offers dozens of them. And seller funded down payment assistance isn't even illegal on non-FHA mortgages. But, if my tax dollars are going to pay for the losses, I certainly don't want them to have to pay for tragedies that could have been prevented.

PLEASE TELL ME YOU UNDERSTAND LISA... PLEASE. TELL ME THE TIME I SPENT TODAY MATTERED LISA. I NEED TO KNOW IT MATTERED... LISA... PLEASE...

PLEASE HELP TO KILL H.R. 600... BEFORE IT KILLS SOMEONE ELSE.

  • 4 votes
#3.6 - Mon Mar 9, 2009 1:49 AM EDT
hhabilis

Thanks for taking the time to spell it out, Mandelman. That was a lot of work. I thought it was self-evident and didn't need that sort of line-by-line, but evidently I was wrong.

  • 1 vote
#3.7 - Mon Mar 9, 2009 2:06 AM EDT
Mandelman

Well, so did I. But Lisa commented 4-5 times, starting early this morning, and I kept trying to make my point and correct any of her misperceptions, in my view, and she wasn't getting what I was saying, for whatever reason. When she said she didn't understand my outrage, but that she did understand the bill... well, I thought she deserved my thoughts and feelings that have me outraged.

I hope I didn't freak her out. (Lisa... if you're reading this... I hope I didn't freak you out.)

It's just that this bill sucks for so many reasons. It's only even alive because a bunch of rich scam artists have lobbied for it to the tune of $1 million+, there are no groups opposing it, because:

1. There are 20,000 bills introduced every year in congress, so this doesn't rise to the level of tremendous scrutiny when you're discussing how to give AIG another $50 billion without causing riots in the streets.

2. Which group would be opposed to sellers kicking in on down payments as a way of getting real estate moving again? Heck, if the sellers want to do it... why not. It's BS, however, it's not really the sellers that are paying for anything.

3. It helps poor people and minorities, according to Green and Waters, and God only knows which of the other congressional Democrats... AND I'M NOT SAYING THAT THE WAY IT SOUNDS. I'm not saying anything bad about congressional Democrats... I'm only saying that they are the group most likely to want to support down payment assistance programs because they are the ones most consistently fighting for lower income housing programs. And lower income housing programs are generally a very good thing.

This bill, however, is not... if not on paper, then unquestionably in practice. And it's not just me saying that, obviously... it's HUD, FHA, GAO, IRS, and last years congress, for heaven's sake.

  • 1 vote
#3.8 - Mon Mar 9, 2009 5:18 AM EDT
Lisa Schneider

Uh...um...I get it completely mandelman...see comment #1.5...did you mean Laura?!

  • 5 votes
#3.9 - Mon Mar 9, 2009 9:04 AM EDT
Mandelman

YES I MEANT LAURA!!!!!

  • 1 vote
#3.10 - Mon Mar 9, 2009 2:14 PM EDT
Bill Harrison

Mandelman

Speaking of builders adding all kinds of sweeteners to entice people to buy their houses, have you heard about what Toll Brothers is doing?

  • 6 votes
#3.11 - Mon Mar 9, 2009 3:06 PM EDT
Raymond Max

Hello Bill. take a moment to read your own attachment. It is a HOOK without barbs. Get it? The builder is taking away the concern of future unemployment by insuring against of possible future lay off. No big deal.

  • 1 vote
#3.12 - Mon Mar 9, 2009 4:09 PM EDT
Bill Harrison

Oh I get it alright. I simply don't get how anyone would be so stupid as to bite.

  • 5 votes
#3.13 - Mon Mar 9, 2009 4:28 PM EDT
Mandelman

I don't know what Toll Bros. is doing, but will follow link now... thanks...

  • 3 votes
#3.14 - Mon Mar 9, 2009 4:44 PM EDT
Raymond Max

Bill , It's the same deal that Hyundai is offering its customers on it's out of work return your car program. Everyone is swimming in the swamp...

  • 1 vote
#3.15 - Mon Mar 9, 2009 5:01 PM EDT
CL1

Do I understand your 3.12 to say the builder will take the home back if the buyer loses his job?

  • 1 vote
#3.16 - Mon Mar 9, 2009 5:35 PM EDT
Raymond Max

No. The builder will cover your mortgage as well as cost associated with that mortgage for up to 6 months of unemployment. It is simply another form of insurance. Credit card companies offer this option on many cards for a monthly fee.

The builder requires that you finance through them to qualify for this insurance.

  • 1 vote
#3.17 - Mon Mar 9, 2009 5:45 PM EDT
CL1

Thanks, R.M. The builder insurance is probably a good idea, as long as the buyer has good credit and long-term employment (IMO). The CC deal....errrrrrrrr....just another way to catch some undeserving soul trying to get by.

  • 1 vote
#3.18 - Mon Mar 9, 2009 5:52 PM EDT
Reply
Nofluer

Very well written - and informative.

As a former real estate agent, I fully understand why they support it - it's called MORE SALES! Gosh - outside of the poor people who don't have squat anyway, the only people who could lose on one of these deals would be the taxpayers - and hey, they don't care. It's all GOVERNMENT money anyway, right? The government can just print up MORE money if they need it, right? It's not like WE as individual tax payers have to pay for this, right?

  • 12 votes
Reply#4 - Sun Mar 8, 2009 10:11 AM EDT
Mandelman

That's right, I'm afraid.

  • 6 votes
#4.1 - Sun Mar 8, 2009 2:27 PM EDT
Raymond Max

He Nofluer. Well put. Just one little thing.... The printing of money deflates the $ in my wallet, How about you. R.Max.. Still REALTOR.

  • 2 votes
#4.2 - Sun Mar 8, 2009 9:54 PM EDT
CL1

RM & Nofluer -- The more dollars printed and in circulation lessens the value, and the fact that our tax dollars go to paying interest to the Fed instead of lessening the defecit only makes matters worse. On the other side, more people are being born every day, and the economy is slipping into an abyss, pressuring a need for more spending. So what is the answer?

  • 1 vote
#4.3 - Thu Apr 23, 2009 1:09 PM EDT
Reply
gleuch

current status: http://politics4all.com/bills/111hr600#/tab_status

  • 4 votes
Reply#5 - Sun Mar 8, 2009 11:26 AM EDT
Mandelman

Awesome... thanks!

  • 1 vote
#5.1 - Mon Apr 27, 2009 10:57 PM EDT
Reply
sneilarreal

The two-party system is problematic. I refuse to take part in either.

  • 3 votes
#6 - Sun Mar 8, 2009 12:03 PM EDT
CL1

agreed, sneilarreal.

  • 3 votes
#6.1 - Sun Mar 8, 2009 12:45 PM EDT
DARKESTDONNIE

The two-party system is problematic.

True!

I refuse to take part in either.

Unfortunately with the current system it makes you ill relevant (not you personally but your 3rd party ideas).

  • 4 votes
#6.2 - Sun Mar 8, 2009 1:38 PM EDT
sneilarreal

Only for the moment...

  • 3 votes
#6.3 - Sun Mar 8, 2009 5:58 PM EDT
DARKESTDONNIE

sneilarreal,

There is much about some of their ideas I like, what I do not like is their inability to win. Unfortunately!

  • 2 votes
#6.4 - Sun Mar 8, 2009 7:33 PM EDT
sneilarreal

I just don't believe the solutions can be found in the two major parties. It will take time but better parties with solutions will/are coming to light. It just takes some time but it will happen. And they will start winning eventually and that should help bring about change.

  • 2 votes
#6.5 - Sun Mar 8, 2009 9:49 PM EDT
Raymond Max

So what are you doing? Just hanging out? 200 + years and waiting. How about we work on changing the system in place ?.. Hay, How about your opinion on H.R.600 ?

  • 3 votes
#6.6 - Sun Mar 8, 2009 9:56 PM EDT
sneilarreal

I stay focused on third party efforts and other programs that focus on liberty.

As far as H.R. 600..it is more of the same...just more of what I have come to expect from the two-party system.

The two-party system's ideology never really changes..just their tactics and methodology.

  • 3 votes
#6.7 - Sun Mar 8, 2009 10:00 PM EDT
CL1

sneil -- It' the difference between having 2 kids or 3. There's never an answer with 2, but things get resolved with 3.

  • 2 votes
#6.8 - Sun Mar 8, 2009 10:05 PM EDT
sneilarreal

I have only two (thank goodness) but I agree with the analogy.

  • 2 votes
#6.9 - Sun Mar 8, 2009 10:08 PM EDT
Raymond Max

OK ? still no answers, Green peace, Libertarian,Communist, .......... What ? CL1 .. So your theory is that with 3 a compromise must be reached to move forward? Majority vote? How about direct representation of the people thru the Internet? now there's an idea.

By the way, what is your opinion on the issue at hand?

Do you feel that Mandelmans concerns are justified? Or that the bill will die on the floor before it is passed. Or do you not have an opinion on this issue? Just currios,

  • 1 vote
#6.10 - Mon Mar 9, 2009 12:20 AM EDT
CL1

R.M.-----  My tracker doesn't work, and just noticed your 6.10. I would like some time to think about this and will return at some point with an opinion.  Thanks.

  • 1 vote
#6.11 - Mon Mar 9, 2009 10:54 AM EDT
Raymond Max

Remember, this comment is directed at two people. party afiliation Sniel, Party of three? your question. Thanks, Raymond

  • 1 vote
#6.12 - Mon Mar 9, 2009 2:14 PM EDT
CL1

Raymond -- Ok, I thought it was just directed at me, CL1.

As for my opinion on the issue at hand, Mandelman's 3.6 says it all. I'm choked up - it got to me. My sentiment: we, as a nation, can't afford to risk destroying another family or human being financially, physically and emotionally by potentially setting them up for failure. Kill H.R. 600 It's not worth the risk. Period.

  • 3 votes
#6.13 - Mon Mar 9, 2009 2:58 PM EDT
Raymond Max

Thank you CL1. have a good day..

  • 1 vote
#6.14 - Mon Mar 9, 2009 3:03 PM EDT
Mandelman

Thank you so much CL1... That means a lot to me.

  • 3 votes
#6.15 - Mon Mar 9, 2009 4:46 PM EDT
Reply
DARKESTDONNIE

The American Dream is earned, and if you have no skin in the game there is no incentive to stay with it.

Looking at the list of sponsors of this bill (two are Waters, Johnson) it does not surprise me how bad it is and their reckless disregard for logic in support of supposedly helping someone. Doing something to help people does not negate the need for common sense.

There is no free lunch

  • 9 votes
Reply#7 - Sun Mar 8, 2009 1:28 PM EDT
Agent 57

these folks will never learn, they just don't get it. nothing invested no reason to be responsible, they'll think they are renters.... as if 3% wasn't cheap enough....

  • 3 votes
Reply#8 - Sun Mar 8, 2009 2:24 PM EDT
Mandelman

I know... apparently 3% isn't making it easy enough... it should be free. Can you imagine? If the condo is $100k, that means the person was unable to save up three grand? $3,000. If you can't save up $3k you have absolutely no business buying a house. Hell, if you can't save up $3k you barely should be able to buy a car.

  • 6 votes
#8.1 - Sun Mar 8, 2009 2:31 PM EDT
Agent 57

there is a certain amount of insanity to all of this. The market keeps pushing for more, more, more as if there is no limit to consumer spending. Hell I heard a BOA or one of them commercial the other day about using your home equity to get those repairs.. get that new water heater or whatever..... it's greed insanity, a nation leveraged in every way.... we need to gain some personal, corporate and federal sanity to this huge tax and spend and greed spree...

  • 3 votes
#8.2 - Sun Mar 8, 2009 4:40 PM EDT
Mandelman

A certain amount of insanity? Well, I'd have to agree, I suppose. Like the Titanic hit a certain amount of iceberg, perhaps.

  • 3 votes
#8.3 - Sun Mar 8, 2009 5:32 PM EDT
Agent 57

A certain amount of insanity?

in two capacities,

1 in a large proportion

2 by a smaller number of people.

  • 1 vote
#8.4 - Sun Mar 8, 2009 7:01 PM EDT
Mandelman

I know... was just kidding...

  • 3 votes
#8.5 - Sun Mar 8, 2009 7:10 PM EDT
Agent 57

welcome to the Matrix .... :>))

  • 3 votes
#8.6 - Sun Mar 8, 2009 7:19 PM EDT
Mandelman

I hadn't realized that I took the blue pill...

  • 3 votes
#8.7 - Mon Mar 9, 2009 1:57 AM EDT
Gina M. Knight

No it is obvious that you all DON'T get it. Why don't you try that thing called investigating and reporting from both sides and see what you really learn- this is all speculation and ignorance.

    #8.8 - Fri Aug 14, 2009 1:13 PM EDT
    Reply
    Dare To Hope

    Whew...alot of research! Well written Mandelman.

    I'm aware of alot of the SFDPA practices, but had no idea about the Indian Tribal Government evasion tactic.

    "If there's a will, there's a way", when will we learn?

    Just thought I'd let you know, when I went to post it told me I had 62 mins. to edit this post, lol, are we overloading the server?

    Friend request accepted, thanks.

    • 4 votes
    Reply#9 - Sun Mar 8, 2009 2:32 PM EDT
    Mandelman

    Thanks and you're right... whew... it was and took days... and days... and days... and there's still more I want to add about the lobbying efforts and lobbyists involved.

    I'll be posting a letter to congress later today and you can use it to help stop this mess if you'd like to help stop this... it needs to be stopped.

    • 8 votes
    #9.1 - Sun Mar 8, 2009 2:38 PM EDT
    Dare To Hope

    Well Mandelman...it's Monday morning and both sides of the sword have just been sharpened.

    I know the crisis the SFDPA has been responsible for, I know the casulties, (no statistics, but do we need them at this point?) I have worked for one of the top 3 homebuilders in my area for 9 years as Office Mgr./Purchasing Mgr./Job Foreman Asst./and worked alot in the real estate end of it as his wife is an agent and the majority of her sales are his homes. Maybe 30% of our sales were SFDPA, but since we developed the sub-divisions and are still building in there we can keep up with forclosures, resales, etc. I can honestly say there have not been many.

    Today I learned that my job will terminate at the end of this month. (I'm an accountant and am sure there's no shortage of jobs in bankruptcy, tax recovery, etc., lol). As much as I agree with you that this has to stop, I also see the other edge of the sword which is throwing the breaks on aspects of the housing recovery, not to mention contiunued loss of jobs. We have put approx. 150 people out of jobs over the last 6 months. As you know alot of these people are subs with their own business's which crumble as we fall. The small business's do not have a chance in this economy, none.

    There has to be an answer. This country has aspects of capitalism, socialism, and every other "ism" you can think of (how can we not be when we are a country open to anyone who chooses to come here and they have a right to fight for their beliefs). I digress, my question to you is this, in the current economy, what is your suggestion to bridge no SFDPA and stimulation of sells?

    Because I see first hand the effects, I agree that this is one of the most important areas of recovery, and as I have read many of your columns, have a great deal of respect for the time and reseach you put into the topics you discuss. I'm seriously interesed, with all your knowledge and research, what your ideas would be to make this beneficial for sellers and buyers.

    • 3 votes
    #9.2 - Mon Mar 9, 2009 4:10 PM EDT
    Reply
    Doug-375144

    As Yogi said it's deja vu all over again . These people just don't get it. What ever happened to saving and working up to home ownership and self reliance ? It's all gimme gimme and when I'm over my head help help it's not my fault .

    • 6 votes
    Reply#10 - Sun Mar 8, 2009 3:42 PM EDT
    Mandelman

    I've never heard that Yogism... loved it.

    • 4 votes
    #10.1 - Sun Mar 8, 2009 5:36 PM EDT
    ftmackinc

    well 10-30% down is back whether ya like it or not. With any less no one is going to think lending on real estate is a very good idea. So if you want to get outa this mess getting used to saving will have to come back....right after you pay off all those high interest bank cards of course....

    but lets be honest old guys... it is the whole rotten easy credit have it now system...

    It is from mcmansions zero down to leasing 6 figure cars, and leasing 15k cars.

    Its just a mess and no amount of work will put it back as it was, which is probably a good thing.

    • 3 votes
    #10.2 - Sun Mar 8, 2009 8:39 PM EDT
    Doug-375144

    Is it the system or is the consumer who thinks they need it all now , not a little at a time , not some now and get that one later , but I want it now ?

    You drive thru a new housing development and all the 20-35 yr olds with several kids 2 new cars and a big house . What happened to a starter house ? Everyone thinks Charge it and they are all payment poor . Allot of bad choices usually ends in failure.

    • 2 votes
    #10.3 - Tue Mar 10, 2009 1:03 AM EDT
    Mandelman

    Doug... You raise an interesting question.

    Is it the system or the consumer who thinks they need it now?

    • 3 votes
    #10.4 - Tue Mar 10, 2009 1:56 AM EDT
    Reply
    thefrogprincess14Deleted
    Was a Democrat-651386

    Very well researched, well written.

    This is not the only bill that is flying under the radar. People need to go and read the other bills that have been proposed while we sheep are herded and focused on what is happening with the economy. I can post a link to the website that I use, if you want to read them.

    • 4 votes
    Reply#12 - Sun Mar 8, 2009 4:59 PM EDT
    Mandelman

    Yes, I do! Post away... I never mind people posting links to information, by the way.

    • 4 votes
    #12.1 - Sun Mar 8, 2009 5:35 PM EDT
    Reply
    JoulesBeef

    You can get 106% loans right now from your FHA.. it never went away.. this just expands it.
    ANd remember it was BUSH who started the "american dream downpayment iniative"
    ADDI
    look it up

    IT is actually very strict and these people are defaulting elss than anyone else.

    WHERE WAS YOUR OUTRAGE WHEN BUSH PUSHED FOR AND PASSED THE ADDI?

    But anyways like i said before./. call your local FHA .. you can get a no downpayment loan right now IF YOU QUALIFY and it is STRICT as hell

    But really their is no reason why poor people who have no hope of ever saving up a downpayment but who are otherwise have great credit and always pay their bills to get assisatnce with the increasing large downpayments.

    Thanks for spinning me but i was dizzy long before i got here.

    • 2 votes
    Reply#13 - Sun Mar 8, 2009 5:51 PM EDT
    Mandelman

    You are reading things into this that do not exist. First of all, I voted for Obama, am a major supporter of Obama, and screamed about many of the things Bush did from the highest mountain tops. Okay?

    You are wrong about the FHA no money down program. They proposed something like it using risk based premiums, but it was opposed by the same people that support this legislation on the grounds that it would create foreclosures. And regardless, this legislation would put people into mortgages that are underwater from day one. Do you see that as being good for them.

    Next... Understand... down payment assistance is not illegal. Nor is it wrong. As I said in my article, there are countless programs offered by HUD and FHA that allow people to get into homes without having to make a down payment, and you do have to qualify for them and they are wonderful and no one is suggesting they be changed. Got it?

    This legislation is about whether companies can call themselves nonprofit charities and then funnel "donations" from sellers to buyers in order to buy homes with inflated mortgages that are insured by FHA. Loans that default at twice the rate of others, according to HUD.

    Do you understand that it would be illegal for a seller to give a buyer the down payment on a house? Do you understand why? Because then, a seller could incentivize a buyer into buying a home. As in: "Buy my house and I'll give you five grand." That would be a bad thing, right?

    If my article spun you, you're either trying too hard, or your just naturally a little spinny.

    • 4 votes
    #13.1 - Sun Mar 8, 2009 7:06 PM EDT
    Reply
    Laura-400055

    Joules: The FHA process was a total PIA when I applied many years ago...with good income, excellent credit...I can't IMAGINE what kind of hoops you have to jump through now.

    • 2 votes
    Reply#14 - Sun Mar 8, 2009 6:23 PM EDT
    Was a Democrat-651386

    Mandelman,

    Here is the link that I use to keep track of what is going on. You can search for any bill by # or list them all.

    Have fun! I know that I have. Some are unbelievable.

    • 1 vote
    Reply#15 - Sun Mar 8, 2009 6:45 PM EDT
    Mandelman

    The link isn't showing up... would you mind clicking on the Contact Author thing and sending it to me? Thanks...

    • 1 vote
    #15.1 - Sun Mar 8, 2009 7:08 PM EDT
    Bill Harrison

    It's the THOMAS website at the Library of Congress.

    • 4 votes
    #15.2 - Sun Mar 8, 2009 7:11 PM EDT
    Mandelman

    Perfect, thanks...

    • 2 votes
    #15.3 - Sun Mar 8, 2009 7:13 PM EDT
    Was a Democrat-651386

    Mandelman,

    I don't know why the link didn't post but here it is again.

    • 1 vote
    #15.4 - Sun Mar 8, 2009 7:47 PM EDT
    Was a Democrat-651386

    One more time. gpoaccess.gov

    • 1 vote
    #15.5 - Sun Mar 8, 2009 8:01 PM EDT
    Reply
    hhabilis

    Long-term loss of short-term memory.

    • 2 votes
    Reply#16 - Sun Mar 8, 2009 7:08 PM EDT
    Mandelman

    And we know what causes that, right?

    • 3 votes
    #16.1 - Sun Mar 8, 2009 7:09 PM EDT
    hhabilis

    ph-f-f-f-ft...a-a-ah-h-h! (munch) what?? ;-D

    • 2 votes
    #16.2 - Sun Mar 8, 2009 8:17 PM EDT
    Mandelman

    Mandelman goes to kitchen to find Oreos...

    • 2 votes
    #16.3 - Mon Mar 9, 2009 5:21 AM EDT
    Raymond Max

    Martin.. Why am I sitting in front of the T.V. watching Warren B, attempting to talk his way out oh his own buy and hold polocy? I wonder if Warren likes Oreo's..

    Back to the issue at hand.. Let me respectfully ask you a question. If language was included in H.R.600 to exclude OUTSIDE sources of contribution to the buyers down payment, and I mean by that, anyone other than the seller should not be allowed to contribute towards the buyers down payment . Would H.R. 600 be an acceptable initiative?

    F.H.A. stated that the down payment assistant progrm inflated the value of housing. WRONG, and here is why. Certified property appraisers adjust any seller contributions out of the gross sales price of a subject property, when used as a comp. That'ss correct, Ant and all seller contributions are deducted from the appraised value of the subject property.

    Your assertion of added debt loan however is correct. although in todays market, I must tell you that it is the norm for Mortgage brokers as well as Real Estate Agents to offset the sellers contribution by reducing mortgage cost, Points charged, Closing fees, as well as reduced sales commisions on both the Buyer and the sellers side of the deal. Something to think about..

    • 2 votes
    #16.4 - Mon Mar 9, 2009 7:43 AM EDT
    Reply
    Was a Democrat-651386

    Mandelman,

    Here is one you might want check out. H.R. 15, "National Health Care"

    • 2 votes
    Reply#17 - Sun Mar 8, 2009 7:27 PM EDT
    Mandelman

    Oh God. Is this Obama's new one? Oh God. I've been dreading this one. I kept wondering, during the debate over the $700 billion stimulus bill that ultimately passed because of Arlen, Olympia and one more Republican I can't recall right now... why the Republicans seemed to have a strategy to make the debates as stupid as possible... by making the stupidist arguments against the bill.

    I remember one was "porkulus," which I understand might have been fun to say for Rush fans and all, but for grown-ups... well, I'm going to need a little more than a fun sounding new word.

    Then Sen. Thune from S.D. gave a legendary presentation in the Senate using huge, poster-size charts with graphics depicting a stack of 700 billion dollar bills going up 689 miles high above the earth. His cartoons were cute, but I hadn't realized that was what they were planning to do with the money.

    And then, just to slap me around a bit more, his next chart showed that the bills, if laid end to end, would wrap around the planet 38.9 times. What bothered me most was that he felt he better not round up in order to prove that he did math. Personally, he didn't have to go to that trouble on my account. I would have been willing to accept any number there, as fact. Like: "They would wrap around the globe 19 zillion times. Any number would have been fine with me. Personally, I wouldn't have challenged him.

    After that, all they kept saying was "tax cuts". I was hoping 3 or 4 of them would get together and do some kind of barbershop quartet thing... "t-a-x-c-u-t-s". You know what I mean...

    Anyway, what I was trying to say was that during the stupid debates, I kept wondering why they didn't go for the obvious health plan component, which not only costs a fortune, but is easy to disagree with in many ways. Of course, I haven't read it, but it looked problematic to me, and I happen to know a fair amount about the subject.

    So, I'll read it now... thanks for the link... I think... lol

    • 2 votes
    #17.1 - Mon Mar 9, 2009 5:36 AM EDT
    Reply
    donald-schumaker

    There is nothing wrong with downpayment assistance or with FHA financing that is limited to 106 percent. Both came in handy for me 8 years ago when coming off a divorce I needed to land a home in my son's school district. At the time buying a home made more sense than renting and the rental stock in my area was substandard compared to what you could have bought for the same monthly payment.

    Bottom line is that I used both to land a modest home with a fixed rate FHA mortgage that I still can afford. I still had to qualify via my income level and credit score.

    Really folks, the problem is that there were predatory mortgages given out to people who didn't know what they were getting themselves in for and that is part of the reason why we are here economically. If the only kind of mortgage available for a home was a fixed rate mortgage, do you really think that we would be in this large of a mess here?

    • 2 votes
    Reply#18 - Sun Mar 8, 2009 7:59 PM EDT
    hhabilis

    I bought my first home with a VA mortgage under similar circumstances. I had decent income and minimal debt, but no down payment. Not to mention that VA, FHA, and FMHA had pretty strict standards for the valuation and condition of the property.

    It wasn't just the variable rate morgages that started the snowball; it was those in combination with a complete lack of income/debt standards and a failure of appraisal integrity. Like the guy who bought a way over-valued home at $700k who only had an income of $14k I read about somewhere today. How could anyone ever have expected him to make payments?

    • 1 vote
    #18.1 - Sun Mar 8, 2009 8:33 PM EDT
    Raymond Max

    Realtor response. My father also bought our family home on V.A. in the 50's. That is not the issue at hand.

    The issue is the enticement of buyers into a home that they can't afford in the long run. while putting $ into the pockets of these shell non profits.

    A scam is a scam.

    Although the Bill mentioned by Mandelman does not have wide support on the floor, major lobby groups. National Home Builders Assoc, as well as National Association of Realtors have voiced thieir support of H.R.600.

    As a member of both groups, I am here to tell you, that many veteran Realtors as well as many builders that have homes sitting in abandoned tracts take exception with these national associations.

    The dangers are self evident. We need long term viable fixes. Many low income family home assistance programs exist in our system today. We do not need another program clouded with gray areas of qualification to be added to the mix.

    • 2 votes
    #18.2 - Mon Mar 9, 2009 12:35 AM EDT
    hhabilis

    Insanity. You just don't borrow more than a property is worth, with payments you can't make. No one should be encouraging that.

    • 2 votes
    #18.3 - Mon Mar 9, 2009 12:45 AM EDT
    Mandelman

    Come on people... this isn't about any of that. Read my comment #3.6.

    And what Ray says about support is tricky... Two weeks ago there were 11 in congress supporting the bill. Today there are 16. And there are no organizations or congressional representatives opposing it. NONE.

    I believe Ray is being optimistic in this regard. I hope he's not, but I fear he is. And this is too important to rest on hope.

    Again, please read my comment in #3.6.

    • 2 votes
    #18.4 - Mon Mar 9, 2009 2:04 AM EDT
    Raymond Max

    Optomistic ? About what?.. Take a moment to read my first and second comments. Answer please. Thanks. Ray

    • 1 vote
    #18.5 - Mon Mar 9, 2009 2:51 AM EDT
    Mandelman

    Optimistic that it will be defeated. As you pointed out, everyone and their mother is coming out in favor of this bill. I can't find a sole against... I shouldn't say that, there are a handful of bloggers against it... but not one organization. When you look it up, it shows the "supporting groups" and "opposing groups," but there are no opposing groups listed.

    The answer to one of your questions is yes... it would make the Indian Tribe ruse and off-shore scams moot, because it would reinstate the nonprofit charity operating model, that was eliminated by the IRS in 2006.

    • 2 votes
    #18.6 - Mon Mar 9, 2009 4:57 AM EDT
    Mandelman

    I'm back... had to restart my computer in the middle of that comment, of all things. Sorry, where was I... oh yeah, your questions above... hang on... I'll read and research and get back to you in morning... too late now...

    • 2 votes
    #18.7 - Mon Mar 9, 2009 5:39 AM EDT
    Raymond Max

    Thank you Martin

    • 1 vote
    #18.8 - Mon Mar 9, 2009 7:47 AM EDT
    space guy

    Insanity. You just don't borrow more than a property is worth, with payments you can't make. No one should be encouraging that.

    Did you actually read the article? That is exactly what happened.

    • 4 votes
    #18.9 - Sat Mar 14, 2009 4:41 PM EDT
    Reply
    analog ninja

    Great Work Here!

    • 4 votes
    Reply#19 - Sun Mar 8, 2009 9:16 PM EDT
    EllieP

    It really is. Clipped to several groups.

    • 5 votes
    #19.1 - Sun Mar 8, 2009 11:13 PM EDT
    Mandelman

    Thank you so much. Please consider telling your representative to look more closely at H.R. 600. I'll be posting a letter you can use later tonight.

    • 3 votes
    #19.2 - Mon Mar 9, 2009 2:05 AM EDT
    Reply
    Smokie-788412

    Isn't this the same reason the housing market is so messed as it is now. Bought our home when I was young and worked like hell to make the payments. We did it the right way and still own the same home. When I purchased the home the interest rate was 13% and 20% of the purchase for the down payment. Times sure have changed. Haven't seen any rewards from the government.

    • 1 vote
    Reply#20 - Mon Mar 9, 2009 1:47 AM EDT
    Mandelman

    Yes it most certainly is. And I remember those days too. And 13% was a good rate, right? Some people paid 18%. And 20% down was the law. I worked for ten years to save up the down payment on my first home. Ten years. I don't think the younger people today even know what ten years feels like. Well, they will soon, I'm afraid... they will soon...

    • 3 votes
    #20.1 - Mon Mar 9, 2009 2:07 AM EDT
    Reply
    Mandelman

    I only have two questions... where the heck is Blizzy and where the heck is GA? Come on you guys... GA, I know you think this bill is okay... but you can't possibly... read my comment in #3.6.

    • 3 votes
    Reply#21 - Mon Mar 9, 2009 2:09 AM EDT
    Lisa Schneider

    Blizzy and GA...if you go read comment #3.6, Martin meant "Laura", not Lisa...just protecting my reputation here!

    • 2 votes
    #21.1 - Mon Mar 9, 2009 9:59 AM EDT
    Laura-400055

    Lisa: You are protecting YOUR reputation? From me? How so?

    • 2 votes
    #21.2 - Tue Mar 10, 2009 4:14 AM EDT
    Mandelman

    My fault... my fault... sorry.

    • 1 vote
    #21.3 - Tue Mar 10, 2009 4:57 AM EDT
    Reply
    robin-6

    Well Martin, you've been busy. Lot's of hard and good work as I too am a Realtor who opposes most things on NAR's agenda. But,. sometimes you have to know when to hold 'em and know when to fold 'em. I have done several FHA's, then and now.. FHA is very strict about not allowing the Seller to finance any of the Downpayment but they do allow Sellers to contribute up to all of the Buyer's closing costs which amount to typically between 2 and 3% of the sale's price too. And oftentimes, Sellers won't even agree to that, so really most buyer's need to expect to bring at least 6% to the table for "most" transactions these days at the very least. I can say on the side of buyer responsibility, the more the buyer contributes the better, but its not always the caveat on the seller downpayment contribution where I find all the fault. Example, when there is a residual of percentage vs. an exact amount written in the buy/sell contract, oftentimes rather than the residual going towards the Seller's downpayment (FHA restricted) the lenders ALWAYS finds ways to use it up in things called Junk fees for themselves. Which irks me to no end. I'd much rather see the buyer and seller make their deal go thru with what help they can be to each other than giving away residuals to lenders. In a case where there is a residual, example: Buyer's closing costs are $6500 and the Seller has agreed to pay 3% of the sale's price towards buyer's closing, we may end up having several thousands of dollars difference, depending on sale's price. So what then happens to the residual? Lenders will say they apply it to discount points (lowers the interest rate) or they find someother fancy fee to throw it in under. In my world, yes, this is what I do for my bucks, this is how I make my living but I damn sure would rather see buyer and seller both happy at the end of the day. It's negotiating. It's coming up with what buyer will pay and seller will sell. I only am a paper pusher that meets both party's needs. And I help people understand this complex process.. I for one, am damn proud of what I do. I get to help others as I help myself and this my friends, is a win/win situation. I make no apologies. Maybe I doth protest too much but its only after hearing so many misinformed snap judgments against my profession. My friend did not make any exception for his Realtor buddies, old or new.

    As far as the backass underhanded ways of Russell or whomever, You're never going to stop them from trying and you're never going to get every congressperson from either party to agree that it's not helpful in some way to have incentive programs. The first time homebuyer's incentive of Obama's is working, we're seeing alot of movement right now.. I have adult kids. People of my age are definitely contributing to our adult kids to make these downpayments as it's a damn good time to buy! So I'm not so sure I can agree wholeheartedly but then what do I know, I'm just a lowly Realtor. ;-)

    I think more than anything, its having an INFORMED public and not scaring the bejeezus out of everyone or causing more panic than necessary. Already people are HIGHLY misinformed as to the facts of this housing crisis and the further we go, the more is revealed that at the very bottom of this, were predatory lenders sucking the life blood out of some unsuspecting folks. It has alot more to do with Lender options, such as ARMS and negative AMs than it does with FHA/VA guidelines. They've always been strict. I think that there are many who don't take no-vest buyers as a threat or "the" catalyst of all that ails the housing crisis. Many find this has been a spin to take the focus off the real problem of the secondary market fraud. That is where the crux of this belongs.

    ***Okay, some of you may have heard enough, so please move on without further ado on my part, but for those whose interest is picqued, let me continue a bit more here and I'll explain this a bit deeper.

    I work in a highly VA loan recipient area due to the high influx of military in my area. VA's contribution from the buyer is zilch in dollars (NO downpayment and NO closing fees) other than a funding fee that gets thrown in the life of the loan. NO mortgage insurance, period. (FHA loan recipients will alway have to pay MIP.) VA folks are suffering right along with the rest of America as they can't sell either when they need to. However, I can't think of a single solitary time when my VA people defaulted because they didn't contribute a dime but rather, their time to the US of A. In fact, VA can default easier on short sales because VA does not require being paid back if the Vet defaults... Short sales for FHA/Conventional, are you kidding? You're much better off foreclosing if your short sale residual is more than you can ever foresee paying back as you will be required to or it will follow you the rest of your life. So there is an example that NO money contributions aren't always a key factor of "easier default". Okay, with that being said, I take exception to the data and question it's entire legitimacy. IS it credible? Okay, some say so. Yes, it is likelier that those who haven't vested, can walk easier, but do they really? Most of these people who are defaulting aren't doing so by choice.. They, like MOST of America are stuck in a DISRUPTION of our economy due to many factors of greed. AN ANOMOLY, not the NORM! I think its disengenious to assume any data coming out right now accurately captures the realism behind anything. It's easily corruptable and persuadable. Too easy.

    I also take offense when Realtors, home-builders are cast in one fell swoop of rape, pillage and plunder. I know I don't, never have. I've never said "goody, FHA's making it easier or VA's making it easier for me to take advantage of people, whoohoo, I might be able to stay in my own home now!" In fact, I make it a huge point in my life to make sure I don't. .. My biggest concern is keeping people from becoming house-poor. Also in this day and age, isn't that getting just a wee bit hard to figure out, who IS worthy?

    I know people suffering now who can't make their mortgages and have vested 50 years of hard work, sweat equity and big bucks into their homes and can't make it right along with the young couple who thought now was a time to make a move in home ownership.
    Call me a lowlife Realtor, but I do believe most middle class people's personal wealth is built upon homeownership and I champion all underdogs of life as I also think homeownership creates a sense of responsibility in being good citizens. A sense of balance in making it in America. It creates self-reliance and self-pride. I will cry foul any day to those who want to put this crisis on the backs of unsuspecting players of this life who were taught, this is how you play this game. For the most part, it works. As I said, this was anomoly. NO shame should be brought the middle class or anyone who got caught in this. NONE.

    I know that appraisals have tightened up something fierce. Those guys took alot of heat in this crisis that may not have been their faults. I'm seeing appraisers not move on a difference between sale's price and their appraisals with as little as 2K to thwart a deal! So the idea, that the seller can simply throw all costs on top of sale's price is a thing of the past. However, I will say it surely was commonplace. But really, we're talking about 10K or less in most sales in my area. Can you really define the difference between an alike home of 180K and 190K? What, corian countertops did it? Fruit trees and a flagstone patio you picked up at Home depot for $200 bucks?

    I agree there were some awful practices, you know this Martin, but this is only one small portion of a huge systemic problem. I find this to be the least of the problems to be honest with you. But, you never cease to amaze me the lengths you go to, to make a very interesting perspective.

    • 3 votes
    Reply#22 - Mon Mar 9, 2009 2:25 AM EDT
    Raymond Max

    Realtor to Realtor....... Let's talk shall we?. Our business has become very tough. You know that, I know that. As a professional that has been in and around Real Estate markets for over three decades, I can say without reservation, that I have never seen the market conditions that exist in today .

    Don't take this comment out of context.

    Yes, I have lived and worked through many up and down cycles. What has caused the stalemate in today's housing market?

    Excess capacity has resulted in the excess inventory of unsold new homes.

    Excess inventory of used homes, 1.3 million, resulting from a lack of demand in today's housing market.

    Why do we have that lack of demand in housing? You and I know the answer to that question, but let me state it one more time for those that have been sleeping under a tree for the last two or three years.

    1. Cost of living indexes have been off center for years. As a result of an increase of cost in everything from gasoline to milk , to insurance to medical costs, Consumer income has not come close to keeping up with the cost of living.

    Most folks have simply had more expense than income at the end of the month, and have made up that difference with credit cards.

    The added debt of carry over expenses have hit a wall as wages and hours worked have been cut back wit a down turn in every sector of the U.S. economy.

    2. Qualifying for a Home loan.

    Even in a stated income loan, most self employed have one, a 43% or better debt to income ratio, coupled with a decent F.I.C.O. score is required to obtain a stated income loan. This animal has effectively been exterminated. Fact: stated income loans are dead..

    3. As everything in our economy, even in a non inflation year, Most building materials increase no less than 3 to 4 % . This is a constant.

    From time to time in our world market, Supply and demand can and does hit an imbalance.

    Example: China's unprecedented growth created a demand for raw and manufactured materials that resulted in a construction material cost increase of 28% in 2005.

    32% in 2006, finally tapering off last half of 2007.

    Ad this to a organic increase in wages to offset inflation, this resulted in the unprecedented increase in home cost. Product to market.

    4. Certainly some Builders , developers, etc, took advantage of a bull housing market. But like you Realtor, most just made a descent living.

    5. Lot cost? Higher.

    6. Simple really. We both know that historically home ownership has been a very safe financial venture. With an average increase in value of about 4% .Owning a home in a normal market made great sense.

    It was a no brawner. Increase in value along with the tax interest deduction, over took the cost of the mortgage. You were living in your home for the long term. And when you retired, your equity would secure a nice spot for you in Florida.

    7. If you lived in a population in flite market, Lets say L.A. or Rawley, The demand for housing in your area would be conducive to quicker growth in your return on investment. you could make some real money. Well that also came to a screaming stop.

    8. So let me recap. Wages fell, Cost of living increased across the board. Builders over built demand, Inflation as well as foriegn material needs increased the cost of construction. Lending standards tightened.

    9. Fewer prospective buyers could now qualify for housing. Housing is no longer affordable.

    There Robin I said out. The cost of home ownership is out of reach for most consumers. And that is not going to change soon. Home ownership is not for everyone.

    Today, the afordable homes on market are the rusult of anothers loss. Be it a Bank or a home owner, some one is walking away with a loss, so that someone else may gain.

    I like you, care for the people that I serve through my Real Estate business. I however am finding fewer reasons to find pride in my chosen profession.

    I could go on for hours, But I will save that for later. You have highlighted some viable points, However , I am not sure where you are going with the issue at hand. For it? Against it? . R.max

    • 5 votes
    #22.1 - Mon Mar 9, 2009 9:16 AM EDT
    robin-6

    HI Raymond, I respect your point of view as I do Martin's or anyone else's but I think we're talking pocket areas of the US that went completely bonkers and while this is true, it isn't true for the majority of the US. I'm in Seattle where we did'nt suffer the bubble but are surely negatively affected by the scope of the systemic crisis. FHA being a federally insured program may have negative affects in some of the super crazy markets of NV, LV, FL, CA. But I can't think of any lending program that was a perfect model for any of those purchasers that lost, whether it was VA, Conventional or Jumbo OR if a borrowor vested major amounts or not. I know folks who vested millions out of pocket and are losing not only their money but their way of life due to this crisis.. This crisis lies solely on the lenders and deregulation. I think most markets across the board were affected negatively, but I disagree that this the fall of the markets has much to do with contributions from outside sources for buyers. You're correct in that "stated income" certainly put people on a low road of disappointment in the end. Again, relaxed lender practices. Too much free money, too much speculation selling.

    Raymond, I concur wholeheartedly with all you've had to say and there is not much to argue here in the facts of life. Yes its true the cost of living has not kept up with inflation and there was a housing surplus. Most builder's can't build without a lender so obviously there was a relax in their ability to qualify too. And in that, yes, supply and demand escalated but we've always had those trends. Real Estate is rarely in middle mode, most markets either benefit the Sellers (demand market) or the Buyers (supply.) Please note: I said that not that I think you don't get simple supply/demand economics, but rather that others are listening to us and to reiterate, there is no such thing as a constant. Life swings as does the ups and downs of the real estate market, as does the ups and downs of EVERY market. FOR my Sellers, it's like anything, buy low, sell high. DO NOT sell in this market if you don't have to. If you have to, know we're back to 2004 prices and you will not realize what you would have 2 years ago. We have to get the inventory moving for those who must sell.

    And yes, many folks got over their heads. We were seeing first generation home buyers buying homes that rival their parents which was/is wrong. You and I both know there is a responsible stepping stone and that is what I try to point out to buyers as to what is sweat equity vs. market equity-- but I can't grab their hands and say "don't do this, don't be a fool, don't get suckered it" even as much as I advise them pretty comes with a price and higher risk. Getting a buyer qualified to their income to debt ratios as well as the steady road of which they traveled is not our jobs, that's the lenders. I most definitley talk about future markets and ask people to make sure they understand what may happen if there's a disaster that affects their lives whether it be a man-made disaster (to which this one is) or natural. (Katrina/Ike/living next to a dormant volcano soon to explode or a health crisis.) LIFE happens.

    This thing about foreclosures rates surely has been going on since the concept of real estate began. Some people simply will not make it. So do you take the data from that, escalate it into a package that quantifies this as being the crux of the apostrophe of the housing crisis? I just do not agree that buyer contributions as incentive from any source is at the malay of this, nor will it be in the future. I don't see this as a repeat of doing bad business.. I think the truth of this needs to be discussed and discredited so people can make informed decisions. I don't want an over-reaction to things that aren't really true.

    In some areas, housing became ridiculously over-inflated and therefore non-affordable. In my area, we've decreased a good bunch now. The correction has been made and we are moving real estate. As far as the pocket areas of the hardest hit? There is no easy answer as to remedy that mess. I'd be curious what the cap is on FHA in these areas. From what I see in those markets, not many would even qualify for FHA or VA.
    As much as I'm usually in agreement with my friend Martin, on this one, I just can't be on a bandwagon that I don't see is a catalyst. Incentive programs have always worked to move every market in the world including retail to the auto-industry.

    Let me ask you this? how many times have you turned down a buyer because you morally disagree how their getting their funding or whether or not they've vested themselves? We don't. We do our jobs which is to process the sale as best we can. We are processors, not much more. But, no, I'm not always proud of the way some folks in our biz take advantage.

    Best Regards, Robin

    • 2 votes
    #22.2 - Mon Mar 9, 2009 2:17 PM EDT
    Raymond Max

    Welcome Robin. Real Estate markets are always regional as well as neighborhood sencitive. I have never kicked a deal because I felt the folks could not qualify. But these days I insist on a bit of pre qualification. As a matter of practice. In my firm, we do not submit an offer from buyer to seller without a letter of pre-qualification from the buyers mortgage broker or bank.

    As you said, It is not in our place as AGENTS, to control the financing of our clients. In fact, it is illegal to do so in the state of Oregon.

    The F.H.A. cap is $440,000. nationally.

    You know that Red Lining is an illegal practice. I practice my agency as a Real Estate consultant, and spend most of my time educating my prospects and clients.

    No, our market in Eugene/PPortland is not as hammered as L.A. or Las Vegas. But it is as slow as watching trees grow. The biggest frustration in today's Housing market is tight to non existent financing.

    One example: For the last few weeks we have been working with a single mother with 2 children. She is a young progressive Hair stylist that has excellent credit and an above average income. Her debt is minimal. Her saving is minimal to non existent.

    Like I said in my earlier comment, Life is expensive. Today she pays $ 1150 per month rent, on a nice apartment for her and the boys. she would like to buy a home. Her budget and financial condition puts her into the $220,000- $235,000.

    That can be a tough price range, but is a bit above mid price in the area that she is looking in.

    After searching the local market within her chosen school district, We did not locate a home that fit her needs.

    Large master bathroom, family room for the boys. Here's the rub.

    My client decided that the solution to here needs would be to buy a lot and build the home.

    Problem: At this time, NO ONE is financing lots with less than 20-30% down. Very few to NO LENDERS are offering convertible construction to 30 year fixed financing.

    The program mentioned in this article would not impact this buyer. We are all giving bits and pieces of the puzzle in an attempt to complete the puzzle.

    All pieces, Stimulus,F.H.A. reform, Tax grants and credits, as well as the Home owner stabilization initiative will help reduce the pile of stress properties on the national market, But will not solve all problems in all markets.. Best wishes and a successful day to you Ray.

    • 1 vote
    #22.3 - Mon Mar 9, 2009 2:56 PM EDT
    robin-6

    I think they just upped that limit for FHA, but no matter the cap, chances are FHA was not the mainstay loan program used in the hotbeds.

    For your client, have you tried Wells Fargo? They are lending quite nicely across the board, restrictions are limited in income documentation like the good ole days but other than that, i've not had any problems with my folks getting qualified with Wells. I'm impressed. They do FHA/VA and USDA depending on rurality status.

    As far as buyer clients, the first step of any buyer is getting qualified before I even show them what homes they can afford in their qualified price range. It makes no sense to show homes until we know what they can afford and that they can qualify for pre-approval. In this day and age, I've never NOT had a buyer understand this.

    You said "The program mentioned in this article would not impact this buyer" . Um, well, please explain what you mean because as it is written and discussed, I would have to highly disagree. Incentive programs are for the benefit of both parties to make a deal work.

    • 3 votes
    #22.4 - Mon Mar 9, 2009 3:26 PM EDT
    Raymond Max

    My comment is in direct relationship to the securing of a lot. F.H.A. does not underwrite raw property. Nor does it underwrite convertible loans. Thank you for the Wells tip. I will give them a call today.

    To compound the problem of today's market, Most buyers are taking a position of extreme value shopping. This of course in in response to the relentless drum pounding of the news media.

    As you stated earlier. One should not attempt a sale today unless absolutely necessary, or willing to accept 2004 pricing as as the benchmark of today's current market.

    You are invited to join my group FROM THE INSIGHT OUT.. Thank you. R.Max

    • 2 votes
    #22.5 - Mon Mar 9, 2009 4:52 PM EDT
    Bill Harrison

    Well, that depends on the locality. In my neighborhood in Arlington, VA there's been virtually no decline in avg. sale price on single family homes since the bubble burst. Of course, this housing is in a very desirable location proximity wise to DC and public transportation. That said, $700K only gets you maybe a 3 BR bungalow that might need some work.

    • 5 votes
    #22.6 - Mon Mar 9, 2009 5:15 PM EDT
    robin-6

    Will do Raymond. Thanks for clarifying. I wanted to make sure I was understanding you and I wasn't..*LOL...glad I asked. Sometimes these conversations can get swung way out there if there is the slightest misinterpretation. So I try to always ask. I'm off for the day but will check out your blog tomorrow, with any luck for time. :-) Take care.

    Bill, that's about median the closer you get to Seattle Metro.

    • 1 vote
    #22.7 - Mon Mar 9, 2009 5:30 PM EDT
    Mandelman

    Hey Robin...

    Example, when there is a residual of percentage vs. an exact amount written in the buy/sell contract, oftentimes rather than the residual going towards the Seller's downpayment (FHA restricted) the lenders ALWAYS finds ways to use it up in things called Junk fees for themselves. Which irks me to no end.

    Yeah... that really drives me insane too. Because interlopers often redress uncomplicated cheeses when insipid leaves internal and arcane hoopla. Huh?

    Between you and Ray I no longer have any idea what's being discussed here. HELP!

    I'm a simple guy... I just don't like people losing their homes. That's about as deep as I get on this.

    • 2 votes
    #22.8 - Tue Mar 10, 2009 5:01 AM EDT
    space guy

    I agree there were some awful practices, you know this Martin, but this is only one small portion of a huge systemic problem. I find this to be the least of the problems to be honest with you. But, you never cease to amaze me the lengths you go to, to make a very interesting perspective.

    If this is only a small part of a larger systemic problem, why is it that the FHA is specifically saying that this small part of a larger systemic problem is causing the first loss in its history?

    Sorry but smooth talk don't equal the truth.

    • 3 votes
    #22.9 - Sat Mar 14, 2009 5:02 PM EDT
    Reply
    Mandelman

    Uh... thanks? I think...

    Okay Lowly Realtor... listen here... I'm going to need the rest of the week to study whatever it is that you're talking about... I may even need to sign up for a class first, but my point is the same. THIS BILL SUCKS. IT'S BAD. It's going to hurt working people at the bottom of the earnings scale and line the pockets of fat cats. IT'S A BAD BILL..... I guarantee that at least a handful of people will end up shooting themselves as a result of this bill, how's that miss-I-know-everything-about-real-estate-person... huh?

    • 4 votes
    Reply#23 - Mon Mar 9, 2009 5:47 AM EDT
    Raymond Max

    Think I'm stepping to the side line on this issue while I gather a bit more information.

    I am confident that you have researched this issue down to the nuts and bolts. But for the life of me, I can't justify killing this initiative based on the past actions of two predatory corporations.

    Do I believe in giving some one a home with nothing down? Usually my answer would be no. But this proposed amendment to an existing program does not cost the tax payer a dime.

    Buyer be ware has and still remains the trumpeters call in the real Estate game. To assume that that the public is too naive to realize the gamble taken when signing a contract is nonsense.

    Is it our Governments responsibility to protect the public? Perhaps, But for one that believes in freedom of choice as well as taking responsibility for ones own actions, I must stop short of protecting the public from itself.

    Lets kill the Bill based on it's lack of built in safe guard from predatory loan practice. Or it's failure to address the outside contributions mentioned by you. Still listening Mandelman. Thanks Ray

    • 5 votes
    #23.1 - Mon Mar 9, 2009 9:34 AM EDT
    robin-6

    Dear Martin, if I didnt' say this correctly, I want you to know that I appreciate all you bring to the table, as always, your passion and commitment are astounding. I may not like the means to the ends by the Tribal route either but I see this as not much more than one more incentive program to stimulate the housing market. The housing market is one of the biggest engines of our economy. Without it, as we can attest, our economy goes to hell. It is sustainable and there is balance to be reached of a way of doing legitimate business that works for the most part for most people. I also don't protest to being a "know-it-all" and I try to never impose that and can only hope that I didn't come across that way. I want to discuss, not preach. That may not always come across that way and because this medium has no real way of inflection, I can only hope that I'm heard in the light of which I intend. I am only putting out there what I know as I simply work this every day of my life, it is my life.

    I also have a great interest in Americans not losing sight of the corruption deep within the system that brought us to our knees which is far more dangerous than any of this. People just do not know what to beiieve anymore. And it's frustrating.. I don't want people to panic or be misled. Already people think some people are getting what they don't deserve or are on a free ride on their backs and in this case, it's simply not the way I see it or have witnessed it. The systemic crash has everything to do with the secondary market and the corruption of unregulated greedy lenders/speculators and high risk investors. I don't believe for one second this fall was by accident. But, if the corrupters can convince you (general) to emote up to a fallacy, then they win and they get to repeat the cycle of abuse. We have a shot of transparency and understanding who the men in the shadows are (metaphoric) and bygod, we need to take it. STICK with the root of this crisis, follow the money and we will be liberated to find what will work best for our best interests eventually. We can't right what we don't understand is wrong.

    "So long, and thanks for all the fish"

    Robin

    • 4 votes
    #23.2 - Mon Mar 9, 2009 4:15 PM EDT
    Gina M. Knight

    GET NUMBERS & Stopped speculating- that is ignorant!!! You always do the numbers before you discuss anything- then you can make an educated choice. Sound like you all just want to jump to conclusions and throw knives!

      #23.3 - Fri Aug 14, 2009 1:27 PM EDT
      Reply
      gjdavis60

      If buyers and sellers want to engage in this practice, have at it, but not with government-insured mortgages (i.e. taxpayers' money)!

      Another perfect example of the moral hazard resulting from government intervention in markets.  When will we learn?

      • 2 votes
      Reply#24 - Mon Mar 9, 2009 5:55 PM EDT
      Mandelman

      gjdavis60... Right, it's not a problem unless it's FHA insured mortgages. The whole issues is about FHA insured mortgages.

      • 3 votes
      #24.1 - Mon Mar 9, 2009 11:33 PM EDT
      Reply
      David G-945585

      There was a key stat that MANDELMAN neglected to point out. That point being that there was 0 statisitical difference between FHA loans with SFDPA compared to grants from citys, fire departments, and what other non profit that a consumer may use. Why did MANDELMAN leave this important stat out from GAO report? Perhaps because that would defeat the point that he was trying to make that there is no loan default difference between SFDPA and any other program that can now be used for the 3.5% down payment.

      Also the fee for the SFDPA program are only $295 a file not $400-$800 so this premise of $400-$800 file is not correct.

      • 1 vote
      Reply#25 - Mon Mar 9, 2009 7:55 PM EDT
      Mandelman

      Hey... DAVID G... Sorry I couldn't get back here sooner... I was traveling... I DIDN'T leave anything out intentionally, I assure you.

      Now, what the stat you're referencing? No difference between SFDPA compared to grants from cities, et al. I'd have to look at the report again to see what you're exactly saying, but after writing this article, I'd rather not. This was the piece that convinced me that I did not want to be any kind of investigative journalist when I grow up.

      Anyway, would you mind saving me the time and telling me more about what your point is? I really don't think I can bring myself to going back through the stuff, but I don't want to ignore whatever point you're making.

      As to the cost, I got the numbers from two of the largest SFDPA provider Websites as of a couple weeks ago, so they are correct, as far as those sources are concerned ... one was the Grant America program, if I remember correctly, and the other was Neamaya, or how ever you spell that company's name... I think. I read so many documents on this that I'd have to look it up to be sure.

      Anyway, all of this notwithstanding, what's your overriding point... you like these programs, I assume? What about them do you like?

      • 3 votes
      #25.1 - Thu Mar 19, 2009 3:03 PM EDT
      Reply
      Was a Democrat-651386

      I still remember the day, Feb. 17, 1974, that was the day my future wife and I signed the papers for our home. We bought our house 2 months before we were married. We both were living at home with our parents when my grandmother offered to sell us one of her rental properties.

      The price she wanted was $36,000, back then that was a lot of money. I had been working for Ford motor for 3 years and since I lived at home I was able to save $10,000 over that 3 year period. I thought, why not I have enough for a down payment plus.

      Luckily, I had a friend who had started working at an S&L. He was 2 years older and had become a junior loan officer. He gave us a lot of advice about the how, what and where of buying a home. He told us that we shouldn't just jump at the first thing we come across. He told us that we needed to research the neighborhood, research the latest real estate sale prices for homes in that area over the last 5 years, get quotes on home insurance, and the approx. amount of property tax from the county. He explained income to debt ratio, He also explained the loan application process and told us that it would take at least 30 days at the minimum to be approved for a loan, if we qualify to have the loan go before the board. He told us that the minimum down-payment, at the time, was 10%.

      Since my girlfriend didn't work, I had to supply copies of the following; last 4 pay stubs, W2 form, list of creditors, and amounts owed to those creditors. We were working 60 hours a week at Ford. I had more money than I knew what to do with. (Oh the delusions of the young). After looking at my check stubs and W2 form my friend informed me that he could not use the figure on my W2 because it contained overtime. Ford puts your hourly rate on your paycheck so he took my hourly rate x so many hours per year and that was the figure he used.

      My girlfriend and I were really sweating. It took 45 days to approve our loan. $155.00 per month for 30 years. I would have to pay over $55,000 for a $32,000 loan which also included property taxes. I had sticker shock for the first time in my life. The new car I had just purchased did not give me that feeling, the payment for that was $58.00 per month. When I added the two numbers together it would take 95% of one weeks pay.

      I have since helped two of my daughter's purchase homes. It amazed me at the size of the homes they were looking at and also the price range. This was about 8 years ago. I knew how much my daughters were making and I also knew they could not afford the homes they were looking at. I told them they were not going to be able to afford those types of homes. They already had checked with 3 different mortgage brokers and those brokers told them that they could afford that price range of homes.

      Luckily, I was able to talk to my daughters and show them that they could not afford them so they bought homes they could afford.

      I confronted the mortgage brokers who told my daughters they could afford much more. I related the process that my wife and I had to go through. Their answer made me so mad that I walked out. They told me, "What you went through back then has been changed, all that documentation they asked you for is now not required. Plus we have creative ways that we can get financing now and there would be no down payment required."

      • 6 votes
      Reply#26 - Mon Mar 9, 2009 8:38 PM EDT
      Mandelman

      I know exactly what you mean... my memories of buying our home are similar, but with more zeros, as it was 1991, not 1974. I was 30 years old and about to get married. The house was $340,000, and I was making really good money. I had started my own firm in 1989 and it was doing very well. Everyone said that I just had to buy a home because, the argument went, you can deduct the mortgage interest instead of giving it to the government. And besides, my parents had always given me the impression that buying a home and settling down was the responsible thing to do.

      I had $120,000 saved. I could have put less down, of course, but I was scared to death of the mortgage payment. As it was, the payment was going to be $2666.77, I'll never forget it. At the time, however, I was only paying $1500 in rent, which seemed like a lot to me anyway. If I had put less down the payment would have been even higher, and even though I was making something north of $200k at the time... I just kept thinking... what if something goes wrong... what if my business fails... what if I get injured... what if... what if...

      I remember having to get all of my paperwork together to give the banker at Bank of America. It took me like two weeks to get everything together that they needed. Tax returns, paycheck stubs, I can't even remember everything they needed, but it was a lot.

      I signed those papers and looked at that $2666.77 number and thought: "Oh my God... How am I ever going to make that payment every month?" But, I also thought... it's good to have something that forces you to put money into it every month. The next day I went to work... and I worked my butt off... because now I had a house payment... I was a homeowner...

      Of course, it worked out fine... I calmed down about the house payment, we refinanced when rates were lower and our payment went down to $1511. But then we had a daughter a few years later and I've been working my butt off ever since.

      Life's funny... I keep waiting to feel like I've grown up. I guess that never happens. My father's been a grown up all of my life, but I've always been a kid.

      I still own my own firm. I lived through the year after 9/11... kept my business alive, kept payroll going, didn't lay people off, but should have. It was hard. It was scary. It was touch and go on several occasions. Once, in 2002... I almost lost it... fell three payments behind on my mortgage... worked seven days a week, 12 hour days and longer... pulled it out one week before I would have been three months late. It was horrible, but I made it.

      About a year ago, I saw what was coming. This time I reacted, changed the way my firm operates, what we offer, what we charge. I'm positioning myself for the hard times ahead. I'm not going to do 2002 over again.

      It's true what they say, although younger people will never believe it... live and learn. And, what I always tell others who are starting their own companies... You learn a lot more on the way down then you do on the way up.

      • 6 votes
      #26.1 - Tue Mar 10, 2009 12:03 AM EDT
      Raymond Max

      The value gained from this conversation, is the insight gained from stories like yours that have been told because of articles like this one. Well done.

      Your story is the story of a man that made a commitment to his future as well as the future of his family.

      Perseverance as well as fortitude prevails in your personal story. Perhaps it is time for you to admit to your reading public that you do not believe in a free lunch.

      That is my stance and I am willing to share it with anyone that cares to listen. R.Max

      • 3 votes
      #26.2 - Tue Mar 10, 2009 3:00 AM EDT
      Mandelman

      I definitely don't believe in a free lunch.

      Now if I could just understand the rest of what you're saying I'd be a happy man. Help!

      • 1 vote
      #26.3 - Tue Mar 10, 2009 5:03 AM EDT
      Raymond Max

      Time out ... Give me a call when you have a moment. For me it all has to do with compliance and regulation.

      If you can demonstrate to me $$$$$$$ how Mr. Big is directly contributing to the passage of H.R.600 by interjecting corrupt ofshore or re chaneled Indian nation money into the Congressional pipeline.

      Hookers, Champagne and limousines on THE HILL.

      Than I will gladly get on the phone and plead with the N.A.R. Washington lobby to cut support out from under H.R. 600. R.Max

      • 1 vote
      #26.4 - Tue Mar 10, 2009 2:01 PM EDT
      Reply
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