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  • May 24, 2016 at 12:38 PM #21983
    HLS
    Participant

    There is so much money around that is chasing yield…
    Here’s a guy with a new idea…..

    The extent to which student debt is keeping Millennials from buying homes is debatable. But for high-earning young professionals who are saddled with such loans, a Florida investment advisor says he has devised a path to homeownership.

    In the next six to eight weeks, John Burkey will launch the BurkeyLoan, which combines borrowers’ student loans and their mortgages.

    “Basically,” he said, “they will be refinancing their school loans into their mortgages.”

    Initially, BurkeyLoans will be aimed at college graduates with “top-tier work and academic profiles” who seek jumbo mortgages in the $425,000 to $600,000 range. But by year’s end, Burkey said, the new mortgage product should become available for those needing financing for houses in the high $200,000s.

    Student debt is considered in many circles to be an impediment to qualifying for a mortgage. According to the Brookings Institute, after the typical undergrad with a bachelor’s degree and $30,000 of debt makes a $350 monthly student loan payment, there often isn’t enough left over to make a mortgage payment.

    But the nonpartisan research group says the main driver between housing haves and have-nots is education, not the debt used to finance it. Men with a bachelor’s degree, it says, earn $35,000 more a year than those without, while women with degrees earn $25,000 more. And those amounts can purchase a lot of house.

    Burkey and others have a different take, though. He says grads with a four-year degree leave with $35,000 in debt. But those who go on to graduate school leave owing somewhere in the neighborhood of $53,000 to $54,000. And if they go to medical or law school, they end up being “saddled solidly with six-figure debt.”

    It is those higher-end graduates he is targeting. He calls them “high-performance Millennials” and says there are perhaps as many as 11 million of them. “We are aiming for the top 20% in income distribution who went to the top-tier schools and have great work experience.”

    Here’s how a typical BurkeyMortgage might work: Say the would-be homebuyer is looking at a $500,000 house but has $50,000 in outstanding student loans. He would roll the two amounts into a single mortgage. But he would have to make a down payment of close to $50,000.

    That would leave a balance of $500,000, which would be almost equal to a 100% loan-to-value mortgage. The rate on the mortgage would be far less than that on the student loans, which currently run between 6% and 7%.

    While this seems eerily similar to old-fashioned subprime loans, Burkey says it’s not. Borrowers will have to have “almost perfect credit” and work in professions in which if they lose their jobs, they will be able to get another in four to six weeks, no problem.

    Also, borrowers will be underwritten largely on how much money they have left to pay their other bills once they make their mortgage payment rather than on their income levels.

    Another loan feature will allow borrowers to temporarily make lower monthly payments for three consecutive months for “life events” such as the birth of a child or a divorce. Of course, interest will continue to accrue during that period, and escrows will be recalculated once the borrower resumes making regular payments.

    Burkey plans to originate the loans directly and hold them in his firm Burkey Capital’s investment funds. He said he is aiming at the high-end market first to perfect the product. Once that is accomplished, he expects to “go lower.”

    May 24, 2016 at 12:44 PM #797976
    XBoxBoy
    Participant

    [quote=HLS]
    While this seems eerily similar to old-fashioned subprime loans, Burkey says it’s not.

    Burkey plans to originate the loans directly and hold them in his firm Burkey Capital’s investment funds. [/quote]

    All this will hinge on the quality of borrowers Burkey gets. If he does plan to hold the loans, then chances are good he’ll really try to get good borrowers. If that’s true, then I don’t see it at all like old-fashioned subprime loans.

    May 24, 2016 at 12:50 PM #797977
    HLS
    Participant

    His money, His rules!

    “Borrowers will have to have “almost perfect credit” and work in professions in which if they lose their jobs, they will be able to get another in four to six weeks, no problem”

    Ahhh…if it were only so simple.
    Are there ANY professions that guarantee LOCAL re-employment within 4-6 weeks ?

    May 24, 2016 at 1:08 PM #797978
    scaredyclassic
    Participant

    Does the entire debt become nondischargeable when commingled with nondischargeable student loans? If so, I want to invest in his co.! And anyone who takes such a loan is a fool…

    Basically looks like a,zero down home loan..

    I’d pay off my student loan debt first, since the total down payments required is about equal to the payoff amount of student loan. You’ll be unlikely to get as good a return on the house as you would from the imputed return just by paying off the student loan. If your student loan is at 7 Perc, you’d need to make 10 percent return pretax. Your house is not going go up 10 percent a year for the life of your student loan. Therefore this is for suckers…but I love the concept. I need to devise a product based on either instant gratification or sugar consumption. Those seem like two can’t lose bets…

    I would tell my kid to pay down the high interest student loan first and save up after that to maximize his,strength for financing down the road

    May 24, 2016 at 1:17 PM #797980
    bearishgurl
    Participant

    Well, Burkey can do whatever he wants, of course. It’s his and his firm’s money they’ll be lending out on RE at 100% LTV, lol. And his proposal seems like a bit of a scam to the poor schlump millenial who will take a mortgage/student-loan (assignment?) with his firm because Burkey and his firm aren’t legally responsible to pay a dime to the buyer’s student-loan lender.

    Instead, I see structural problems with the thinking of millenials (and even some straggling Gen-X … who are indebted – or still indebted) with student loans, which needs to be corrected if they expect to function as a adult who is able to fully participate in society.

    Millenials, in general, want it ALL right out of the gate. Many of them do things back a$$wards in life. They marry and start families (or just start families) WITHOUT first paying their student loans off. They buy $10K and up vehicles (even brand new vehicles) WITHOUT first paying their student debt off. They rent luxury apts and homes WITHOUT first paying their student debt off. Etc, etc, etc. In general, many (most) of them are “consumers extraordinaire” whilst still owing on mountains of 6.5% to 8% (non-dischargeable in BK, of course) student debt.

    I counseled my kids to never, ever marry anyone with outstanding student debt as they will be left holding the bag in more ways than one. I told them that Sallie Mae (or a SL private lender) can place a lien on a student debtor’s home in the event of default (which THEY may be half-owners of). I told them that Sallie Mae (a “pseudo-gubment organization”) doesn’t even need to file suit and get a judgment to do so!

    This huge student-debtor group likes to cry wolf at the age of 35, 40 or beyond because they are still hamstrung in life by student loan debt and their kid(s) need braces, money for sports, diapers, formula, daycare … or even college, ad nauseam.

    If they would have just hunkered down driving a parent’s old ’80’s/’90’s vehicle (or rode public transportation) and “rented” a parent’s back bdrm (or dive apt in another city) while working FT the first 3 years after college graduation, they could have RETIRED ALL of their typical $30-$35K student debt.

    The ex-students who are now complaining they can’t buy a home right now due to student debt aren’t anywhere near ready to buy one, IMO.

    May 24, 2016 at 1:18 PM #797982
    bearishgurl
    Participant

    [quote=HLS]Ahhh…if it were only so simple.
    Are there ANY professions that guarantee LOCAL re-employment within 4-6 weeks ?[/quote]Short answer is NO!

    May 24, 2016 at 1:23 PM #797983
    bearishgurl
    Participant

    I know I sound a bit like one of my “contemporaries,” here, Suze Orman, “First things first (for young people),” and “Get your sh!t together before you pass GO and collect $200.”

    But millenials don’t like to listen to this “boring” advice. They’re too busy standing in line to get the latest $800+ iphone hours before its release :=0

    May 24, 2016 at 1:56 PM #797984
    FlyerInHi
    Guest

    BG, don’t bitch about millennials. They were enabled by their parents. So there is responsibility all around.

    I kinda like their happy go lucky attitudes.

    The facts are we need to find a solution to keep consumers spending, and buying houses. Our economy depends on it.

    Otherwise, the future is Japan where economic stagnation is eroding standard of living. Young people don’t really care, so they don’t work, produce and consume as much as their parents.

    BTW, that’s why we need immigrants. Legalizing the immigrants already here would be awesome for the economy.

    May 24, 2016 at 2:11 PM #797986
    spdrun
    Participant

    At least this isn’t being offered to the average millennial Twitter-twit so not too many millennials will get uppity. A good millennial is one that’s happily renting away.

    If people aren’t buying houses: BUILD FEWER HOUSES. Rednecks in the ticky-tacky box-building industry aren’t owed a job, last I checked.

    May 24, 2016 at 3:11 PM #797997
    bearishgurl
    Participant

    [quote=spdrun]At least this isn’t being offered to the average millennial Twitter-twit so not too many millennials will get uppity. A good millennial is one that’s happily renting away.

    If people aren’t buying houses: BUILD FEWER HOUSES. Rednecks in the ticky-tacky box-building industry aren’t owed a job, last I checked.[/quote]Exactly, spdrun. Thank you.

    May 24, 2016 at 3:15 PM #797998
    bearishgurl
    Participant

    [quote=FlyerInHi]BG, don’t bitch about millennials. They were enabled by their parents. So there is responsibility all around.

    I kinda like their happy go lucky attitudes.

    The facts are we need to find a solution to keep consumers spending, and buying houses. Our economy depends on it.

    Otherwise, the future is Japan where economic stagnation is eroding standard of living. Young people don’t really care, so they don’t work, produce and consume as much as their parents.

    BTW, that’s why we need immigrants. Legalizing the immigrants already here would be awesome for the economy.[/quote]Actually, FIH, young people consume more than their parents did when they were their age as well as now. That is … they consume far more in consumer goods. If young people “don’t really care” and “don’t work as much (as their parents did/do),” as you say, then they shouldn’t be bitching as to why they can’t qualify to buy a home …. whether indebted with students loan(s) … or not.

    May 24, 2016 at 3:38 PM #798001
    FlyerInHi
    Guest

    There is a national apartment boom now.

    May 24, 2016 at 3:53 PM #798005
    bearishgurl
    Participant

    [quote=FlyerInHi]There is a national apartment boom now.[/quote]That sounds like a “less-than-optimal lifestyle” for a millenial to begin raising a family in who has 2+ kids who are already walking.

    Whatever floats their boat.

    May 24, 2016 at 4:14 PM #798006
    FlyerInHi
    Guest

    BG, don’t be so hard-headed. Give millennials what they want. I believe that urbans areas will see renewal thanks to millennials. We see that in cities like Portland.

    http://vegasinc.com/business/real-estate/2016/jan/28/drawn-to-chinatown-las-vegas-developer-skips-the-s/
    http://www.usatoday.com/story/money/markets/2016/04/02/millennials-apartment-building-urban-lifestyle/82205392/

    The only worry I have is that millennials delay having kids and that will affect the economy (from automobile to homeownership). That’s why need more immigrants to make up the difference. We can develop policies to adjust.

    May 24, 2016 at 4:26 PM #798008
    spdrun
    Participant

    No one in the auto or property (or any) industry is owed a living. I’m supportive of immigration for other reasons, but keeping UAW and Realtor parasites in the trough is not a reason for policy.

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