Investing in Trust Deeds (Mortgage Notes) and LLPs

[EconProf]

Sorry, CA Renter, but I don’t think assumable loans were that big a factor in the real estate price runup in the late 1970s. The idea of carrying back a second TD was just too uncomfortable for many sellers. They were afraid they wouldn’t be able to unload it, and they were frightened about the discount they would have to take.
Instead, the price runup was because of the understandable panic people felt due to mounting inflation. The pessimism about our country’s future then was palpable, and the anger against President Carter and his lackey Fed chief fueled the appetite for inflation hedges such as gold (at $800/oz.) and houses. Remember also that Proposition 13 was passed in 1978, adding fuel to the fire. Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.

[briansd1]

[quote=EconProf] Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.[/quote]

Interesting comments.

It sounds like you’re saying that the hard choices made by Carter and Volcker were the reasons for the growth and prosperity of the 1980s.

[briansd1]

[quote=EconProf] Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.[/quote]

Interesting comments.

It sounds like you’re saying that the hard choices made by Carter and Volcker were the reasons for the growth and prosperity of the 1980s.

[briansd1]

[quote=EconProf] Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.[/quote]

Interesting comments.

It sounds like you’re saying that the hard choices made by Carter and Volcker were the reasons for the growth and prosperity of the 1980s.

[briansd1]

[quote=EconProf] Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.[/quote]

Interesting comments.

It sounds like you’re saying that the hard choices made by Carter and Volcker were the reasons for the growth and prosperity of the 1980s.

[briansd1]

[quote=EconProf] Carter finally got a backbone and appointed tough-guy Volcker to head up the Fed, who was willing to put the economy through the high-interest rate ringer in order to slay inflation. Reagan was elected over the hapless Carter. The economy briefly stayed in its deep tight-money slump, until people realized were not going to turn into the Weimar Republic, then exploded with 8% growth out of the recession. Real estate stayed fairly flat for the first half of the 1980s, then heated up for the second half, peaking around 1990.[/quote]

Interesting comments.

It sounds like you’re saying that the hard choices made by Carter and Volcker were the reasons for the growth and prosperity of the 1980s.

[briansd1]

[quote=EconProf]
A little history for those under 50 here. TD investments were once really big in the late 70s and 80s when prevailing interest rates were ramping up as inflation gathered steam. In those days existing mortgages were assumable by the next buyer of a house. Remember that mortgage rates and inflation rates peaked around 1980, pre-Reagan and pre-Volcker, at about 18% and 13% respectively. This meant that the lucky homeowners selling their house with a 6% assumable loan in an 18% new-loan-environment had a terrific selling point. So much so that it capitalized into a much higher market value of the house.
Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so.
But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. [/quote]

That’s exactly how old timers in real estate explained it to me also.

VA loans were automatically assumable without credit check so VA loans were rampant with fraud.

VA loans are now assumable only with underwriting approval.

[briansd1]

[quote=EconProf]
A little history for those under 50 here. TD investments were once really big in the late 70s and 80s when prevailing interest rates were ramping up as inflation gathered steam. In those days existing mortgages were assumable by the next buyer of a house. Remember that mortgage rates and inflation rates peaked around 1980, pre-Reagan and pre-Volcker, at about 18% and 13% respectively. This meant that the lucky homeowners selling their house with a 6% assumable loan in an 18% new-loan-environment had a terrific selling point. So much so that it capitalized into a much higher market value of the house.
Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so.
But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. [/quote]

That’s exactly how old timers in real estate explained it to me also.

VA loans were automatically assumable without credit check so VA loans were rampant with fraud.

VA loans are now assumable only with underwriting approval.

[briansd1]

[quote=EconProf]
A little history for those under 50 here. TD investments were once really big in the late 70s and 80s when prevailing interest rates were ramping up as inflation gathered steam. In those days existing mortgages were assumable by the next buyer of a house. Remember that mortgage rates and inflation rates peaked around 1980, pre-Reagan and pre-Volcker, at about 18% and 13% respectively. This meant that the lucky homeowners selling their house with a 6% assumable loan in an 18% new-loan-environment had a terrific selling point. So much so that it capitalized into a much higher market value of the house.
Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so.
But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. [/quote]

That’s exactly how old timers in real estate explained it to me also.

VA loans were automatically assumable without credit check so VA loans were rampant with fraud.

VA loans are now assumable only with underwriting approval.

[briansd1]

[quote=EconProf]
A little history for those under 50 here. TD investments were once really big in the late 70s and 80s when prevailing interest rates were ramping up as inflation gathered steam. In those days existing mortgages were assumable by the next buyer of a house. Remember that mortgage rates and inflation rates peaked around 1980, pre-Reagan and pre-Volcker, at about 18% and 13% respectively. This meant that the lucky homeowners selling their house with a 6% assumable loan in an 18% new-loan-environment had a terrific selling point. So much so that it capitalized into a much higher market value of the house.
Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so.
But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. [/quote]

That’s exactly how old timers in real estate explained it to me also.

VA loans were automatically assumable without credit check so VA loans were rampant with fraud.

VA loans are now assumable only with underwriting approval.

[briansd1]

[quote=EconProf]
A little history for those under 50 here. TD investments were once really big in the late 70s and 80s when prevailing interest rates were ramping up as inflation gathered steam. In those days existing mortgages were assumable by the next buyer of a house. Remember that mortgage rates and inflation rates peaked around 1980, pre-Reagan and pre-Volcker, at about 18% and 13% respectively. This meant that the lucky homeowners selling their house with a 6% assumable loan in an 18% new-loan-environment had a terrific selling point. So much so that it capitalized into a much higher market value of the house.
Trouble is, the mortgage might only be for 50% of the asking price. Enter the carry-back. The home seller would sell and create a 2d TD for 30% or 40% of the price, so the buyer would only have to come with 20% or 10% down. Terms of the 2d TD might be 10%, 3 – 5 years or so.
But the seller wants cash, not a note, so they immediately advertise in the classifieds (remember them?) or sell to a broker/middleman who would turn around and sell it. [/quote]

That’s exactly how old timers in real estate explained it to me also.

VA loans were automatically assumable without credit check so VA loans were rampant with fraud.

VA loans are now assumable only with underwriting approval.

[34f3f3f]

Bearishgurl, he’d need to be a blood relative with a reputation for doing good on his debts. This worked example is apparently typical. It may be that the majority work out for the investor, but I’d personally want to see actual capital upfront, just as many residential lenders do.

[34f3f3f]

Bearishgurl, he’d need to be a blood relative with a reputation for doing good on his debts. This worked example is apparently typical. It may be that the majority work out for the investor, but I’d personally want to see actual capital upfront, just as many residential lenders do.

[34f3f3f]

Bearishgurl, he’d need to be a blood relative with a reputation for doing good on his debts. This worked example is apparently typical. It may be that the majority work out for the investor, but I’d personally want to see actual capital upfront, just as many residential lenders do.

[34f3f3f]

Bearishgurl, he’d need to be a blood relative with a reputation for doing good on his debts. This worked example is apparently typical. It may be that the majority work out for the investor, but I’d personally want to see actual capital upfront, just as many residential lenders do.

[Author]

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