The Bank of Piggington

[New Guy]

I am curious to hear what sort of criteria and options everyone would if there was a Bank of Piggington. What I mean is, forget about fixed loans, interest only, optional arm’s. Forget even a 30 year, 15 years or 40 years (yikes!)…forget everything we know about loans. Forget even monthly mortgage payments.

In everyone’s opinion, what sort of criteria and terms would make a “perfect” loan? Let’s assume we all have a financial interest in the Bank of Piggington and we want to make loans that are profitable but also make homeownership attainable and sustainable for the long term. What income would be required? Etc., etc., etc.

Thoughts?

[bsrsharma]

I will setup a GSE Conforming/FHA/VA loan machine and go on vacation. If Uncle Sam buys all your loans, why sweat? There may not be a lot of profit in each loan; But hey, I can set it up to run from Bangalore and still make nice money!

[bsrsharma]

I will setup a GSE Conforming/FHA/VA loan machine and go on vacation. If Uncle Sam buys all your loans, why sweat? There may not be a lot of profit in each loan; But hey, I can set it up to run from Bangalore and still make nice money!

[no_such_reality]

In everyone’s opinion, what sort of criteria and terms would make a “perfect” loan?

Perfect for who?

The borrower?

The bank?

The investor to whom the bank sells the loan?

The mortgage agent on commission that makes the deal?

The RE Agent that brokered the home sale?

The appraiser that provides the number the bank yeas or nays?

The future neighbors of the person to whom the bank is thinking of loaning the money?

[no_such_reality]

In everyone’s opinion, what sort of criteria and terms would make a “perfect” loan?

Perfect for who?

The borrower?

The bank?

The investor to whom the bank sells the loan?

The mortgage agent on commission that makes the deal?

The RE Agent that brokered the home sale?

The appraiser that provides the number the bank yeas or nays?

The future neighbors of the person to whom the bank is thinking of loaning the money?

[kewp]

The kind you don’t have to pay back?

[kewp]

The kind you don’t have to pay back?

[tangouniform]

I like the “rent-to-own” concept:

You want to own a house outright at some point (to eliminate most of the housing expense when you retire, say). Your standard monthly mortgage is composed of overhead and debt payoff. That debt hangs over you like a piano on a cartoon string. Why not flip it around so your money is working for you:

* The bank owns the property outright for the term. The term length is flexible, depending on your goals.
* You pay a monthly overhead fee (rent) and pay an installment of the principal into escrow. The bank gets a cut of the overhead fee and uses the remainder to pay property upkeep via some property management company.
* The bank maybe gets a cut of the interest generated by the principal payoff funds that sit in escrow.
* At the end of the term, a cash transaction takes place and you get the clear deed.
* If you decide to move before the end of the term then the property is appraised and if it’s the same or higher (inflation adjusted?) than the contracted terms then you get all your funds back from escrow and are free to go your way. If, alas, the property appraises under the contracted term price then you lose money from your escrow account (maybe some fractional multiplier kicks in to keep you from being sucked dry?). The appraisal is a “mark to market” moment. The property is put back on the market at or around the appraisal price. If other lenders are doing similar things then the appraised price will be pretty accurate for the market, I think.

I like this because you know exactly where you stand. You’re renting from the bank and you know exactly how much cash equity you have in your escrow account. I think this would preclude the creation of bubbles because the only way you can sell property is if you own it outright. You can’t leverage OPM; that’s the bank’s job now and they’re regulated. Maybe.

Some of us renters are doing something like this right now. I’m socking money away like mad and paying for my housing like its a service. At some point in the next few years I expect the (falling) house price curve to intersect my (rising) cash balance curve. At that point I can buy in cash and then start REALLY saving because I’ll have chopped my housing costs back further.

[tangouniform]

I like the “rent-to-own” concept:

You want to own a house outright at some point (to eliminate most of the housing expense when you retire, say). Your standard monthly mortgage is composed of overhead and debt payoff. That debt hangs over you like a piano on a cartoon string. Why not flip it around so your money is working for you:

* The bank owns the property outright for the term. The term length is flexible, depending on your goals.
* You pay a monthly overhead fee (rent) and pay an installment of the principal into escrow. The bank gets a cut of the overhead fee and uses the remainder to pay property upkeep via some property management company.
* The bank maybe gets a cut of the interest generated by the principal payoff funds that sit in escrow.
* At the end of the term, a cash transaction takes place and you get the clear deed.
* If you decide to move before the end of the term then the property is appraised and if it’s the same or higher (inflation adjusted?) than the contracted terms then you get all your funds back from escrow and are free to go your way. If, alas, the property appraises under the contracted term price then you lose money from your escrow account (maybe some fractional multiplier kicks in to keep you from being sucked dry?). The appraisal is a “mark to market” moment. The property is put back on the market at or around the appraisal price. If other lenders are doing similar things then the appraised price will be pretty accurate for the market, I think.

I like this because you know exactly where you stand. You’re renting from the bank and you know exactly how much cash equity you have in your escrow account. I think this would preclude the creation of bubbles because the only way you can sell property is if you own it outright. You can’t leverage OPM; that’s the bank’s job now and they’re regulated. Maybe.

Some of us renters are doing something like this right now. I’m socking money away like mad and paying for my housing like its a service. At some point in the next few years I expect the (falling) house price curve to intersect my (rising) cash balance curve. At that point I can buy in cash and then start REALLY saving because I’ll have chopped my housing costs back further.

[cr]

I.O.U.s

[cr]

I.O.U.s

[Author]

Posts