Forum Replies Created
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bearishgurl
ParticipantWell, ER, the people I’m referring to that aren’t paying on their student loans or aren’t paying on them regularly are students who graduated in the last few years … some of my kid’s college classmates and kids of neighbors and a friend. Also, the “professionals” I referred to back in the early nineties were newly-minted attorneys who chose to work in govm’t service, which at that time started them at just short of $39K annually! As I recall, there were several of them over 40 with 12 or more years experience and who had gotten promoted one or more times but were STILL complaining of the strong-arm tactics that were used against them when their student loans were in default. They didn’t get paid for “billable hours” or “client referrals to the firm” as private attorneys did. They just got paid a set salary for however long it took to do the job. Being a worker (working just as hard, I thought) who was making half or less as much as they did, I just had a hard time understanding whey they couldn’t retire their student loan(s) and why they still had them 15 or more years later with a spouse and children when they came to us single, fresh from their bar exam results.
I suppose there are people who DO pay them off in a timely manner but I don’t know any. Everyone I ever knew who has them have taken one or more deferrals and is paying only the minimum monthly payments on them.
In addition, I’ve looked at various online blogs and message boards where student-loan debtors post where 90% of the posters are crying wolf, stating they were “scammed” by their school and so they shouldn’t have to pay or they should be “excused” from paying their loans back. Some of them who already graduated are saying they are a “special case” because they can’t work in their field now because they or their parent / grandparent / spouse / kid is now ill and they have to take care of them. Therefore, their student loans should be forgiven. (Does this mean their degree should be revoked also? How can they officially lose the knowledge they gained from their degree program?) A majority of the posters on these boards are over 45 and a majority of them went to for-profit schools and colleges on student loans, mostly on the internet (meaning they never set foot in a classroom). Often, the colleges they “attended” were hundreds or thousand(s) of miles away from their homes. I completely agree with ER that it is foolish to take out a student loan to undergo an occupational or degree program at the age of 45 or older. Unless the older student already has ironclad connections to get a job in a field or their employer is paying for them to get a particular degree to promote them into a particular position, these older students have no guarantee that they will ever be hired in their degree field or in any job at all if they are currently unemployed.
Also, I think some (not all) of the 12-month trade schools (for both young and older students) are a scam, such as programs to learn dental hygienist, computer networking, medical billing, etc. Some of these schools prey on HS grads from low-income families and load them up on loans during enrollment where they make big promises of eventual job placement. These schools often get the (unsophisticated) parents to cosign on their kid’s student loans so they will have 2-3 people on the hook to pay it back. By the time the student finishes the program, they have had little “real” on-the-job training and receive no placement assistance from the school except a suggestion to go to the EDD (unemployment office) to search open positions or are handed a list of medical offices to call to see if they have any openings. Some of these schools in SD have taken students’ student loan money and shut their doors either before the first class meeting or midway through the program.
Case in point: the well-known Kelsey Jenney College in dtn SD, who filed for BK in 2002 and left several classes of business students stranded three months before “graduation.”
If it weren’t for student loans literally falling from trees, these “internet diploma mills” and local “trade schools” with a less-than-stellar local reputation would be out of business.
bearishgurl
Participant[quote=earlyretirement]…I don’t agree with BG’s point of “don’t get a college loan”. Not at all. I just think that you have to really take an intimate look at what field of study you will go into, the prospects for employment in that field, how much your education costs vs. typical salary levels in that field….[/quote]
But ER, you have to admit that you didn’t attempt to drag your $100,000 (nondischargeable) debt into a marriage/relationship with your partner, have kids and attempt to get a mortgage to buy real property with them with this debt hanging over your head.
You took care of first things first … even if you had to work MANY hours to do so and only THEN progressed your life the way you wanted it.
Some students from modest means have the drive to retire their student loans expediently, before the lure of consumerism, pleasure and family responsibilities set in. But I believe these former students (who take care of business first) are in the distinct minority, ER. Congratulations. You are a member of that minority.
As it should be.
Note: a student loan follows ONLY the student-borrower until death. Whether taken out before or after a marriage, it is not a “joint debt” in any state that I am aware of. It is solely the former student’s own debt and will not show up on the credit report of a spouse or parent of the student unless they cosigned for it.
bearishgurl
Participant[quote=joec]I always found it strange that if you had a ton of equity in a home, why a bank would not want to refinance you. I assume if you had 40% equity, won’t they just get your home at 40% off if you defaulted?
The whole problem with the past housing bubble was no money down. If they required 20%+ down, the housing bubble probably wouldn’t have happened.[/quote]
joec, the problem is that lenders don’t want your home at all. It is (apparently) too much hassle for them to foreclose on delinquent borrowers, ready the property for sale and carry it for a time (maintenance, insurance, taxes, MR, HOA fees) until it is resold. The vast majority of lenders won’t take a chance on people who can’t demonstrate on paper that they have enough monthly income to make the mortgage payment every month, even if it DOES represent 60% (or less) of their home’s value as appraisals are subjective.
This is part of the reason why many people who are semi-retired or retired pay all cash for RE. They may have demonstrated for many years on their credit reports that they can make mortgage payments which are even higher than that of the mortgage they might seek today but their “numbers” don’t pencil out on a mortgage application such as to be “qualified” to take on a mortgage. The other reasons they don’t take out a purchase-money mortgage are that its initial cost is too prohibitive due to the length of time (possibly just a few years) they’re planning on keeping the mortgage. IOW, they’re only planning on keeping a mortgage until they’re 59.5 years old (and can access retirement funds to pay it off), or, in the alternative, when they are eligible to collect SS (coinciding with leaving their jobs).
Just 12 years ago, a conventional mortgage of 275K or less (conforming) only cost a (prime) borrower $2800 to $4400 to close. Now a mortgage of the same size costs $7000 to $9600 to close, due to hikes in lender’s and appraisal fees and escrow, title and recording fees. Although the ancillary fees can’t be changed, the lender fees today are too high for someone who is only going to hold the mortgage for a few years. If a lender advertises $0 in closing costs, there is a catch. In this case, the fees are built into the interest rate, the terms or the APR or all three. In the absence of the latter two, the mortgage broker is collecting a yield-spread premium from the lender between the rate contracted for and the prevailing rate and the mortgage is recorded under “MERS” and immediately resold.
“Old school borrowers” (such as myself) will not sign up for these shenanigans when seeking purchase or refinance money. We want to borrow our mortgage money from a local direct lender (ex. Downey Savings, Chase, Union Bank) where they will guarantee 100% on our note and trust deed that they will hold our loan forever and keep it in their “portfolio.” Twelve years ago, if a borrower put down at least 20% or had 20% equity (no PMI was involved) and did not trouble the lender with a (labor-intensive) impound account, a portfolio lender only charged them a doc prep fee of $150 and a $75 “tax service fee” (to check if the borrower pd his taxes at every installment). This amounted to ~$225 total in “lender fees.” If docs had to be “redrawn” for another payment date/closing date, the “redrawing” fee was $75. These lenders offer their portfolio borrowers payment flexibility and other conveniences such as multiple “brick-and-mortar” locations to make payments in on the last day at the last hour before a late charge kicks in. In addition, they were not required to adhere to FF guidelines and thus were not required to participate in “loan modifications” or “short sales” of their portfolio mortgages and in recent years could foreclose timely in accordance with state law. As such, their closing costs tend to be lower due to lower, more straightforward lender’s fees. These lenders can also make their OWN decisions re: a borrowers creditworthiness and aren’t required to adhere to strict front and back-end ratios when making loans to creditworthy individuals who have a long history of paying their bills on time.
I’ve strayed off the subject of your answer, joec, but, in short, lenders consider the borrower’s qualifications on their mortgage application and credit report as having more weight than the appraisal when deciding if they will loan purchase money or approve a refinance. You might think your house is “special” and any lender would want it for 60 cents on the dollar but when all is said and done, they don’t.
IIRC, you posted here before that you were self-employed. If you are having trouble refinancing but otherwise are a prime borrower, I would suggest you contact one of the above three major lenders among a slightly larger list of portfolio lenders who do business in CA.
Note: Chase also makes mortgages backed by Freddie Mac in addition to those they keep in their portfolio (not to be confused with one another).
bearishgurl
ParticipantIf former students with good jobs wouldn’t keep taking deferments and consolidating their student loans into 20 or 30 years and then missing payments, they wouldn’t have this problem.
When a recent college grad gets a “good job,” it seems most of them immediately buy a new or newer vehicle at a high interest rate (because they don’t yet have enough credit established to get lower rates). Then they rent too expensive of an apartment/condo and/or don’t have enough roommates. This money could have been deflected every month to their student loan(s) while they take their old car to a garage and have it fixed to drive a few more years and keep their lower registration fee and cheaper insurance.
Employers very much DO want to hire college-degreed Gen Y and younger Gen X (the under-40 crowd)… that is, if they didn’t get a degree in art history or underwater basket-weaving. Employers SURELY don’t want to hire the “over-50 crowd,” regardless of experience, (unless they work as a “consultant” or “independent contractor” for whom they will issue a 1099). Often, the indebted former student has to be willing to relocate for that first (or second) “good job.” I don’t know about other states, but many, many CA natives in this group will NOT relocate, especially if they are living with parents or on/in their property (residence or rental property). After living in coastal CA all of their lives, they just can’t quite stomach the idea of Kansas City. But if that is what they have to do to get off the starting blocks of life, then they should do it, IMHO. It’s not for the rest of their lives but just to get them launched in their fields.
Eventually the young degreed worker finds an employer with whom they can have a “career.” By then, a lot of them have one or two “accidental” kids and their pay becomes ensnared for child support or daycare expense. Then they find their tax refunds have been levied for student loan defaults so they file a new W-4 claiming 9 exemptions.
Soon they are 40-45 with a family of five to support or help support and their student loans have barely shrunk from when they were fresh grads of 25-26. Some of their spouses had to buy a home in their name only so the family could have a home. Of course, it was a lesser house in a lesser area than if both of the buyers could qualify for a mortgage.
I’ve seen the above phenomenon with younger lawyers (Gen X) as early as 1990. It was just pathetic as these professionals worked their a$$e$ off every day and had VERY little, if any, discretionary income. They borrowed for college/law school in the ’80’s or very early nineties and their spouses bought houses in the early nineties for their families (when SD housing prices were down).
I can only imagine how hard it must be now. This is why NONE of my kids have ever or will ever take out a student loan.
If you have student loans, they come first, before new vehicles, partying every weekend, personal traveling, etc. The student should endeavor to pay them off as fast as possible, even if they have to get a second job to do so.
Lesson learned. DON’T BORROW FOR COLLEGE. If you can’t afford it and can’t get a scholarship or fee waiver, go to CC or ROP and get an associate degree or trade or join the military until such time as you CAN afford to go. It’s NOT WORTH IT for a young person to mortgage their lives away before they even get them started.
And don’t drag your evil student-loan baggage into a marriage or domestic partnership. It is not fair to an un-indebted partner. And if you are already married or are not but purchased (mortgaged) real property with your partner, then DON’T take out a student loan. Life happens and your responsibility now lies with helping your partner pay that mortgage every month.
That is my personal opinion. I’ve just seen too much. ‘Nuff said.
[end of lecture]
bearishgurl
Participant[quote=FormerSanDiegan][quote=all][quote=bearishgurl]desmond, I don’t think paramount needs to worry about whether the property he’s selling is his “official residence,” or not. Any Pigg tax people correct me if I’m wrong, but he would have to make a least a $250K profit upon sale over the price he paid for each house in order to need an “official residence.”
[/quote]
You are wrong.[/quote]I second that. Completely wrong.
If you sell a property that is not your primary residence you will owe taxes on any gain.
If you sell a property that is your current residence, but previously was a rental you will owe some taxes as well, based on a prorated percentage of how much time it was not your primary residence (as of 2009, when the law changed).
The best summary of the tax laws involved that I have found are here:
http://firstexchange.com/March2012Newsletter
Beware other sources of info that were written before the 2009 law took place.[/quote]
FSD, thanks for the clarification. I am not a tax preparer and have read the link you provided: Here is an excerpt:
…Another important exception is that property that is first used as a primary residence and later converted to investment property is not affected by these restrictions on excluding gain. For example, if you own and live in a house for 18 years and then you move out and rent the house for two years before selling it, you can receive the full amount of the exclusion. Because your investment use occurred after the last day of use as a primary residence, all of the gain accumulated over your 20 year ownership of the property can be excluded, up to $250,000, or $500,000 for married couples…
Of course, the OP would have to tell us, but I think his situation meets the exception described above. From my memory of his prior posts, I don’t think his rental house has been in service very long (1-2 years??). Before renting it out, it was his principal residence.
If I’m reading this paragraph right, the OP won’t have to pay capital gains on any portion of proceeds he nets from sale because his rental house hasn’t been in service long enough.
Is this your understanding of this exception?
paramount, how long has it been since you moved into your new primary residence and how long have tenants occupied your old house (if the answer to the 2nd question makes a difference)?
FSD, if paramount is coming up upon, say, 3 years since he turned his old house into a rental, what should he do here if he wanted to sell at least one house and avoid capital gains tax?
bearishgurl
ParticipantI want to clarify that I didn’t “read too much” into the (scanty) stats provided by foreclosureforum.com when posting above.
Because I was following about 45 NOD’s in my local area from 2010 forward for almost two years, I realized only two of them ever went to trustees sale. After checking MLS aggregators and just intermittently watching the properties in person, I came to the conclusion that about eight of them sold short (more could have done so without puttting the property on the MLS – I didn’t check ARCC sales).
The majority of borrowers who had NOD’s filed from 2007 forward never got a Notice of Sale filed. And the ones that did had up to 12 postponements. So all of those thousands of remaining NOD’s filed were not acted upon by the lenders and a (good) portion of them (don’t know the percentage) were not sold short or taken back with a deed-in-lieu. The only thing to deduct from this study is that the trustor previously in default either still resides there or has tenants or relatives that do.
My guess is a portion of delinquent borrowers did not want to sell short and further ruin their credit so cooperated with a mod when it was offered to them.
bearishgurl
Participant[quote=all]It’s ok to be exact while having no data to back results – the study shows that 89% of all study results are made up anyways.[/quote]
I figured as much, all.
I’ve just been around long enough to understand how things work around here :=]
bearishgurl
Participant[quote=all][quote=zk]
I’d be interested to hear other theories that might explain the lack of inventory.[/quote]Based on DataQuick data:
County NOD’s
2009Q2: 9,866 2011Q4: 4,813 2012Q4: 2,655foreclosures
2009Q2: 3,518 2011Q4: 2,044 2012Q4: 1,285Different source, similar drop in NOD’s, trustee sales (from 1,600+/month in 2008 to <400/month in 2013)
http://www.foreclosureforum.com/stats.html%5B/quote%5D
In looking at the chart, the large amount of trustee sales in January 2013 appears to be overflow from repeated sale postponements in 2012. We haven't yet seen the stats on completed trustees' sales for those (first) NOD's filed in 2013.
The lower number of current NOD filings in comparison to past years is NOT indicative of borrowers catching up on all their back principal and interest owed. It is indicative of borrowers cooperating with their lenders in a loan mod, many of which no doubt have "equity-sharing" arrangements built into them with their 1st or 2nd trust deed holder in exchange for being allowed to pay a 2% or 3% fixed rate and have some or all of their deferred interest and/or late charges forgiven. This deferred interest arose from when these borrowers' mortgages exceeded 125% LTV due to them choosing to pay Option 2 (insufficient to fully amortize) and/or Option 3 (I/O) and/or Option 4 (less than I/O - this choice was not avail on all Option ARMS) for a period of months or years. My guess is that these "equity sharing" provisions will be lifted or lessened if borrowers pay their mortgages under the new, modified terms for X amount of years faithfully, in full and on time.
The result is the same. These many thousands of properties are off the market for the foreseeable future unless these borrowers HAVE to sell for reasons of employment, death or divorce.
bearishgurl
Participant[quote=outtamojo]The new normal? Jim the realtor had an interview w/ the Davidson homes guy a while back
There was a map showing how all the land for big projects is gone in S.D. County.[/quote]
I saw this video back when it came out last year. The developer is correct and all is as it should be. Enough is enough. SD County is grossly overbuilt and we were in danger of running out of water and had our landscape water rationed when it had less than half the population it does today. This situation with the State of AZ is still precarious. AZ is now grossly overbuilt as well and needs ALL of its share as is their right.
Short of having (ugly) desalination plants in the future on our bayfront and/or oceanfront (perhaps a huge one in Tijuana, BC to share with their residents … how’s that for “quality control?”), SD County residents have no guarantee how long our future rights to Colorado River basin water will last. The supply is certainly far from infinite.
And it is absolutely wacky to raze avocado groves and build huge subdivisions in Bonsall and surrounds (an idea I have been reading about). It is going to cost a FORTUNE to bring utilities to this area (read: VERY high MR). A good portion of the eastern section is covered with large boulders and is therefore unbuildable. If new home buyers want to live this far from SD, then TV will welcome them … that is, IF there are any new developments currently underway there.
TV is also grossly overbuilt. It is well past time for Big Developers to call it a day and leave SoCal permanently. Most already have.
bearishgurl
ParticipantI don’t know if SD County currently has more “buyer demand” than normal. Non-resident people who wanted to retire here always did if they could afford to buy a home here.
As far as new household formations, I don’t see that here, but it may be happening in areas I’m not too familiar with. New Gen Y college graduates, even if SD natives are all aware that they can make more money in LA and SF in their chosen fields. I’ve seen not only my kid(s) but many of their HS classmates flee the county for college to never return, except for holiday visits. Many friends, neighbors and former co-worker’s children left CA long ago (either before or after college) and are raising their own children in other states (where they were offered employment). I’m not sure that the SD County HS graduate or college graduate “resident-retention-rate” is that great. Even though SD has a well-paying high-tech sector, other industries, especially state and local government and FIRE industry jobs pay up to 40% less here than for an identical position elsewhere in CA.
I think the typical buyer pool in SD County is more “well-heeled” than those buyers emanating from “new household formations” as most in this group are renters.
I think the vast bulk of SD County buyers of personal residences are comprised of households with W-2 incomes over $150,000 (whether already a resident or a “transplant,” these are the buyers using PM mortgages), former SD residents/natives returning to live near family (some using PM mortgages of all levels), out-of-county residents moving here (or moving back here) to retire (using all cash and poss small PM mortgages) and out-of-state residents and foreign nationals buying vacation homes (all-cash buyers).
Then, there is the investor-buyer cohort, which I believe is about 32% of all buyers (the vast majority paying all-cash).
No charts or published facts to go on, all just my own opinions.
bearishgurl
Participant[quote=SD Realtor]…The only real mystery is why the lack of inventory.[/quote]
I don’t see any “mystery” here. Prospective sellers who hung on during the millenium boom, have equity and didn’t participate in the cash-out/HELOC party during the millenium boom have no doubt improved their properties over the years. Unless they purchased before 1997, a lot of them STILL can’t recover ANY of their cost of the improvements they made with their own money if they sold now. This is true in many micro-markets in SD County. It is not yet time for many homeowners in this category to sell unless their property is located in a “hot” zip code (where they can possibly now get up to 20% over asking price, possibly countering in a multiple-bid situation).
Many of the millenium-boom-era purchasers and owners who took “cash out” during this era and who still own their residences still cannot recover all of the cost of improvements or “cash-out” portion they took out of the property (some of which was no doubt used for improvements to said property), pay a RE commission and their portion of closing costs and still be “above water” at closing. If the market still seems to be rising and they are able to continue with their mtg payments (likely “modified” to lower monthly payments by now), they feel they can wait for a “better day” to sell.
In the “hot” areas, many prospective sellers may still have minor children in school since “schools” (and nothing else) seem to be the sole reason why these areas currently have a “hot” market and the sole reason for these prospective sellers’ purchase of the property in the first place.
And lastly, prospective sellers who have annual property taxes of less than $1000 are thinking twice about what their taxes would be if they bought another CA property which was NOT in a county participating in assessment transfers pursuant to Prop 60 (if they haven’t already taken this benefit). OR these same owners may just want to leave their unencumbered, low-taxed CA real property to their heirs, whether they currently occupy it or not. As well they should as long as the law allows this.
What say Piggs? If you had plans to move in the next 1-3 years, would you sell your home now … or wait? And if you would wait, how long would you wait to list it?
bearishgurl
Participant[quote=zk]…I’d be interested to hear other opinions on current market prices vs. peak prices.[/quote]
I agree with SDR that whatever “peak prices” were (during the millenium boom) has no bearing on prices today. The two periods of time are not related. And if they were related, “peak pricing” would be irrelevant as “peak pricing” was only obtained through the copious issuance of NINA mortgages to unqualified buyers.
Even though some homeowners made a (ill-gotten-but-perfectly-legal) killing off the sale of their properties between 2004 and 2006 (to the detriment of their buyers), the sold comps in this period of time should never be “studied” or used again for comparison purposes as they were all derived from “funny money.”
Peak pricing certainly happened but it wasn’t based on reality in any way, shape or form.
If you want to use past sold comps for comparison values, go back to 2002/2003 (depending on area). Homebuyers still had to traditionally qualify for their mortgages up until late 2003/early 2004.
bearishgurl
Participant[quote=livinincali]FHA default rates are up around 10% right now. FHA MIP has been skyrocketing as that default rate has increased and FHA reserves have gone negative. The reason FHA got so popular is it was the only high leverage game in town when the bubble popped. The saving rate in the nation is a record lows. At some point you need the underlying economy and wages to push housing up. You can game it high with increasing amounts of leverage and lower rates but that only lasts so long.
That’s why I’m of the belief that right now or in the next year might be a really good time to sell. Almost every market condition in terms of rates, leverage, constrained inventory, etc. is in the sellers advantage right now. You’re looking for an improving wage and employment situation without any impact in rates to really push it higher on fundamentals.[/quote]
livinincali, I could understand why the Kansas City market has to cater to “high-leverage” borrowers in most areas there, but I don’t understand why CA coastal markets do. Why do “very desirable” markets with a “captive audience” (such as SD Co) need to cater to “high-leverage” borrowers? Before 2000?, FHA loans only represented <5% of overall purchases in SD County. Back then, the local FHA ceiling was set in line with the likes of SFR pricing in Spring Valley, Lemon Grove (just barely) and other similarly-situated communities in the county .... as it should be.
I don't understand why the ceiling EVER rose beyond $300K in SD County. Certainly, with the recent run-up in local home prices everywhere (2013), $400K should be the current max FHA mortgage available in SD County ... the absolute max. $400K is a HUGE mortgage for a moderate-income buyer.
In a nutshell, why is the FHA attempting to serve households with more than the "average income" in a particular county? It doesn't make sense. That is the sole purpose of fannie, freddie, portfolio lenders and the VA (for eligible vets only, regardless of income). It was never and is not today the FHA's role to provide this level of leverage.
bearishgurl
Participant[quote=livinincali]… Most of the sales in the past 3-4 years are all cash investors (30-40%), FHA/VA (30-40)%, and then traditional 20% down loans (maybe 20ish%)…[/quote]
livinincali, I think the “buying pool” in SD County in the last four years was a little stronger than you make it out to be here. I agree with the ~40% cash-buyer part, but do not agree that they were all “investors.” A percentage of this category of buyers – I’ll take a stab at it and say 8% (or 20% of cash purch) paid all cash for a personal residence.
With the other two categories, I think the answer lies somewhere in the middle. I personally know a few people who purchased a residence in SD County in the last four years and they put 25-80% down. Not everyone wants an 80% mortgage. A lot of people who know they will just work a few more years take out a 15 yr mortgage which will yield only as much MID tax writeoff for their current and projected taxable income as they know they will need in the coming years and not a penny more. For a lot of these people, that magic number is somewhere between a $5K and $12K annual interest writeoff. Beyond that size of mortgage, they’re just throwing money away on interest. At the time of retirement from their W-2 job, they typically plan to pay their mortgage balance off and remain in the property or sell their residence and move elsewhere.
So my rough (educated) guess is that the SD County buyer pool in the last ~4 years is comprised of 40% all-cash purchasers, 30% FHA/VA purchasers and 30% conventional purchasers of which 25% (83% of conv purch) put 20-80% down and 5% (17% of conv purch) put <20% down and used PMI.
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