by Anton Blewett on October 19, 2007
By Anton Blewett, Cell: (650) 996-2028
Since the mortgage crisis, the lending industry adopted new practices. One new practice worth highlighting is the switch from stated-documentation and full-documentation to primarily full-documentation only. Lenders made the switch because full-documentation borrowers carry significantly less risk than stated-documentation ones.
The Distinction
Stated-documentation loans were an attempt to simplify the documentation process. Instead of verifying bank statements, a borrower simply said, “I make $120,000 annually, I have $80,000 in my savings account, I carry $10,000 in credit card debt.” The lender accepted these statement as fact. Today most loans require full-documentation, meaning a borrower must provide actual documentation.
Is not stated-documentation an oxymoron?
Impact? Less borrowers qualify
Less buyers qualify for two reasons. First, the stated reality versus actual reality are sometimes very different. Now borrowers that qualified by lying are ferreted out. Second, variable-income earners, such as myself, salespeople and consultants, have much difficulty documenting steady past and future income. Consequently variable-income earners who are new (without three or more years of steady income) or had bad years (low income) no longer qualify.
Final Thoughts
Variable-rate earners make up a large portion of the Peninsula buyer pool and therefore, the loss of their presence definitely impacts demand for local homes. On the flipside, lending to risky borrowers fueled the mortgage meltdown. Moves to safer practices, such as requiring full-documentation, are welcomed with open arms.
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by Anton Blewett on October 19, 2007
By Anton Blewett, Cell: (650) 996-2028
Congressman John Dingell, a democrat from Michigan, is formulating a plan to phase out mortgage interest write-offs for new homes with interior space greater than 3,000 square feet. Although the legislation is not yet introduced, a debate is firing up between environmental groups and the National Association of Home Builders and the National Association of Realtors.
I will keep you posted over the coming weeks and months as the situation unfolds. Kenneth Harney does a good job of framing the debate in his San Francisco Chronicle article:
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by Anton Blewett on October 14, 2007
By Anton Blewett, Cell: (650) 996-2028
The front page of today’s Sunday Edition San Francisco Chronicle reads: “Mortgage Meltdown: Neighborhoods crumble in wave of foreclosures,” “One Street’s Nightmare: People bail out, those who remain suffer,” and “Local Trouble Zones: Epidemic repossessions hit several ZIP codes.” The three articles are largely based on the chart titled “How ZIPs become trouble zones,” which lists the zip codes with the highest rate of foreclosures.
- Is any zip from San Mateo County listed? No.
- Are any San Mateo County cities mentioned in the article? No.
- Will the article affect the value of San Mateo County homes? Big time.
The articles mislead the public, specifically potential buyers, into thinking that a major real estate downturn is occurring in all areas of the Bay Area when in reality, it is occurring in only specific neighborhoods. [click to continue...]
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by Anton Blewett on October 3, 2007
By Anton Blewett, Cell: (650) 996-2028
I hear it all of the time, “Homes are not made like they used to make them.” With all of the advances made in home materials and construction, is this statement true? In my opinion, no.
Maybe profit gets in the way more today than previous decades. There may be more pressure on builders today to sacrifice quality in an effort to meet deadlines and maintain profit margins. However this line of reasoning is pure speculation. We need answers! So I went straight to the source and asked a local builder, Bill, the question. He replied, “Baloney. The problem is people do not maintain homes like they used to maintain them.”
Basic principles are lost on many people today. Consider fiscal responsibility. In my opinion, many people fail at managing money. Why else is the average consumer spiraling into massive debt? I am not surprised that they fail at managing their home as well. When a person charges $100 for an item of clothing, is he aware that it will cost, on average, four times that amount by the time the debt is paid off? (With accruing interest and late fees). Likewise the same person is unaware that an improperly caulked tub may cost thousands of dollars to repair in just a few years. (From fungus damage to sub floor and / or framing).
Bill told me that homes today, with construction and materials, are built to last at least 300 years if the owner maintains them properly. My advice to all: maintain your home on a regular basis. Both your home and pocketbook will appreciate it.
See my next posting detailing common maintenance routines.
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by Anton Blewett on October 3, 2007
By Anton Blewett, Cell: (650) 996-2028
Most of us heed the little sticker in the upper left corner of our windshield that says, “Next oil change: 25,967 miles.” So why do so many of us allow our home to fall into disarray, when we maintain our automobile with total vigilance at the same time? While you change your oil every few months, do you check the caulking of your tub with the same regularity?
A tube of caulk: $2.18. Replacing a bathroom sub floor damaged by fungus: $4,137.24. Which would you prefer: checking the seals on your showers and tubs with regularity or replacing the sub floor in 5 years? As extreme as it might sound, the scenario is quite common. Fungus damaged bathroom and kitchen sub floors are one of the most common fix-it items I see daily.
Most major repairs are the result of “The Slight Edge” principle: a few bad choices made daily compounded over many years cause major problems. Consider the alternative: routine maintenance over many years preserves the lifespan of your home. If you maintain your roof according to the manufacturer’s recommendations, it will last 30 years instead of 20. A home is just like your body. The less you take care of it, the faster it wears out.
See next week’s post: Why do most people fail at home maintenance?
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