All Forum Posts by: Paul B.

I don't think the issue is securitization, per se.

The issue is partly that an entity backed by the full faith and credit of the government -- oops, I mean the taxpayer -- undertook a social mission to increase homeownership. Whether you think that's a battle that should be waged by government in the first place is largely an opinion; we need homeowners, for sure, but we need renters, too. And at least as recently as 30 to 40 years ago, owning a home was something you aspired to.

You scrimped and you saved, and you dreamed of your white picket fence. My parents did this for six years, eventually putting 20% down on their home and taking out a fully-amortizing 10-year loan -- at a rate of 10.75%, I believe.

Of late, however, the notion is that you need only 3% down to buy a house, and hey, if you don't have that, get a relative to give it to you, or get a non-profit to help you, or hey, just pay 3% more for the house and get the seller to contribute 3% (or more). We've had people buying houses for years with no real skin in the game, and for a time, it all worked out. They were able to make their payments, and eventually the home's value crept up enough that, even if there was a foreclosure, the lender had a better shot of coming out whole. (Everyone remembers the 125% LTV HELOC, right?)

My point in all of this is that it has little to do with securitization, which is nothing more than taking a basket of small securities (the individual loans), putting them into a larger basket, slicing that basket up into pieces with some degree of cash-flow predictability. Now, did Fannie and Freddie rely on this process to fund the loans they bought? Yes, of course. But securitization, in and of itself, is not the issue. At least in my opinion...

I think what we had here was the perfect storm. Not only did we have underwriting standards go out the window, but we also had interest rates held down too low after 9/11. The low rates did what they were supposed to do, which was keep the economy going, but they were kept there for far too long, and speculation in real estate was rampant. I think I remember there being a time when something like 40% to 50% of all real estate sales were "second homes" because people were buying solely for an appreciation play. Remember hearing tales of people buying two ocean condos, watching them double, then selling one to pay for both? I remember that very well...that was insanity.

So, we had a good ol' fashioned speculative bubble, only it was funded with debt secured by the very asset on which the speculation was being made, which made it even worse when the whole thing imploded. Sort of like when we used to let people buy stock on 90% margin...only with real estate we were really letting people buy it on 99% to 100% margin. Who WOULDN'T speculate on a house when you have zero dollars invested? Heads, I win...tails, you (the taxpayer) lose...

Time to conclude my rant...I suppose you could argue that, but for the securitization process, Fannie and Freddie never would have existed, ergo, securitization is to blame. If Fannie and Freddie were not GSEs, though, they could still have used securitization to raise funds for their operations, but the cost would have been a little higher because of the lack of the implied government backing. But, non-GSE versions of Fannie and Freddie would have likely paid more attention to credit quality (assuming that they could be brought down and not deemed "too big to fail"), and they certainly would not have had a social mission at the direction of the federal government.

I do agree that it would be better for everyone if the people who made mortgage loans just kept them in their portfolio, but the total value of all mortgages in the US (at least around 2008) was about $10 trillion. All banks in the US today have assets of about $12 trillion, so it looks as if we can't rely on the banking system to fully fund all of the country's mortgage needs, thereby making some level of securitization a necessity.

REVA=Real Estate Virtual Assistant

But, you're not writing a check directly to this "wholesale brokerage," are you? The money is going into escrow at an attorney's office, right?

Also, I don't follow your numbers in the second paragraph.

Lastly, I do not like the idea of buying a property without having the utilities on. I know that this is sometimes how it is (like when you buy on the courthouse steps), but it's not for first-timers.

It's unlikely that you'll find anything that will completely sink your deal, but if it were my first deal, I'd want to have as much uncertainty removed as possible.

What are you talking about? What is this charge, and when and how is it paid?

You also used the word "brokerage." Is an actual real estate brokerage involved?

http://online.wsj.com/article/SB10001424052748703786804576137942242796306.html

Does anyone actually have the property tied up? I assume that is your wholesaler.

I wish you were not paying for an inspection without having your own contract (or assignment agreement) in place. Do you?

Your numbers look pretty good, but I'll bet that you also end up contributing to your buyer's closing costs and down payment. You might want to prepare yourself for at least a 3% contribution towards that, if not closer to 5-6%. Thankfully, you appear to have the wiggle room to do that.

Good luck, and keep us posted.

Fair enough...point being, however that you don't need to do any title work before you write your first contract. The last question asked whether he needed to do a title search before meeting the seller; I don't think that's necessary (beyond perhaps digging up what's readily available on the Interwebs).

No need to get a title search before writing your contract.

I think what's being said here is that if during the process you uncover more people who eventually end up a party to the transaction (that is, they sign the deed), you will want to rewrite your contract so that they are parties to that document, too, just to take a "belt and suspenders" approach.

Short answer, though, no, you don't need to do a title search before you write your contract. (Although I am sure some title companies wish that were the case!)

A couple things don't make sense here...

If you don't know what your credit looks like, how do you know it needs to be "fixed?"

Also, if you are buying houses for cash, you don't need credit. You're paying cash.

First thing you should do is get a copy of your credit report as well as your credit score.

Then think about your real estate strategy. It sounds like you may not have one fully formed just yet.

Then take a look at your income and cash on hand, and think about what you'll need to execute on your strategy. If you will need loans, get referred to a couple of good lenders who understand investment properties, tell them what you want to do and what you bring to the table financially speaking, and let them tell you what they can do for you.

My experience has been that the last four digits will secure your authorization to release.

On the form I asked borrowers to fill out, the first five digits were "X," like XXX-XX-_____.

That should be all you need.