Beyond shelter

Beyond shelter

There are 15 comments on the The Indianapolis Star story from Oct 29, 2006, titled Beyond shelter. In it, The Indianapolis Star reports that:

In Morgan County, an alarming number of homeowners have lost their houses or are having difficulty paying on them.

Join the discussion below, or Read more at The Indianapolis Star.

DLT in Morgan County

United States

#1 Oct 29, 2006
The poor financial management skills, both of individuals and the government, do not lead to sustainable conditions for our society.

I consider myself a free-market leaning person but markets require knowledgable participants. Savy participants taking advantage of opportunities are the efficiency drivers of markets. The opportunties create winners and losers. The losers, either the unlucky or the unwise, are often real people- our nieghbors even. If we aren't prepared to see them lose we must either educate them (make them more savy) or search for a different solution than markets.
Dave

United States

#2 Oct 29, 2006
Blame the government! After the stock market bust and then 9/11, the Feds artificially lowered interest rates (and also loan requirements) to keep us from going into a recession. Programs like "American Dream" with no money down grants, and slogans like "Everyone deserves to own their own home" (Not EVERYONE should or can). There was a reason why we had requirements of down payments, and financial selectivity for obtaing mortgages. Now everyone qualifies for a loan, even if you don't even have a job (I'm not exaggerating), and even if you are an illegal immigrant (I'm not exaggerating on this also). All to keep the economy moving along, while we outsource our good paying jobs, and replace them with lesser pay jobs, and the government turns their head to this also. It's the government that will also take the loss on all of these foreclosures, which means you and I will pick-up the tab on this also. Vote all the incumbents out!!! It's time for a fresh way of thinking, not just borrow, borrow, borrow this country into oblivion!!!
J Rutherford

Fishers, IN

#3 Oct 29, 2006
I don't completely blame the gummint as the 2nd poster does but whether it be in Morgan County or 46201, there is a huge push to get people to buy houses come heck or high water. There's a similar push to get people to go to college. And another push to build the Colts a very fancy new stadium.

50 years ago people lived happily in one thousand sq ft houses, a high school education meant something, and we didn't have to pay for stadiums and arenas. We were better off.
Local Appraiser

Peoria, IL

#4 Oct 29, 2006
The properties in most of the recent developments were never worth what the "system" told the buyers the homes were worth. To get the loan to "work", the developers, mortgage salesmen and lenders had to claim the property was worth the actual value plus all the fees, commissions, etc. the the buyer was responsible for paying. They just simply rolled those loan expenses into the mortgage. So, they hired their favorite appraiser to provide an appraisal to "say" it was worth enough to "make the loan. Shame on all of you who participate in this fraudulant activity.

I'm the appraiser that the homeowner hires to tell them what their property is really worth when they can't sell it for the amount they already owe. This has been going on for the last 4-6 years. So, don't blame economics over the last 2 years. The developer,(who alot of times is also the mortgage broker - very, very bad idea)the original appraiser and the lender knew these properties were not worth the value claimed.
Old School

United States

#5 Oct 29, 2006
It used to be that an individual had to plan and save up a down payment, even if they had never learned to save before. Now, everything is no money down with credit cards, car loans, and home loans. These new homeowners have no savings, don't know how to save, and low and behold, if their car breaks down, they can't make their house payment. Right now the interest rates are low, and the unemployment numbers are low, and we have huge numbers of foreclosures. What is going to happen when the economy sours, and the employment tightens-up? We will be awash in vacant houses, the likes this country has never seen before. 10,000 vacant homes in Marion County will seem like nothing.
Honest

United States

#6 Oct 29, 2006
God are those some butt ugly looking houses at Heartland Crossing, and so very close together. One house has a fire, and the neighboring homes vinyl siding melts. This will be a slum in the near future. All they did was sell homes to the least qualified to be homeowners.
Jim

AOL

#7 Oct 29, 2006
Call it what it is. There is one builder in that community that loaded almost all of their clients up with loans that had 2-1 rate buydowns and maximum points used for the buydown. They put these people in homes that had about 10% marked up for the buydowns. Then didn't tell them how property taxes don't come until sometime in the third year. So these kids payments double in three years, and they owe about 10% more than the homes are worth. Why doesn't the paper mention names? The last time this story was run about a year ago, all but 1 of the foreclosures in Heartland Crossing where in one builder's community.
Slimeball Builder Hater

United States

#8 Oct 29, 2006
There are many low end builders that target low end apartment complexes all over the city. "More square feet for the money" is famous for pulling this stunt.

Beazer Homes, Arbor Homes and Westport Homes pull the same stunt. Take a look at these builders communities after 2-3 years.

They are like rich slumlords in college.... only richer
Local Appraiser

Peoria, IL

#9 Oct 29, 2006
Old School wrote:
It used to be that an individual had to plan and save up a down payment, even if they had never learned to save before. Now, everything is no money down with credit cards, car loans, and home loans. These new homeowners have no savings, don't know how to save, and low and behold, if their car breaks down, they can't make their house payment. Right now the interest rates are low, and the unemployment numbers are low, and we have huge numbers of foreclosures. What is going to happen when the economy sours, and the employment tightens-up? We will be awash in vacant houses, the likes this country has never seen before. 10,000 vacant homes in Marion County will seem like nothing.
It is not just the new home buyers. The same thing has been happening with equity and refinance loans. And don't forget the financial advisors who sold old school people into taking their equity to buy stocks and investments.
Bubba

Mentor, OH

#10 Oct 29, 2006
This is exactly why I'm renting a room in my parents' house since graduating college. I've got a great job now, and I'll be buying a house only when I have at least 20% saved for a down payment, plus enough for closing costs, etc.

Certain builders, lenders, and realtors want nothing to do with me when they hear of my plan. I've been offered these scam ARM no-down deals before, and when they realize I know better, they stay away from me.
Jim

AOL

#11 Oct 29, 2006
Bubba,
That is a fine plan. However, the problem isn't the low down programs that our out there, but the negative amortization plans either rear end or front end loaded.
The high foreclosure rates from the above mentioned builders are do to using a program that thankfully the FHA has changed how they accept them.
Here is the math:
Say you buy a 100,000.00 home with a Nehemiah down payment assistance. There is nothing wrong with Nehemiah's program, but many of those builders use it incorrectly. They raise the price to the buyer by 3.5% to cover the "gift" money. That is actually a federal offense, but for some reason some of those above mentioned builders still do it all the time, and openly. Then the program that was so badly abused was an FHA 2-1 Buydown. What this does is buys the rate down 2 percent the first year, 1 the second and then none the third through 30th. Then they would use the legal maximum seller participation of 6% to get that first year rate as low as possible. What used to be the reason for this is FHA used to allow them to qualify on that first year rate. Even though the rate was going to go up 2% in rate in the next two years. This all happens when the taxes actually kick in after the second year, effectively doubling the buyers payment. This program was designed for buyers who say were medical interns who would see massive income increases in that time, not for someone who might get at best a cost of living raise.
So here is the math:
100,000.00 home
10,000.00 in Buydowns
110,000.00 sales price

If they try to sell due to the payments being too high, they are upside down 10,000.00, plus the about 9,000.00 in Real Estate fees and closing costs, so these kids would have to pay 19,000.00 to get rid of their home.

There are new programs that are equally scary, such as Payment Option ARMS. All of these programs are wonderful for the sophisticated buyer who they are designed for, but not for most people.
However, there are so many wonderful programs out there that do work for most people. The idea of waiting to save 20% really isn't a very good idea in most peoples case, you will lose so much in equity gained, and in the increased price as homes continue to climb. If you save that much money, and came to me, I would strongly advice you to keep the cash and invest it elsewhere and let your home increase on it's own.
Local Appraiser

Peoria, IL

#12 Oct 29, 2006
Jim wrote:
Bubba,
That is a fine plan. However, the problem isn't the low down programs that our out there, but the negative amortization plans either rear end or front end loaded.
The high foreclosure rates from the above mentioned builders are do to using a program that thankfully the FHA has changed how they accept them.
Here is the math:
Say you buy a 100,000.00 home with a Nehemiah down payment assistance. There is nothing wrong with Nehemiah's program, but many of those builders use it incorrectly. They raise the price to the buyer by 3.5% to cover the "gift" money. That is actually a federal offense, but for some reason some of those above mentioned builders still do it all the time, and openly. Then the program that was so badly abused was an FHA 2-1 Buydown. What this does is buys the rate down 2 percent the first year, 1 the second and then none the third through 30th. Then they would use the legal maximum seller participation of 6% to get that first year rate as low as possible. What used to be the reason for this is FHA used to allow them to qualify on that first year rate. Even though the rate was going to go up 2% in rate in the next two years. This all happens when the taxes actually kick in after the second year, effectively doubling the buyers payment. This program was designed for buyers who say were medical interns who would see massive income increases in that time, not for someone who might get at best a cost of living raise.
So here is the math:
100,000.00 home
10,000.00 in Buydowns
110,000.00 sales price
If they try to sell due to the payments being too high, they are upside down 10,000.00, plus the about 9,000.00 in Real Estate fees and closing costs, so these kids would have to pay 19,000.00 to get rid of their home.
There are new programs that are equally scary, such as Payment Option ARMS. All of these programs are wonderful for the sophisticated buyer who they are designed for, but not for most people.
However, there are so many wonderful programs out there that do work for most people. The idea of waiting to save 20% really isn't a very good idea in most peoples case, you will lose so much in equity gained, and in the increased price as homes continue to climb. If you save that much money, and came to me, I would strongly advice you to keep the cash and invest it elsewhere and let your home increase on it's own.
That's what a whole lot of people thought when they were convinced by financial advisors to take the equity out of their home and put it in investments. Of course the investments were through the advisors and guess who supplied the appraiser in most of those deals. Guess who was the broker for the loan in most of those deals and guess who made the money in most of those deals. Guess who ended up owing more money on the home than it was worth.

Bubba, all things being equal, the more you have in equity, the more you can negotiate the int. rate. When all is said and done, the best lenders still view risk as the major component for determing the percentage they need to earn. Forget brokers and form a good relationship with your bank. When it is time for you to do the deal, try to work your deal with your banker. Brokers are middlemen for most people because they do not have a good relationship with a bank. Who knows what the environment will be when your time comes, but a fixed rate is almost always the best in the long run. A 15 year mortgage will save you a bundle. And, it will always be true that your monthly payment on an $80,000 mortgage will be less than your payment on a $100,000 mortgage.
Jim

AOL

#13 Oct 29, 2006
I wasn't advising them to invest with me, I am not selling investments. However, there are some more sophisticated ways to work your money than your advocating "local Apraiser". How about taking a 30 year fixed, and yes I agree when rates are this low go fixed. But if you do a 30 but get an amorization table on your loan, and pay the next months principle each month it gets you the pay off in 15 years but with a much lower payment since very few people stay in a home 15 years anyway.
Local Appraiser

Peoria, IL

#14 Oct 29, 2006
Hope for the best. Plan for the worst.
BRP

Plainfield, IN

#15 Dec 7, 2006
I cant see why the govt. is blamed for everything bad that happens to individuals. Maybe its time to start blaming the parents and teachers who dont teach these young people how learn to crawl before they walk. To many people think the govt. is the answer to all problems, we need to downsize the govt for sure, but the govt. wants people to think they know how to manage our lives better than we can. The young people buying these big price new homes need to get the good old "starter homes", first and stop being a generation of instant gratification

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