Lending program helps homebuyers, nei...

Lending program helps homebuyers, neighborhoods

There are 16 comments on the TwinCities.com story from Jan 9, 2009, titled Lending program helps homebuyers, neighborhoods. In it, TwinCities.com reports that:

It's a tough sell: Buy a rehabbed foreclosure in St. Paul's Dayton's Bluff neighborhood and help bring a devastated area back to life.

Join the discussion below, or Read more at TwinCities.com.

Wilbur Wright

Minneapolis, MN

#1 Jan 10, 2009
Who would want to live in gang country?
Ryan - St Paul

Cottage Grove, MN

#2 Jan 10, 2009
You mean like North MPLS? Thats why the community wants WORKING individuals to buy homes; Rather than have them sit vacant waiting to blow-up from the natural gas leaks.
John

Minneapolis, MN

#3 Jan 10, 2009
Isn't it all wonderful......just take some conseling and bingo, you're in a different world. NOT! A scam is still a scam and this one isn't any different. They can call it what they want and structure it whatever way they want, but giving credit to people who shouldn't have it always produces the same results at the end. And then there's the neighborhood......yuk.
TiVo Girl

Saint Paul, MN

#4 Jan 10, 2009
Buy a rehabbed foreclosure in St. Paul's Dayton's Bluff neighborhood! Dodge the bullets from the gang-bangers! Watch drug deals from the comfort of your living room!

That was a craptacular neighborhood when I grew up in it (Mounds Park/Dayton's Bluff back in the late 60s-mid 80s). It's exponentially worse now. I say raze the whole place and make it into a nature preserve.
Diogenese Searching

Portland, OR

#5 Jan 10, 2009
This is a 36 month venture for profit.

In this dismal market, a 7.5% return is a VERY handsome profit when traditional mortgage rates are under 5%, bank CD's are under 2% and traditional savings accounts are not worth mentioning. On-line/Internet saving accounts are the highest interest paying -- and they're (mostly) hovering at 2.5%.

On a $198,000 loan a 7.5% interest rate would yield $14,800 to the investors I suspect there will be additional incentives/tax benefits for the investors lending this money, thus, increasing the true yield. Assuming all goes well, not a bad deal for the money lenders.(The couple in the story making $96,000 per year should do fine as long as they stay current and don't become complacent.)

This is an example of sub prime lending with a three year balloon. The investors are betting that in three years those with tattered credit will behave themselves and reestablish their credit ratings enough to refinance into a non sub prime loan.( A credit) It's high risk no matter how they sell it.

My only wonder is there must be another part to the lender protection? With no MIP (mortgage insurance premium to guard the lender against default) the lender would be fully exposed--less the 2%/$2000 down.

Why would an investor hand someone a check for $198,000 in exchange for $2000 with nothing to guarantee their investment other than a house in a declining value area?

On the bright side, it is a second chance. For a price...

Bob the Bilderberg

Minneapolis, MN

#6 Jan 10, 2009
Location, location, location.
Cindy Stainker

Saint Paul, MN

#7 Jan 10, 2009
TiVo Girl wrote:
Buy a rehabbed foreclosure in St. Paul's Dayton's Bluff neighborhood! Dodge the bullets from the gang-bangers! Watch drug deals from the comfort of your living room!
That was a craptacular neighborhood when I grew up in it (Mounds Park/Dayton's Bluff back in the late 60s-mid 80s). It's exponentially worse now. I say raze the whole place and make it into a nature preserve.
I did part of my growing up there too, it wasn't too bad, I lived on Maple Street, and before that on Third and Mendota. Neither of the neighborhoods that I lived in were really bad at all, I guess time takes it's toll.
Diogenese Searching

Portland, OR

#8 Jan 10, 2009
Diogenese Searching wrote:
This is a 36 month venture for profit.
In this dismal market, a 7.5% return is a VERY handsome profit when traditional mortgage rates are under 5%, bank CD's are under 2% and traditional savings accounts are not worth mentioning. On-line/Internet saving accounts are the highest interest paying -- and they're (mostly) hovering at 2.5%.
On a $198,000 loan a 7.5% interest rate would yield $14,800 to the investors I suspect there will be additional incentives/tax benefits for the investors lending this money, thus, increasing the true yield. Assuming all goes well, not a bad deal for the money lenders.(The couple in the story making $96,000 per year should do fine as long as they stay current and don't become complacent.)
This is an example of sub prime lending with a three year balloon. The investors are betting that in three years those with tattered credit will behave themselves and reestablish their credit ratings enough to refinance into a non sub prime loan.( A credit) It's high risk no matter how they sell it.
My only wonder is there must be another part to the lender protection? With no MIP (mortgage insurance premium to guard the lender against default) the lender would be fully exposed--less the 2%/$2000 down.
Why would an investor hand someone a check for $198,000 in exchange for $2000 with nothing to guarantee their investment other than a house in a declining value area?
On the bright side, it is a second chance. For a price...
EDIT

>>>This is an example of sub prime lending with a three year balloon. <<<

I'm sorry. The way the article is written, I don't think there is a balloon on the contract for deed itself? I believe they meant the buyers pay for three years on the CD then after 36 months they must refinance the balance with a new loan. Either way, balance due needs to be paid off or refinanced.

It doesn't state if the loan/contract for deed is interest only or it's principal and interest.
Peter

Houston, TX

#9 Jan 10, 2009
Another program. If what ails St. Paul were fixed, the programs wouldn't be needed. St. Paul's biggest problem is government intervention and a lack of understanding that it's stable successful families that'll bring the city back, not more subsidizing of slums.
Diogenese Searching

Portland, OR

#10 Jan 10, 2009
Peter wrote:
Another program. If what ails St. Paul were fixed, the programs wouldn't be needed. St. Paul's biggest problem is government intervention and a lack of understanding that it's stable successful families that'll bring the city back, not more subsidizing of slums.
Simple truth. Not everyone is "entitled" to own a house any more than everyone is "entitled" to own a car. Aside from special humanitarian and medical circumstances, it's something that should be earned.

I tend to think that if people had more of their own money into their down payments since 2003, there would be be fewer foreclosures today.

No skin in the game is no skin off the nose if things get tough.

Peter

Houston, TX

#11 Jan 10, 2009
Diogenese Searching wrote:
<quoted text>
Simple truth. Not everyone is "entitled" to own a house any more than everyone is "entitled" to own a car. Aside from special humanitarian and medical circumstances, it's something that should be earned.
I tend to think that if people had more of their own money into their down payments since 2003, there would be be fewer foreclosures today.
No skin in the game is no skin off the nose if things get tough.
Absolutely agree. We pushed home "ownership" too far in the first place, that's a huge part of what this recession is all about.

St. Paul needs to look at things more broadly. Any city with a future, finds a way to attract middle class families. Middle class (or higher) families have this funny little attribute: They can pay the taxes that the city needs. They need to do a survey of people in Woodbury, Shoreview, or Roseville and ask people why they don't live in St. Paul. Then aggressively go after and fix the things on that list. The rest fixes itself, no programs required.
brevity

South Saint Paul, MN

#12 Jan 10, 2009
7.5%? That is a far cry from the 4.5% the banks are offering right now. If you have bad credit then save more or swallow your pride and have a relative with good credit sign onto your loan. Amortize the payment on 200,000 at 7.5 and 4.5 for 30 years and the difference in payment per month is very large. Just because it is a "program" does not make it right. Any program offering worse terms than a for profit bank is not a good deal and very risky considering that you have to pay off the ballon or refi in 3 years.
nanny state

Minneapolis, MN

#13 Jan 10, 2009
Housing is not just a St.Paul problem. Fact is the housing issues that St.Paul is dealing with are being fostered on the inner suburbs that USED to be the first choice places to move for young families. This isn't about middle class,etc. it really doesn't matter.
No one wants to live on streets and in neighborhoods where there is subsidized housing, group homes,shelters, and other nice social service run places all over the place next do otherwise working family/owner occupied houses.
Bob the Bilderberg

Minneapolis, MN

#14 Jan 10, 2009
St. Paul's problem is that there's less value in buying a home there.

For the same amount of money, say $200,000, a young family could get a larger lot, better schools, lower taxes, and safer streets.

Given all the disadvantages St. Paul has in the housing marketplace, they should be lowering prices (taxes). But no, the city government is raising taxes because they are reluctant to cut costs to compensate for less revenue.

There's no good outcome for St. Paul, or Mpls for that matter, because in a free society, where people can live wherever they choose, sellers who don't adjust to the market conditions will lose.
Fernando

Minneapolis, MN

#15 Jan 11, 2009
A down payment of 2 percent should be more than enough. Certainly, there are also many "service" jobs out their that will support folks getting into homes. McDonald's, KMart, Target, Walmart, Burger King ....
Brenda Lachman

Fort Worth, TX

#16 Jan 11, 2009
Buying a property in a desirable location such as on the water, in resort towns, or near city attractions might help you get a loan for a house regardless of your credit, if you stage your property for short term rental, mortgage companies know you will be paying on time, because while some travelers prefer to stay in hotels, many families or big groups prefer to rent a house, villa or chateau, or even a condo, the difference in price is considerable and home offers the most precious commodity a hotel can never offer: PRIVACY! so when thinking on investing in a home, look into this option, some houses hava an annex that makes if perfect to live in while you are retning your property, or renting the annex to help you pay the mortgage.
http://www.strategicbookpublishing.com/Welcom...

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