Tuesday, December 06, 2005

So you like the stories of FB's....eh?!?!?


From the feedback I received last weekend, it seems the readers have spoken and they like to see real life scenarios of FB's. Well, I aim to please....so here we go!

Bwr NEEDS to refi. Looking at about 85% LTV with a sub 580 FICO score. They need cash-out (don't they all). $400,000 loan amount. "Stated" income. Nothing too ugly. Oh wait, I forgot to mention the multiple 90 day mortgage lates during the past 12 months. OOOOPS. The max I could do on this loan is about 70% LTV or $250,000...and the rate would be in the 9's. Somehow, I don't think this borrower can be helped....UNLESS any of you want to pool your money together and give this guy a "hard money" loan?!?!? Any takers?!?!? That's what I thought.
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This next scenario is one from a few months ago. I remember this story vividly. We had a bwr that had approximately 100k equity in his house that was worth about $480,000. The bwr wanted to refi, and take some cash out. BUT, about three months before they decided to refi, they were feeling pretty "rich" with the quick 100k+ their house had "made" for them. It just so happens this was about the same time Cadillac was doing their 0% financing special. Do I really need to tell you what happened next?!?!!?

No, but I will anyway...this borrower went out and bought a new Escalade. The monthly payment was about $960 a month for 60 months. Let me tell you, buying a 60k SUV before you want to refi is not that bright. BUT wait, the story gets better. There was another new tradeline on the blog from some "custom car" business. Come on ...are you REALLY going to be caught dead in an Escalade with stock wheels?? and no TV's in the headrests?? That's right. The same month the car was bought, this new tradeline with a $17,000 balance was opened. When you add over $1200 a month in debt payments (in addition to other debt the borrower had) it REALLY kills your DTI (debt to income ratio)...and your credit score (I will do a post about credit scores another time...remind me). So, the borrowers FICO dropped, his DTI was off the charts, and he needed close to a 100% refi to "save him". IF the bwr had been patient, and thought ahead, he could have easily refi'd and THEN done all of that stuff.

I hate to say it, but I told the broker to tell the guy that I hope that Escalade is nice...because he is going to be living in it soon! The only solution for the bwr was to sell the house, and start over. I don't know what happened to that bwr. I only know that the loan officer was not able to get the borrower a loan anywhere.

And NO, they could not have gone stated income. Their FICO dropped too far, and the LTV was too high. See, I told you that not everybody can get a loan!! ;)

26 Comments:

Anonymous semper fubar said...

Hi socal. I'm a long time lurker and occasional commenter at Ben's place. Just want to tell you I like your blog. More "reality show" stories please! Stories like that make me feel feel less like a financial moron.

I'll lurk here too from now on.

:-)

12/07/2005 4:44 AM  
Anonymous semper fubar said...

And I'd feel even LESS like a moron if I proofread my posts first!

12/07/2005 4:45 AM  
Blogger David said...

The borrower could sell the SUV and get a boarder.

Wow! Bling Bling!

12/07/2005 6:09 AM  
Blogger Jim A said...

Well I'll bet that he's seriously upside down on the Escalade. (insert SUV rollover accident pun here) Presumably he might have enough equity in his house to save him if sells NOW.

12/07/2005 6:35 AM  
Blogger Karen said...

I used to think there must be a lot of wealth in my area with all the Hummers and Escalades hogging the road. Now I know the truth! What is wrong with these people?

12/07/2005 6:50 AM  
Blogger Catherine Wilkinson said...

This blog rocks...not only informative, but pretty funny. I don't (usually) like to laugh at other people's misfortunes, but...damn!
Maybe I should open a "Car Park"..sorta like an "RV Park", but smaller. With hook-ups.
Can you put a king-size bed in a Hummer?

12/07/2005 8:52 AM  
Blogger SoCalMtgGuy said...

Catherine...

Thanks for the comment!

The purpose of my blog is in NO way to "laugh" at others misfortunes...but to inform others of the "traps" others have fallen into.

As a whole, I try to add humor to the blog (pictures, titles, writing) to keep it entertaining while informing.

I could have told that story with just "data" but I don't think it has the same effect.

Keep spreading the word and checking back.

Thanks!

SoCalMtgGuy

12/07/2005 9:19 AM  
Blogger SD_suntaxed said...

Catherine,

Maybe we'll start seeing ads pushing amazingly low monthly IO Option payments for Hummer and Escalade conversions. The living situation would be something like a cross between VW urban assault campers and those old van conversions from the 70's, but tastefully updated with travertine floorboards, granite accents and stainless steel dashboards. Groovy!

Better get in now on the beginning of the Parking Bubble. After all, they aren't making any more land for parking spaces.

12/07/2005 11:38 AM  
Blogger loonofficer said...

How About this prime example of what I am seeing all too frequently of late:

Applicant purchased back in March this year. 0% down. The 80/20 combo is as follows:
1st TD $304,000 30-F @ 6%.
2nd TD $76,000 @10%.

Before he bought the home this guy was a teacher. I'm not going to knock the teaching profession but I certainly intend to knock this guy's basic economic sense. I, for one know that he could not afford to own based on a SoCal teacher's salary but it gets worse: This guy decided to quit his day job shortly after the purchase to start his own business in..... wait for it.... HYDROSEEDING (whatever that is)!!!!
Needless to say in the past 9 months he hasn't made a penny, has run up his credit cards and is way behind on the card payments and auto payments. As for his "once golden" credit? He's now below 500 FICO.
But wait. It gets worse!!! After 9 months of making diddly squat most people with a microgram of funtioning grey matter would probably say to themselves "Hmmmm..... maybe this wasn't the sure bet I originally thought it would be. Maybe it's time to seriously think of a day job of some sort." Oh no..... This guy wants to "pull out some equity" so he can pay off his credit cards and pay for advertising!!!!!
His problems are compounded thus:
Bought the home as a 3 bed/2 bath. Later fornd out 1 bedroom and bathroom were built WITHOUT A PERMIT!!!! So the home is still considered a 2 bed/1 bath in a neighborhood where there are absolutley no comps. I didn't have the heart to tell him that , even if we could find comps he would need to have lived there for 12 months before we could even think of using it.

I really wanted to tell this guy how completely effed he is but the desperation in his voice forced me to tell him "I'll call you back".


..... I just hope he's not holding his breath.

12/07/2005 3:19 PM  
Blogger r patrick said...

I don't know how you do it. Well I am glad I did not go into your field. There is a radio show in Jersey and they talk about "Heating bills hurting, xmas gifts gonna hurt?, get a 1% refi"

And there is a neon green sign on 80 into NYC in Hackensck 1.00% Payment in like 6 foot letters with 4.6% APR in 6 inch letters.

I know people like this and the guy with the Escalade too. I appreciate hearing about these people just because I'm 26 and I am living right.

I appreciate a little validation for my choices now and then and your the one giving it.

Thanks

12/07/2005 5:03 PM  
Blogger SoCalMtgGuy said...

R patrick...

There are SOME younger people making a killing, but MOST are living way beyond their means.

Keep doing the right things right, and you will be rewarded 2007-2010.

12/07/2005 5:17 PM  
Blogger Sensible Lender said...

I am in SoCalif, and what amazes me the most about the increases in home prices the last couple of years is the the high cost of living here. People are being qualified with 50% overall ratios and the can't pay taxes and living expenses on the other 50%. It just can't be done. Many people are in a temporary situation where they can afford to live in the short term, but in the long term, with increasing payments on their ARMS, increasing costs of living and the "unexpected" expenses of life.....

12/07/2005 7:20 PM  
Blogger Out at the peak said...

Thank you guys. I cannot wait to read even more stories. I don't have TV, so this is my reality channel.

12/07/2005 7:43 PM  
Blogger SoCalMtgGuy said...

Sensible Lender...

Believe me...I hear ya!

Everybody lives in the NOW, with no thought as to whether that income can continue for years to come. They just assume that appreciation will save them.

I was in an office this week and one of the LO's told me that one of the guys in there is busting his butt because he has a $4000 a month I/O mortgage payment (taxes included)...and now that the holidays are rolling in, and things are tighter, the guy is stressing pretty good.

Call me lazy, or unmotivated, but I prefer NOT to have that kind of financial pressure hanging over me every month. I don't need a huge mortgage payment to "force" me to work harder.

Thanks for the comments...

SoCalMtgGuy

12/07/2005 8:07 PM  
Anonymous Anonymous said...

So are you saying to wait until 2007?

I am about to put 40k down (10%) on a detached house in a good neighborhood in La Mesa (San Diego). 800 sf house w/ 2-car garage on 7200 square foot lot. This is a house we could raise 2 kids in for ten+ years.

I am doing a 30-year fixed 6.5%... Payment with PITI is 30% gross income... FICO is probably 650-675, can I do better on the rate?

If I wait 2 years I can easily put 80k down or more... but I have already waited a long time.

12/07/2005 10:02 PM  
Blogger SoCalMtgGuy said...

rate looks pretty good...

what is the purchase price (ballpark...I don't need to know exactly)

12/07/2005 10:07 PM  
Anonymous Anonymous said...

400 - 425k

12/07/2005 10:12 PM  
Blogger SoCalMtgGuy said...

What are you paying for rent right now?

I assume you are going full doc?

12/07/2005 10:20 PM  
Anonymous Anonymous said...

yes... nothing special in the loan...

12/07/2005 10:22 PM  
Anonymous Anonymous said...

I pay 1450 in rent, larger, nicer place in a better location.

12/07/2005 10:23 PM  
Blogger SoCalMtgGuy said...

Give me a few minutes...and I'll get back to you...

SoCalMtgGuy

12/07/2005 10:31 PM  
Blogger SoCalMtgGuy said...

Do you mind if I make a post out of this??

I want to do a write up...and post it in a few minutes after I type it up.

I know you are "anonymous", but I still want to ask you.

12/07/2005 10:43 PM  
Anonymous Anonymous said...

go ahead... make a post.. you rule!

12/07/2005 10:48 PM  
Blogger Idaho_Spud said...

r patrick is right. There is something validating in reading about this...

I'm surrounded by people who *seem* better off than I am - bigger, newer homes, high-end cars with wheels that are worth more than my vehicle, etc, etc.

I'm reminded of Aesop's fable of the Ant and the Grasshopper, where I feel like one ant surrounded by 300 million grasshoppers - and wondering about my own economic sanity.

I'm still waiting for this year's Christmas Lexus commercials where the woman looks out the window and sees one with the big red bow parked in the driveway... Bling!

12/07/2005 11:04 PM  
Blogger SoCalMtgGuy said...

idaho spud...

I hear you. I live in southern california where people that make 30k a year have a 5k TV on their wall and drive 40k cars.

I used to be bothered by it...wondering what I was doing wrong. The thing is, we are doing things right.

Yes, there ARE a lot of people that truly do HAVE money out here...but they are not the majority. The statistics say that most people are making between 40-50k a year.

The lifestyles we are seeing people live cannot be afforded on that type of income...so something has to give...and the thing that is being given is CREDIT.

Keep doing the right things right over the long haul, and you will be fine.

I'm glad to hear posts like yours and r patricks, it means this blog is doing what it was intended to do...let people know that not everybody that looks like a "baller" is a "baller".

SoCalMtgGuy

12/08/2005 12:07 AM  
Blogger Karen said...

SoCal...

Thank you, thank you, thank you for injecting some reality into the world. My husband and I don't get it either. We feel like salmon swimming upstream, trying to avoid being swept away by the current.

We console ourselves regularly by looking at our savings & investments, knowing that our family has a significant cushion. It helps innoculate us against irrational fiscal behavior. So what if our house is small and our cars modest. We have everything we need, and we're content.

You are doing a great service by sharing your knowledge. Kudos!

12/10/2005 10:28 AM  

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