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Old 08-08-2013, 07:36 PM   #41
Act of God
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http://econpapers.repec.org/paper/pramprapa/4318.htm
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The results indicate that borrowers who provide down payments from their own resources have significantly lower default propensities than do borrowers whose down payments come from relatives, government agencies, or non-profits. Borrowers with down payments from seller-funded non-profits, who make no down payment at all, have the highest default rates. Additionally, borrowers who do not make down payments from their own resources tend to have higher loss given default in the small subset of loans that had completed the property disposition process.
Paper

http://www.fhfa.gov/webfiles/1276/workingpaper075.pdf

http://blogs.reuters.com/felix-salmo...th-statistics/




Makes sense from a business standpoint: The more you have to lose (down payment) the less likely you are to default. Putting zero down lets you walk away from the mortgage for basically nothing (credit can be rehabilitated VERY quickly). Strategic defaults are no bueno in my opinion.
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Old 08-08-2013, 07:42 PM   #42
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Read it again.


The results indicate that borrowers who provide down payments from their own resources have significantly lower default propensities than do borrowers whose down payments come from relatives, government agencies, or non-profits. Borrowers with down payments from seller-funded non-profits, who make no down payment at all, have the highest default rates. Additionally, borrowers who do not make down payments from their own resources tend to have higher loss given default in the small subset of loans that had completed the property disposition process.

Bold does not support your claim as it's looking at buyers that had to come up with downpayments still (Credit worthiness did not allow them to quality for zero down loans) from outside sources.

Edit: Thank you, the graphs are more what I'm looking for. Taking it at face value, that supports your theory, but I'd like to point out the time span and a theory of my own. Post-2007, sub 20% down borrowers were defaulting at a lower rate than above 20% borrows in 2007, 2006 and close in 2005. I'd like to see what that data is beyond 2008 as that indicates that the bank's more stringent approach to qualifying borrowers even with lower down payments may show a significant reduction in defaults alone.

There will always be default borrowers and foreclosures and it looks like these statistics are going to show that the less down you have, the higher chance of default, but can the argument be made that the risk for high chance of default be mitigated based on other credit credentialing than down payment alone?
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Old 08-08-2013, 07:46 PM   #43
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Buyers who make no downpayment at all have the highest default rates - End of discussion

You asked for an answer, I just gave it. I'm happy things worked out for you, but you clearly aren't the norm.
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Old 08-08-2013, 07:50 PM   #44
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Obama Calls For Eased Restrictions on Home Mortages : Bubble Here We Come!!!

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I bought a house under Clinton's program. I never missed a payment and sold it 6 years later. Nobody was missing house payments under Clinton's program. The meltdown occurred after Dubya decided to hand half a billion dollars and easy mortgages to people who couldn't make a house payment. Combine that with a blind eye to real estate thievery and you have a meltdown of Dubya proportion.
No. The Clinton surplus with the government having no debt to issue; plus the push for buying buying homes created a feeding ground for people to start buying mortgage debt. Thus the bubble is born.


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Old 08-08-2013, 07:58 PM   #45
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Buyers who make no downpayment at all have the highest default rates - End of discussion

You asked for an answer, I just gave it. I'm happy things worked out for you, but you clearly aren't the norm.
You have an interesting definition of the "norm" if you're considering sub 5% as far back as 2008 being the norm.

95% of sub 20% borrowers aren't?

There are other statistical factors you aren't considering in what you've looked up so far.

Zero down borrowers had a much higher credit requirements they had to meet in order to be able to qualify for that loan compared to those with lower credit but still could get 10-20% loans.

These statistics looking at only sub 20% borrowers aren't segregating out those that had true zero down loans versus those that had other down payment sources, poor credit worthiness requiring lender supplied down payments (80/20 loans), etc.

The lenders have changed their rules since 2008, and it's a whole nother ball game with regards to who can or cannot get financed and the conditions of their qualified loans. I'd suspect the banks could quite easily setup requirements that allow qualified borrowers that simply weren't able to accumulate the cash to mitigate the risk with a zero down loan today.
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Old 08-08-2013, 08:08 PM   #46
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Assets cannot also be considered investments? When the economy is on the up and the housing market is appreciation and not depreciating, as we've historically seen is the case for many markets, I would argue it is most certainly an investment when compared to other options like renting.

Considering the tax benefits of mortage interest deductions, principle value applied and retained to the value of the home, appreciation of the market value and remodel investments that add value in excess of money spent....

I really don't understand your argument.

FWIW I bought my house in 2007 before the crash. I just sold my home for 30k more than I paid in 2007...soooo.... if that wasn't an investment, I'm not sure what is.
You can only call it an investment if you expected to make money.
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Old 08-08-2013, 08:15 PM   #47
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You can only call it an investment if you expected to make money.
.....I did. And when the economy is on the up, you can...

That's not to say everyone can or will, but folks make their entire living on housing investments.

Just because there is high risk doesn't mean a house cannot be considered an investment. I am seriously confused on why I'm having to argue this concept.
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Old 08-08-2013, 08:20 PM   #48
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.....I did. And when the economy is on the up, you can...

That's not to say everyone can or will, but folks make their entire living on housing investments.

Just because there is high risk doesn't mean a house cannot be considered an investment. I am seriously confused on why I'm having to argue this concept.
I don't disagree. A house CAN be an investment. For most people, it isn't. Even if you sold your home at a profit, your new home cost you more money because it went up in price as well. I dont think you would tell someone "buy a house, you'll make X amount in 5 years" would you?
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Old 08-08-2013, 08:26 PM   #49
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On a (slightly) related note, the new Governor of the Bank of England this week indicated that UK interest rates would not rise above their current mark of 0.5% until UK unemployment dips below 7% - which most observers think wont happen for at least another 3 years. It's an unprecedented announcement in UK monetary history and looks set to inflate a property bubble and a flight of savings into riskier asset classes. Great for me as a homeowner, as it gives me a good opportunity to overpay on my mortgage payments to great effect.
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Old 08-08-2013, 08:29 PM   #50
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I don't disagree. A house CAN be an investment. For most people, it isn't. Even if you sold your home at a profit, your new home cost you more money. I dont think you would tell someone "buy a house, you'll make X amount in 5 years" would you?
???

Severe logic break down man.

So if have profitable stocks in my retirement accounts and I decide to sell those stocks at 200/share and reinvest those at 400/share, those 200/share stocks were not investments simply because I reinvested them into higher priced shares?

That makes...NO sense.

And you don't have to make "profit" to consider it an investment because the alternative housing options guarantee that a home is an investment in comparison. Pay rent at 1500/month, none of that money comes back to you.

Pay a mortgage at 1500/month, 10-20% of that early on in the amortization table is applied to principle and every penny thereafter that goes to principle can appreciate. That is the investment....not even considering that the interest and PMI may be tax deductible, resulting in money returned to your pockets that would otherwise be lost to Uncle Sam forever.
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Old 08-08-2013, 08:32 PM   #51
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On a (slightly) related note, the new Governor of the Bank of England this week indicated that UK interest rates would not rise above their current mark of 0.5% until UK unemployment dips below 7% - which most observers think wont happen for at least another 3 years. It's an unprecedented announcement in UK monetary history and looks set to inflate a property bubble and a flight of savings into riskier asset classes. Great for me as a homeowner, as it gives me a good opportunity to overpay on my mortgage payments to great effect.
ZERO.FIVE%?!

Jesus man. My parents until recently refinanced were paying 13% on their mortgage. You Lucky bastard.

What happens when unemployment gets better though and the rates rise? Home values are going to take a severe beating.
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Old 08-08-2013, 09:00 PM   #52
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First of all, if you buy your house for $400,000 and then sell it for $450,000 you didn't necessarily make a profit. There's a whole lot more that goes into it than buying and selling price. If you pay for that $400,000 house through term on the mortgage you are paying over $800,000 for that $400,000 house. Selling it for $450,000 is still a ridiculous loss. Add in maintenance, taxes, closing costs, broker fees, etc. and it's possible you are taking a loss even selling it at a higher price.
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Old 08-08-2013, 09:04 PM   #53
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No. The Clinton surplus with the government having no debt to issue; plus the push for buying buying homes created a feeding ground for people to start buying mortgage debt. Thus the bubble is born.


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Old 08-08-2013, 09:32 PM   #54
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First of all, if you buy your house for $400,000 and then sell it for $450,000 you didn't necessarily make a profit. There's a whole lot more that goes into it than buying and selling price. If you pay for that $400,000 house through term on the mortgage you are paying over $800,000 for that $400,000 house. Selling it for $450,000 is still a ridiculous loss. Add in maintenance, taxes, closing costs, broker fees, etc. and it's possible you are taking a loss even selling it at a higher price.
You're assuming you've gone through term on the home before being able to sell for 450k. You really don't have to make these points as if I weren't aware of the point you're making, I promise. It's all noted.

Again, hypotheticals and risk are all relative to the individual situation and I didn't say everyone can or will be able to profit from the investment, or even that the profit is profit in the traditional sense of comparing total invested costs, simply that it's comparative profit and a home CAN be an investment.

My point is, had I been renting for 6 years and purchased the home I'm buying today, I'd have spent 1000-1500 a month on rent and had zero return on that money I spent. All lost money.

Instead, I spent 1500 a month on my mortgage, of which 15k applied towards principle and the home appreciated by 30k, giving me 45k total in equity that is now a return and able to be reinvested in another house. Comparatively speaking, this home was an investment for me as opposed to renting.

No listing fees btw...I sold the home FSBO and sold to an unrepresented buyer. Small title fees and the rest is straight cash equity.
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Old 08-08-2013, 09:45 PM   #55
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ZERO.FIVE%?!

Jesus man. My parents until recently refinanced were paying 13% on their mortgage. You Lucky bastard.

What happens when unemployment gets better though and the rates rise? Home values are going to take a severe beating.
I see a house being an investment if it can be paid in full with cash or be paid off sooner than the entire loan term, while being rented out or with the intent to rent it out. Provided that monthly rent is higher than the mortgage payment and repairs/expenses are low.
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Old 08-09-2013, 07:48 AM   #56
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Hi.

A graph showing the very outcome of what I was talking about. Thank you.
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Old 08-09-2013, 12:25 PM   #57
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Yes! A graph that shows a huge increase in foreclosures after Bush's 2003 American Dream Downpayment Assistance Act was passed proves that it was all Clinton's fault.

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Old 08-09-2013, 12:54 PM   #58
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Re: Obama Calls For Eased Restrictions on Home Mortages : Bubble Here We Come!!!

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Yes! A graph that shows a huge increase in foreclosures after Bush's 2003 American Dream Downpayment Assistance Act was passed proves that it was all Clinton's fault.

Wait so we can't blame the previous administrations anymore?

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Old 08-09-2013, 04:26 PM   #59
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ZERO.FIVE%?!

Jesus man. My parents until recently refinanced were paying 13% on their mortgage. You Lucky bastard.

What happens when unemployment gets better though and the rates rise? Home values are going to take a severe beating.
We've had 0.5% in the UK pretty much for the last three years as a result of QE and other efforts to kick start the economy. Rates will have to get to c.15% for me to start worrying.

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I see a house being an investment if it can be paid in full with cash or be paid off sooner than the entire loan term, while being rented out or with the intent to rent it out. Provided that monthly rent is higher than the mortgage payment and repairs/expenses are low.
I intend to rent my place when I move - I can easily get more in rent than I pay for my mortgage.
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Old 08-09-2013, 04:38 PM   #60
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you really should seek help. I'm not trying to be funny. I'm not trolling. I'm dead serious.
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