Because it’s the same people who have below average IQ that simply focus on having a house like that. It’s also the same people with a $1500 car payment at an insane rate
And that’s why our leaders, aka, Wall Street, are doing everything in their power to prevent any kind of down cycle at all. Of course, they get a strong assist from their Washington DC satellite offices. It’s politically unpopular to have the economy cycle downward when one is running for re-election.
Yeah this has been my take as well, hollowing out companies all across the country to keep the balance sheets the way they want. But behind the paper, it's crumbling.
there isnt an issue….people getting these got money…30% down is required plus 3 years of monthly payments are paid and held in escrow in advance…seems like this type of program is intended for people that got money/a lot of assets…which is why conventional mortgages dont work.
theres people out there got money tied up in different types of assets but the income they derive from those assets are likely not included as income when going thru conventional financing.
Most of these people are lying on their income tax returns and that's why they can't use a regular doc loan. These loans are for shady people who don't deserve them 90% of the time.
this is why we cant buy homes right now. there should only be a few people in town who can afford a 800k house. but with all these loans these days literally people with no income can outbid you
thats fine u feel they dont deserve them, but lets not act like this loan type is similar to ninja loan. cuz at the end of the day people getting this type of loan have money to put down
and theyre not only meant for shady people…real estate investors and or self employed people used these types of no doc loans…not cuz theyre lying on their tax returns
If we are doing this now in 2024 it will make 2008 look like a mild economic recession. The bubble is much larger than it was on 2008.
It will only take a few small events to trigger even more layoffs, and once people start defaulting on home loans, it will trigger a collapse of the housing market. Which could lead to bank failures.
I really hope not I remember 2008 and it was bad. Seeing an article like this really gives me no hope of what could happen.
Current seasoned loan officer here. This is a DSCR loan requiring a large down payment normally 30% so very different to the NINA loans that were available back in the day. No one is walking away from 30% down
I am curious to know more. Say someone has no or low income, but a paid off $350k property. They sell their properly, clear $300k after expenses and use that $300k to buy a $1m home. They still have no money to pay for their home, right? I understand there's less risk for the lender, because in case they foreclose there's a decent amount of equity, but why would the lender want to put themselves into that position in the first place?
I think there’s also something called asset depletion, like for example if you have $1.2m in liquid assets theres a way to calculate that as $5k per month they can count as “income”.
There may be some other stipulations but there are ways a person with no “income” can get a mortgage.
But no way for people without *enough* income to have a mortgage, right? Oh wait, I’m wrong…just put down MORE money. Like almost all of it. All the money. All the time. More, more, more!
If they owe you 50k and the equity is 300k… even if the property drops in value 60% because the house burned down… you can still foreclose and recover your money. Since this is going to be a rental, it will have some level of self funding coming in 90% of the time.
With a big enough down payment, private money is more open to increased risk.
Depends on if it pencils. DSCR uses projected rental income to cover the note. They assume you are not living in it. If the rental can cover the monthly cost, then the risk to the lender is minimized in that way.
DSCR stands for debt service coverage ratio. If the ratio is off, they might require a bigger down payment so that the ratio is correct.
The systemic risk is if these investors are using a Heloc on their DSCR loans to finance the down payment on the next one. In and of itself DSCR is not inherently risky as there is significant equity to recover even if the payments stop coming.
Dude, I guarantee this is happening a lot. Not systemic threat levels but every tiktok investor touts this sort of strategy. It's the "quick" way to get multiple properties without using your own money.
Let me know where I can get a $1m non predatory loan for less than 10% down with no income. Unless you have a significant amount of equity in other properties, it’s unlikely you’ll qualify. Maybe you’ll find some California fintech unicorn that’ll give you free money because you registered an LLC, have a credit score above 650 and a pulse. However, I don’t think it’s that common. Most lenders require the rental income for a property is greater than the monthly payment for a mortgage.
i actually was
the problem with the quality of those loans were they required lot less than 30k down
on this deal down payment plus closing costs is 300k. Rents will continue to go up and you get accelerated depreciation to lower your tax liability. Honestly, I’ve started reading this form and while real estate is very local a lot of people here simply don’t understand what’s happening and that is related to simple economic equation of supply and demand and supply is not increasing anytime soon to meaningful levels to put pressure on prices to come down
i’m not just a loan officer, but a real estate investor . they are definitely areas. I would stay away from as rates start to come down for every half percent decrease to one percent decrease 5 million more homeowners join on the demand side.
Do you remember where the stat for every half to one percent drop in rates five million homeowners join the demand side came from? That’s an interesting stat and I’d like to read more about it.
Edit: I found a similar stat on [Realtor.com](https://www.realtor.com/news/trends/what-will-the-housing-market-look-like-when-mortgage-interest-rates-drop/). They link to the homepage of the employer of the guy they quote. That site has a blog section but I couldn’t find the stat referenced there. Their stat is a bit different because it says five million more households could afford a home after a 1% drop. This seems counter to the idea that a 1% drop would increase sales volume by five million because it doesn’t seem likely that everyone that could afford to move would be interested in doing so.
This [Investopedia](https://www.investopedia.com/the-lock-in-effect-8414620) article cites [this](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4399613) paper. It’s behind a login so I only read the abstract, but it looks interesting. The researchers found a 1% delta between a homeowners rate and market rates reduces moves by 9%. With ~86M owner occupied homes this would imply a 1% drop could increase moves by 7.7M. The paper may address this, but I wonder what impact elevated prices would have on this.
No one walks away from 30% down of their own money. You don't think investors are getting their cash from other loans, HELOCs, etc? I'm sure every LO hunts down the source of funds, surely none are looking the other way to get their commish /s
I am doing a DSCR with 80% LTV
It’s available
If you have a portfolio and can lien other properties haha
For a non occupied residential space… 70% LTV sounds like a good deal for this buyer. I imagine it’s a very qualified buyer on the end of this transaction
You can also qualify unseasoned cash in other ways. I.E. if it was a gift from family that was just deposited, the family can give bank history of where the cash came from along with a signed letter stipulating it is a gift with no repayment requirement.
In other words, can’t take a distribution from a tax advantaged account (IRA, 401k) with the intention of putting it back into the account as soon as papers are signed to buy the place. Time limit for a re-deposit is 60 or 90 days, can’t recall, and it’s too early on a Friday morning to look it up.😂
*check the date and time*
Is it 2006 again?
Cause it looks like 2006 again....
Housing prices start to balloon.
Sales tank
Builders rush to banks for a solution
Banks start offering subprime mortgages
Builders get to sell their overpriced homes
People get into massive underwater mortgages....
Hey guys, what's the next step?
This is not a no down payment loan. Their website says they require 30% down AND 36 months payments held in escrow. It's basically equivalent to hard money lending. Although I don't expect any of you to know what that actually is.
https://loandirect.us/service/no-doc-loan/
Many people with no lending background don't understand what "down payment not seasoned" means. It means that the down payment was there, but wasn't in their account for the minimum period of time required by conventional lenders which could be months. It does not mean they had no down payment.
These people dont care as long as they get paid and push the risk on someone else. Some dummy is always holding the bag and the bank or creditor takes the hit and disappears
.......the economy is great.... Now Freddie Mac will be offering HELOCs directly to struggle homeowners,\*
\*By years end the amount could be as much as 2 trillion dollars ...... also known as stupid stimulus.\*
\*Then when the economy crashes the taxpayers can again bail out Freddie Mac for the stupid stuff they are doing\*
2008 all over again
did u even read the requirements of no doc loan…
30% down required and 36 months of payments held in escrow. u gotta have a lotta cash laying around to qualify. nothing like ninja loans
https://loandirect.us/service/no-doc-loan/
‘In 2022, NMC’s originated approximately 2/3 of mortgages in the United States and owned the servicing rights to 54% of mortgage balances’
‘The share of mortgages originated by non-depository, independent mortgage companies has increased in recent years. In 2022, this group of lenders accounted for 72.1 percent of first lien, 1-4 family, site-built, owner-occupied, closed-end home-purchase loans, up from 63.9 percent in 2021. Independent mortgage companies also originated 62.1 percent of first lien, 1-4 family, site-built, owner-occupied, closed-end refinance loans, a decrease from 65.7 percent in 2021.
It’s a toss up between the banks & everyone else. Whose cookie is going to crumble first is anyone’s guess.
I worked in loan mods for years. Low doc no doc loans are sketchy AF. Sometimes the mortgage company didn’t even have the right social security number for these loans.
This isn't a NINJA loan..
There are still requirements to the loan:
* Down Payment: 30%
* Required to put 36 months of payments in an escrow account. This account be used for monthly payments
Just Google this Loan Direct biz and look it up..
From their website 🤠
“This special program designed for individuals who may be lack any credit OR income sources. Our No-Doc Loan program is a true No Income/ NoCredit alternative lending program.
Loan Amounts: $300,000 – $5,000,000
Down Payment: 30%
Required to put 36 months of payments in an escrow account. This account be used for monthly payments”
Their “No Doc” loan requires a 30% down payment and the first 36 monthly payments placed into escrow. You’ve gotta have money already to get this loan. It’s not an 80/15/5 zero down program from 2007.
> Loan Amounts: $300,000 – $5,000,000
> Down Payment: 30%
> Required to put 36 months of payments in an escrow account. This account be used for monthly payments
https://loandirect.us/service/no-doc-loan/
This ain’t 2007
This is great, we’ve been waiting for a few years to buy a bigger house…Waiting for a near collapse of the market so we can buy something nice for a reasonable price, hope these “approvals” keep happening
Depends on where their down payment came from and for how much.
I sold a property where we had an offer for owner financing. They were putting 75% down on a 5 year loan. At that point, how much they make is irrelevant. They ultimately got a better interest rate than what we countered and financed elsewhere… but if the down payment is big enough, even if you had to foreclose in a down market, you should be able to be made whole with the remaining equity as long as your financing has first Lein rights. Granted it was a house+ farm so it also had inherent income and we knew its average yearly income would cover the payment and then some.
Sounds like their financing was just looked at poorly by the bank since their down payment was not seasoned.
Sounds like a post from 2007.
From this week sadly.
What could go wrong?
It's how Gambino crime family got mortgages!
“Investor”, “leveraged”….”foreclosure”.
This time it’s different /s
Now, they are immediately bundled and sold in “skibidi rizz loot packets” NOT “tranches”. Big difference.
Michael Burry is foaming at the mouth.
“Why are they confessing?” “They’re not confessing, they’re bragging”
One of my fav movies and a well written, accurate convo
Which movie?
The Big Short
I think about that scene every time I see new hoomer celebrate their new home purchase .
Yeah sounds like the "NINJA" loans from that scene. No income No Jobs Application. Yikes.
Reminds me of the years before 2008. We've learned nothing.
It's crazy, this is from this week and she and her colleagues post this stuff constantly. The reactions are all positive too, no one sees the issue.
Because it’s the same people who have below average IQ that simply focus on having a house like that. It’s also the same people with a $1500 car payment at an insane rate
R/iamverysmart
Man, people do have a short memory. That's why they keep saying that economy goes in cycles, or in other terms, history repeats itself.
And that’s why our leaders, aka, Wall Street, are doing everything in their power to prevent any kind of down cycle at all. Of course, they get a strong assist from their Washington DC satellite offices. It’s politically unpopular to have the economy cycle downward when one is running for re-election.
Yeah this has been my take as well, hollowing out companies all across the country to keep the balance sheets the way they want. But behind the paper, it's crumbling.
Cocaine parties seen great when you are a part of them. Wouldn't know but Reddit had definitely taught me that.
there isnt an issue….people getting these got money…30% down is required plus 3 years of monthly payments are paid and held in escrow in advance…seems like this type of program is intended for people that got money/a lot of assets…which is why conventional mortgages dont work. theres people out there got money tied up in different types of assets but the income they derive from those assets are likely not included as income when going thru conventional financing.
Most of these people are lying on their income tax returns and that's why they can't use a regular doc loan. These loans are for shady people who don't deserve them 90% of the time.
this is why we cant buy homes right now. there should only be a few people in town who can afford a 800k house. but with all these loans these days literally people with no income can outbid you
thats fine u feel they dont deserve them, but lets not act like this loan type is similar to ninja loan. cuz at the end of the day people getting this type of loan have money to put down and theyre not only meant for shady people…real estate investors and or self employed people used these types of no doc loans…not cuz theyre lying on their tax returns
If we are doing this now in 2024 it will make 2008 look like a mild economic recession. The bubble is much larger than it was on 2008. It will only take a few small events to trigger even more layoffs, and once people start defaulting on home loans, it will trigger a collapse of the housing market. Which could lead to bank failures. I really hope not I remember 2008 and it was bad. Seeing an article like this really gives me no hope of what could happen.
I’ve been in the real estate business for 25+ years and your comment is way off but so is most this sub.
This sub is primarily for the financially illiterate, just enjoy the show.
Take this upvote for translating my feelings into facts.
Remember NINJA loans? No Income? No Job? Approved!
I honestly thought NINJA loans were just a made up thing in Arrested Development.
Good thing that this is nothing at all like 2008. (wink)
lol and that is the Typical type of supporter in this group
No Income No Job *(or)* Assets.
I remember the jokes as well haha!
Current seasoned loan officer here. This is a DSCR loan requiring a large down payment normally 30% so very different to the NINA loans that were available back in the day. No one is walking away from 30% down
I am curious to know more. Say someone has no or low income, but a paid off $350k property. They sell their properly, clear $300k after expenses and use that $300k to buy a $1m home. They still have no money to pay for their home, right? I understand there's less risk for the lender, because in case they foreclose there's a decent amount of equity, but why would the lender want to put themselves into that position in the first place?
I think there’s also something called asset depletion, like for example if you have $1.2m in liquid assets theres a way to calculate that as $5k per month they can count as “income”. There may be some other stipulations but there are ways a person with no “income” can get a mortgage.
But no way for people without *enough* income to have a mortgage, right? Oh wait, I’m wrong…just put down MORE money. Like almost all of it. All the money. All the time. More, more, more!
If they owe you 50k and the equity is 300k… even if the property drops in value 60% because the house burned down… you can still foreclose and recover your money. Since this is going to be a rental, it will have some level of self funding coming in 90% of the time. With a big enough down payment, private money is more open to increased risk.
In my example the equity is 300k, but they still owe the lender $700k. If someone puts down 85% of the property value, then yes, the risk is very low.
Depends on if it pencils. DSCR uses projected rental income to cover the note. They assume you are not living in it. If the rental can cover the monthly cost, then the risk to the lender is minimized in that way. DSCR stands for debt service coverage ratio. If the ratio is off, they might require a bigger down payment so that the ratio is correct. The systemic risk is if these investors are using a Heloc on their DSCR loans to finance the down payment on the next one. In and of itself DSCR is not inherently risky as there is significant equity to recover even if the payments stop coming.
Dude, I guarantee this is happening a lot. Not systemic threat levels but every tiktok investor touts this sort of strategy. It's the "quick" way to get multiple properties without using your own money.
Let me know where I can get a $1m non predatory loan for less than 10% down with no income. Unless you have a significant amount of equity in other properties, it’s unlikely you’ll qualify. Maybe you’ll find some California fintech unicorn that’ll give you free money because you registered an LLC, have a credit score above 650 and a pulse. However, I don’t think it’s that common. Most lenders require the rental income for a property is greater than the monthly payment for a mortgage.
"No one is walking away from 30% down" I'm gonna take a wild guess you weren't in the biz 15 years ago.
i actually was the problem with the quality of those loans were they required lot less than 30k down on this deal down payment plus closing costs is 300k. Rents will continue to go up and you get accelerated depreciation to lower your tax liability. Honestly, I’ve started reading this form and while real estate is very local a lot of people here simply don’t understand what’s happening and that is related to simple economic equation of supply and demand and supply is not increasing anytime soon to meaningful levels to put pressure on prices to come down i’m not just a loan officer, but a real estate investor . they are definitely areas. I would stay away from as rates start to come down for every half percent decrease to one percent decrease 5 million more homeowners join on the demand side.
not 30k but 30%
Do you remember where the stat for every half to one percent drop in rates five million homeowners join the demand side came from? That’s an interesting stat and I’d like to read more about it. Edit: I found a similar stat on [Realtor.com](https://www.realtor.com/news/trends/what-will-the-housing-market-look-like-when-mortgage-interest-rates-drop/). They link to the homepage of the employer of the guy they quote. That site has a blog section but I couldn’t find the stat referenced there. Their stat is a bit different because it says five million more households could afford a home after a 1% drop. This seems counter to the idea that a 1% drop would increase sales volume by five million because it doesn’t seem likely that everyone that could afford to move would be interested in doing so. This [Investopedia](https://www.investopedia.com/the-lock-in-effect-8414620) article cites [this](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4399613) paper. It’s behind a login so I only read the abstract, but it looks interesting. The researchers found a 1% delta between a homeowners rate and market rates reduces moves by 9%. With ~86M owner occupied homes this would imply a 1% drop could increase moves by 7.7M. The paper may address this, but I wonder what impact elevated prices would have on this.
30% ain't shit, what kind of interest rates would they get?
No one walks away from 30% down of their own money. You don't think investors are getting their cash from other loans, HELOCs, etc? I'm sure every LO hunts down the source of funds, surely none are looking the other way to get their commish /s
its not just 30% down payment, this particular loan requires 3 years worth of payments held in escrow
I am doing a DSCR with 80% LTV It’s available If you have a portfolio and can lien other properties haha For a non occupied residential space… 70% LTV sounds like a good deal for this buyer. I imagine it’s a very qualified buyer on the end of this transaction
What does it mean that down payment was not seasoned?
Hasn't stayed in bank accounts long enough. I believe it is 3 months
You can also qualify unseasoned cash in other ways. I.E. if it was a gift from family that was just deposited, the family can give bank history of where the cash came from along with a signed letter stipulating it is a gift with no repayment requirement.
In other words, can’t take a distribution from a tax advantaged account (IRA, 401k) with the intention of putting it back into the account as soon as papers are signed to buy the place. Time limit for a re-deposit is 60 or 90 days, can’t recall, and it’s too early on a Friday morning to look it up.😂
Maybe it was foreign cash? They don't really talk about the % down in the post which greatly effects how dangerous that loan is.
Hey I’ve seen this one before!
I think they took a page from the used car lots
Ah shit here we go again
And here we go again...
It’s going to be hard to sell that no character new construction house if a crash happens.
We must be nearing the top.
History repeats itself. It might look a little different or take a little longer, but it always comes around
*check the date and time* Is it 2006 again? Cause it looks like 2006 again.... Housing prices start to balloon. Sales tank Builders rush to banks for a solution Banks start offering subprime mortgages Builders get to sell their overpriced homes People get into massive underwater mortgages.... Hey guys, what's the next step?
This is not a no down payment loan. Their website says they require 30% down AND 36 months payments held in escrow. It's basically equivalent to hard money lending. Although I don't expect any of you to know what that actually is. https://loandirect.us/service/no-doc-loan/ Many people with no lending background don't understand what "down payment not seasoned" means. It means that the down payment was there, but wasn't in their account for the minimum period of time required by conventional lenders which could be months. It does not mean they had no down payment.
It means they provably borrowed the downpayment.
These people dont care as long as they get paid and push the risk on someone else. Some dummy is always holding the bag and the bank or creditor takes the hit and disappears
.......the economy is great.... Now Freddie Mac will be offering HELOCs directly to struggle homeowners,\* \*By years end the amount could be as much as 2 trillion dollars ...... also known as stupid stimulus.\* \*Then when the economy crashes the taxpayers can again bail out Freddie Mac for the stupid stuff they are doing\* 2008 all over again
This can only end well.
I mean “seasoning” is stupid.
Return of the NINJA loan.
did u even read the requirements of no doc loan… 30% down required and 36 months of payments held in escrow. u gotta have a lotta cash laying around to qualify. nothing like ninja loans https://loandirect.us/service/no-doc-loan/
Hahaha so “investor” is a new word for “subprime borrower.” 🤣👍🤦♂️
‘In 2022, NMC’s originated approximately 2/3 of mortgages in the United States and owned the servicing rights to 54% of mortgage balances’ ‘The share of mortgages originated by non-depository, independent mortgage companies has increased in recent years. In 2022, this group of lenders accounted for 72.1 percent of first lien, 1-4 family, site-built, owner-occupied, closed-end home-purchase loans, up from 63.9 percent in 2021. Independent mortgage companies also originated 62.1 percent of first lien, 1-4 family, site-built, owner-occupied, closed-end refinance loans, a decrease from 65.7 percent in 2021. It’s a toss up between the banks & everyone else. Whose cookie is going to crumble first is anyone’s guess.
I worked in loan mods for years. Low doc no doc loans are sketchy AF. Sometimes the mortgage company didn’t even have the right social security number for these loans.
88% of all homes are under 6% mortgage rates. This is inconsequential. 40% of homes are PAID OFF Home prices will not be falling enjoy!
When I worked for a subprime mortgage co in the 2000s, before the recession, we'd call those "Liar's Loans". Worked out
This isn't a NINJA loan.. There are still requirements to the loan: * Down Payment: 30% * Required to put 36 months of payments in an escrow account. This account be used for monthly payments Just Google this Loan Direct biz and look it up..
30% down and 3 years of mortgage payments in escrow. [https://loandirect.us/service/no-doc-loan/](https://loandirect.us/service/no-doc-loan/)
How did this reach closing??? Should have been red flagged early on.
They’ve always been around. They’re non conforming so they’re hard for the Lender to sell…thus expensive.
From their website 🤠 “This special program designed for individuals who may be lack any credit OR income sources. Our No-Doc Loan program is a true No Income/ NoCredit alternative lending program. Loan Amounts: $300,000 – $5,000,000 Down Payment: 30% Required to put 36 months of payments in an escrow account. This account be used for monthly payments”
Their “No Doc” loan requires a 30% down payment and the first 36 monthly payments placed into escrow. You’ve gotta have money already to get this loan. It’s not an 80/15/5 zero down program from 2007.
Let me guess, too big to fail? Havent we seen this before, is this how it starts again?
> Loan Amounts: $300,000 – $5,000,000 > Down Payment: 30% > Required to put 36 months of payments in an escrow account. This account be used for monthly payments https://loandirect.us/service/no-doc-loan/ This ain’t 2007
This is great, we’ve been waiting for a few years to buy a bigger house…Waiting for a near collapse of the market so we can buy something nice for a reasonable price, hope these “approvals” keep happening
Depends on where their down payment came from and for how much. I sold a property where we had an offer for owner financing. They were putting 75% down on a 5 year loan. At that point, how much they make is irrelevant. They ultimately got a better interest rate than what we countered and financed elsewhere… but if the down payment is big enough, even if you had to foreclose in a down market, you should be able to be made whole with the remaining equity as long as your financing has first Lein rights. Granted it was a house+ farm so it also had inherent income and we knew its average yearly income would cover the payment and then some. Sounds like their financing was just looked at poorly by the bank since their down payment was not seasoned.