Posted on 09/18/2013 10:31:24 AM PDT by whitedog57
Rapid increases in house prices have spawned unintended consequences. One of the unintended consequences in the return of the shared appreciation mortgage.
Jeff Uter would have needed to sell stocks or pull cash out of his consulting business to afford the down payment on a $780,000 home in Orange County, California.
FirstRex is seeking to benefit from homebuyers who need extra cash as values climb at about the fastest pace since 2006 and lenders require larger down payments after loose mortgage underwriting helped fuel a global crisis.
Instead, he paid half of the 20 percent required and got the other $78,000 from San Francisco-based FirstRex. In exchange, the real estate investment firm will get 40 percent of any gains in the value of Uter’s 4-bedroom condo in a golf course community.
Here is the punchline: “With the recovery underway, FirstRex started offering the down payment assistance this year using money from pension funds and endowments to fill a need otherwise served by wealthy relatives, according to co-Chief Executive Officer Jim Riccitelli.”
Here is a chart of house prices since Q1 2012 (the Loan Performance index from CoreLogic).
loanhptoday
And so it goes. Rapid house price growth begat demand for “affordable” mortgage products which begat products like shared-appreciation mortgages (SAMs) backstopped by pension funds and endowments.
Let’s see if HUD and/or Congress pressures Fannie Mae and Freddie Mac to purchase these new SAMs.
If they do purchase these SAMs, they can be called “Berkowitz Bonds” after the original Son of Sam, David Berkowitz.
(Excerpt) Read more at foxnews.com ...
“Jeff Uter would have needed to sell stocks or pull cash out of his consulting business to afford the down payment on a $780,000 home in Orange County, California.”
Maybe Jeff should buy a home he can afford?
Derivatives worked really well didn’t they????? Now you can use other peoples money to buy an asset that you don’t truly own nor will you ever realize any appreciation.
Kash for Kardashians.
Another bubble, another burst.
Do you have the correct link to the original article?
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