The Message Is Finally Getting Across
The Saugus Advertiser reports from Massachusetts. “Homebuyers are paying less these days to jump in to the Saugus market, following the nationwide trend. Prices have fallen to an average of $380,100 for a single-family home in Saugus, according to MLS statistics. At the same time, it’s taking longer to sell a home. The Saugus market peaked in 2005 with an average sales price of $404,000 for the 285 single-family homes that were sold that year.”
“Meanwhile, there have been 47 foreclosures in the town of Saugus in the past 180 days, according to foreclosuremass.com. ‘The aggressive predatory mortgage industry put a lot of people in a bad situation,’ said Arthur Coombe of Century-21 Coombe Real State.”
“He further explained that homebuyers with variable mortgage rates and no money down are in the biggest trouble. The market had been rising steadily for nine straight years, added Combe, who said that it was inevitable that an adjustment period would eventually take place.”
“‘I see a change with sellers and buyers coming to grips with the market,’ added Rick Parziale of Red Coach Realty, who gave the example of a seller from Indian Rock Hills whose home might have sold for $725,000 during the recent market peak, but would now probably get closer to $625,000 for the home.”
The Boston Globe from Massachusetts. “More than 9 percent of all homeowners in Massachusetts with adjustable-rate home loans, about 10,000 borrowers, are facing larger housing payments when their mortgages reset to higher interest rates over the next three months. The total value of all those loans, according to First American LoanPerformance, is $2.45 billion.”
“‘This is an unprecedented wave of resets,’ said Wellesley College economics professor Karl Case. ‘It’s going to lead to a credit crunch for people who will find it hard to find loans,’ he said.”
“‘I don’t know how I’m going to survive,’ said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.”
“That mortgage will reset on Dec. 1 to 7 percent, from 6.125 percent, pushing up Masoud’s total monthly housing costs to $4,350. She rents the second unit for $2,400 and earns $63,000 a year. But her income will not be enough to cover the mortgage and other expenses, such as property taxes, college tuition for her eldest daughter, and ongoing medical bills for her youngest daughter.”
“‘I don’t want a foreclosure,’ said Masoud, who is asking her lender to renegotiate her mortgage.”
The Staten Island Advance from New York. “Ada Diaz’s belongings are packed in boxes, ready to be moved sometime in the next 10 days. The bank recently sent her a notice to get out of the Mariners Harbor home she owned for 17 years before losing it in July to foreclosure, the result of a series of increasingly calamitous subprime mortgages.”
“Ms. Diaz refinanced four times over the last four years, public records show. WMC Mortgage Corp., where Ms. Diaz got her last and what she says was her worst mortgage in 2005, was recently shut. A Long Island-based mortgage broker solicited Ms. Diaz and originated the last loan, allegedly falsifying her income in the process.”
“‘We wish Ms. Diaz’s case was unique but it’s not. It’s happening all over America,’ U.S. Sen. Chuck Schumer said during a visit yesterday with Ms. Diaz at her Grandview Avenue townhouse. ‘It’s just criminal,’ he added.”
“She said she was seeking some extra cash to finish work on her house. Loan documents show her income was listed by the broker as $8,000 a month. The broker also said she worked at a cleaning service, even though she was retired and not working at the time.”
“What was supposed to be one mortgage payment turned into two payments of $1,769 and $550, respectively, for a combined total of $2,319. The first mortgage was slated to reset next year to $2,314, and the total monthly payment represented more than 90 percent of Ms. Diaz’s income.”
“The broker, meanwhile, made $10,000 to originate the loan, noted Margaret Becker, director of the Foreclosure Prevention Project for Legal Services NYC/Staten Island.”
The New York Times. “With home foreclosures on the rise, buying a property in default may seem a sure route to profit or, at least, a cheap way to get a home. It can be. But it is not an endeavor for the shallow of checkbook or faint of heart.”
“‘Before, even if you didn’t know what you were doing, you were safe because the general market was on the upside,’ said Joseph Tammaro of Brooklyn, a real estate agent and investor. ‘Now, when you buy foreclosures in today’s market with property values in decline in certain areas, you have to be careful because you might be catching a falling knife.’”
“Brad Rozansky, a real estate agent in Bethesda, Md., cautioned against thinking that buying and selling foreclosures is an easy way to make a living. ‘I have plenty of customers who have lost $20,000, $30,000 or $40,000 on a house,’ he said.”
The New Haven Register from Connecticut. “Connecticut’s home building market continued to pull back in August, with the number of permits issued falling 13 percent from July levels. For the year to date, the number of permits issued statewide was down 12 percent at the end of August.”
“Mark J. Nuzzolo, owner of Brookside Development LLC in Woodbridge, said…a logjam has been created as many potential buyers put off making a move in anticipation of further price drops. ‘Clearly sales are down, and as builders we’re a lot more cautious today than we were in the last recession. We’re not anxious to run out and start building new houses,’ he said.”
“Nuzzolo said people are attending open houses and expressing an interest in buying new homes, but many cannot find buyers for their current homes.”
“‘There are so many homes on the market now that buyers are becoming paralyzed by the choices they have,’ he said. ‘Everything is bogged down, and people are very nervous.’”
The Washington Post. “If there’s anything real estate experts agree on these days, it’s that you should not buy property unless you are willing to keep it for years.”
“‘I think a person who’s buying, they’re not going to do quick flips,’ said Sara Rubida, an agent in Arlington. She said she advises her clients to be prepared to own their home for at least three years to break even or make a profit on their investment. ‘But I’d feel more comfortable if they lived there at least five years.’”
“‘The investors who got into the market recently are really paying the price’ for not treating real estate as a long-term investment, said Gregory H. Leisch, CEO of a research firm in Alexandria.”
“‘Try to save some money so you can come up with a 20 percent down payment,’ advised Tom Bryan, a senior VP of Coldwell Banker Residential Brokerage.”
“With Washington area prices as high as they are, that’s no easy feat. As of May, the median condominium resale price for the metro area was $303,968, and the median single-family house resale price was $465,726, said Leisch.”
“So you’d better have about $61,000 or $93,000 sitting around if you want to get a decent mortgage.”
“Condo resale prices in the past 12 months fell in the District and Northern Virginia. New condo prices, meanwhile, declined 0.5 percent across the metro region, according to the Delta report.”
“‘We’re not going to see too much of a rise in the market until all these foreclosures are cleared up, and that’s going to take two to three years,’ said Randy Morrow, an agent in Arlington.”
“In 2005, the pipeline of apartment units planned for construction over 36 months was 18,000. As of June, it had ballooned to 31,030 units, according to Delta.”
“For the first time in a long while, the tide may be turning in favor of renters. ‘It looks as though, through anecdotal evidence so far, rents are pretty flat from last year this time,’ Leisch said. ‘We were predicting that rents would turn flat for the next year or so because of all the condos turned into rentals. The more supply, the less pressure there is on rent.’”
The Virginia Pilot. “South Hampton Roads is not experiencing the condo collapse that has plagued some big cities, but in the past year, prices have fallen more than 20 percent, units are staying on the market about a month longer, and condo building permits have fallen off.”
“‘This is a very tough time to be building these high-rise condominium projects,’ Norfolk Mayor Paul Fraim said, adding that the shortage of credit is killing projects nationwide, especially condominium developments.”
“James V. Koch, an economist and former president of Old Dominion University who oversees the school’s State of the Region report, said the climate in Hampton Roads does not appear to differ greatly from the national situation.”
“‘Verbal reports I have received indicate that some condo buyers are walking away from their condo prior to purchase,’ he said. ‘They forfeit their deposits rather than purchase units that in some cases have fallen in value since the deposit was made.’”
“The median sales price of a condo in South Hampton Roads, for example, has dropped about $60,000 in the past 12 months, from $289,272 to $229,900, according to the most recent data.”
“Not many people are willing to put money down on a condo they can’t see, said developer Bart Frye, of East Beach. ‘When the market was white-hot, people were buying without doing as much due diligence as they do now,’ he said.”
From WVEC in Virginia. “The housing market in Hampton Roads is making some condo developers reevaluate their projects. Crews are hard at work on the East Beach Villas in Norfolk. When they’re done, there will be 20 new high-end condos and it’s owner Bart Frye’s job to sell them in a tough housing market.”
“‘Unless you were living on an island someplace by yourself, you’d be concerned about the market,’ said Frye.”
“Several local condo developments are now on-hold, like the Point Chesapeake project. Economist Dr. Vinod Agarwal says he’s not surprised by builders’ reactions. There are more condos on the market this year than last year, and they take longer to sell, so developers are cancelling projects and lowering prices for new condos.”
The Daily Press from Virginia. “The first home price drop in more than five years means that everyone involved in real estate in Hampton Roads is about to stare down the biggest boogeyman of the business: buyers’ expectations.”
“Hampton Roads home sellers came to grips with their own expectations and finally recognized in August that they no longer had the upper hand on price in an oversupplied market. August marked the first month since February 2002 when the median price of a home in the region was lower than that from a year earlier.”
“‘The message is finally getting across to sellers,’ said said Perry Pilgrim, broker in Hampton.”
“Now that seller psychology is changing, will the consumer get stubborn and wait? Pilgrim said anyone who needed to move would find no problems finding a good deal and mortgage. The buyers who hold out are the marginal ones just looking for a deal that blows them away, he said: ‘Some percentage of buyers are always going to wait for the best deal.’”
“If there’s anything real estate experts agree on these days, it’s that you should not buy property unless you are willing to keep it for years.”
…and don’t read anything about real estate for a long time, either. You won’t like what you see happening to the “value” of your acquisition. Just wait until Bernanke inflates enough that your house is finally worth what you paid for it, and a loaf of bread is $5.00.
“If there’s anything real estate experts agree on these days…….”
Real estate experts advising people not to throw caution to the winds and buy property? What is the world coming to? I thought these guys were expert optimists!
And from the Washington Post no less. Hoorah for Woodward, Bernstien and the Cryogenics Team at the Post
“If there’s anything real estate experts agree on these days:
these days = the last 10 or 15 days.
When we got out of dodge and downsized to Elysian Fields, my brother in law couldn’t believe we would do something as stupid as pay for our house, in entirety…
We could be investing and reaping the whirlwind profits, he said as they were in the process of buying their 3rd home, on loan
Please put ‘Bubba’ on your prayer list. It sounds like he is in for a whuppin.
It sounds like his lenders are in for a whuppin.
“‘I see a change with sellers and buyers coming to grips with the market,’ added Rick Parziale of Red Coach Realty, who gave the example of a seller from Indian Rock Hills whose home might have sold for $725,000 during the recent market peak, but would now probably get closer to $625,000 for the home.”
Yep, I know this area very well. That $725,000 that’s now worth $625,000 is probably only worth $450,000 - $500,000 (and I’m being very, very generous at that). IMO, the houses in this particualr subdivision (vintage 1970 - 1990) with a few “huge” new builds in the last few years, should only be selling at $300,000 - $400,000). Saugus is 10 miles or so from Boston. It has crappy schools, congestion, etc., but it is a relatively easy commute to Boston.
Next town over, Lynnfield, the prices soar, because of the better land lots, schools, etc. BUT..the Lynnfield has pretty much become UNAFFORDABLE by most any standard. There might be one or two houses priced below $400k at any given time. Most homes are $600k - $800k. Virtually all new construction is $1,250,000 and up. Lynnfield’s biggest claim to fame is that it has the highest concentration of HUMMER owners in the region. This might explain why most of the people in the town Blow!
As HD74 would say, we are totally FOOKED here.
“‘I don’t know how I’m going to survive,’ said Sana Masoud, a single mother facing a $600 a month increase in one of two mortgages she obtained to buy a two-family house in Brighton for $712,000 in 2004.”
Hmm..just did a little investigating on this property..
Purchased by Sana Masoud on 12/30/04 for $712,000 w/$569,600 mtge. (I’m guessing that’s only the first mtge). It was purchased from Maisa Masoud (father, mother, who knows?).
Maisa Masoud paid $437,000 on 7/25/2000 (4 1/2 years earlier).
The previous owner paid $190,000 on 4/1/1999.
Maisa Masoud bought two properties in Stoneham on 10/20/04 for $360,000 each. ok $360,000 + $360,000 equals $720,000, which is the proceeds from the sale of the Brighton property.
I don’t mean to accuse anyone of Flipping, but something sticks here.
OK, so I will.
Old Sana makes 63k and buys a duplex from her father, bro, ex, whatever for 712K, giving a cool 275k to said father, bro, etc.
Even with a tenant paying just half the mortgage,not taxes, maintenance, utilities, etc., she’s looking at 356 mortgage for her half the duplex. And how the fook does 63k translate to carrying a 356k loan?
These numbers never added up, these folks were thieves from the get-go.
So failed thief Sana should go live in Stoneham with her father, bro, ex, whatever. And shut up.
Sana is a victim. Remember, that, and please don’t point out inconvenient truths.
In this case, the renter pays approx. half the mortgage. Hence, does the rent not reflect the bubble price? As in, jacked up out of proportion?
Maisa Masoud is a real estate agent.
http://www.local.net/realestate_MA_Middlesex_Melrose_agent_details_864307.html
I went back to re-read the article, picking it off of the top email list. Check out the picture mixup, it’s pretty funny (but might not stay that way):
http://tinyurl.com/3xp4u3
“‘We wish Ms. Diaz’s case was unique but it’s not. It’s happening all over America,’ U.S. Sen. Chuck Schumer said during a visit yesterday with Ms. Diaz at her Grandview Avenue townhouse. ‘It’s just criminal,’ he added.”
CHUCK!!!! It’s not criminal! She’s experiencing the consequence of her greed and stupidity!
CHUCK!!!! You’re not that stooopid, are you?
CHUCK!!!!
CHUCK!!! She “liberated her equity” four times!
She done robbed herself!
Old Chuckie is just too dumb to be a senator from New York. He makes Al D’Amato look like a freaking Rhodes Scholar.
He’s standing there for his photo op with an old lady who’s a fast hustler and is peddling a sob story, and old Chuckie is buying it, hook, line and sinker. Maybe she could sell him a bridge while she’s at it.
Spike. Schumer isn’t dumb. He’s a smart, slick, slippery politician which is why he’s survived for so long. He’s simply a run-of-the mill opportunist politician who continually scans the horizon for a photo-op/news opportunity to promote his good guy image. This time he’s jumped on the, “I’m a politician who cares about the ordinary hard working, honest american citizen. Take a picture of me with this poor woman who I’m going to help or, better still, do a video interview of me concerning my pledge to look into this sub-prime story to show on CBS’s 60 Minutes.
The REAL question to ask this as*hole (and 99.9% of all politicians are as*holes) is, “Where were you when all this was going on over the last 6 years and please don’t give me some b.s about it only just came to light. EVERYONE knew what was going on.” However, don’t give him time to think - because he will certainly come up with an answer.
Hear hear! This “victim” was a serial refinancer who almost certainly was complicit in the fraudulent documents submitted on her behalf. Chuckie Schumer is a snake-oil sales par excellence. If you think his comments on the housing bubble are disingenuous, you should see his comments on gun control. What a crap weasel.
Not only was she a serial refier, but she knew @#$% well that her income would not cover the payments on that amount of money, regardless of whether the loan officer inflated her income or not. She deserves everything she gets. If CHUCK feels so sorry for her let him make the mortgage payments for her.
Maybe grammy should just go live with Chuckie. He looks like needs to be wised up, and she’s just the broad to do it.
Economic Darwinism 101
Chuck, chuck, bo-buck, Banana-fanna…
I believe he is that stupid.
HELOCs and Cash-out refinancings are the crack cocaine of the 2000-2006 time period. Absolutely addicting. Withdrawal is going to be painful.
“… WMC Mortgage Corp., where Ms. Diaz got her last and what she says was her worst mortgage in 2005, was recently shut.”
Can you imagine thinking back on your life, doing a “Best of/ Worst of “…and ranking your mortgages? “1999…great year, got the best mortgage of my life…but that 2005 mortgage just stunk up the joint.”
I’ve had some troubles in my life but for the most part never knowingly walked into them like some of these f@cktards.
I’m laughing so hard my eyes are leaking…stop…let me catch my breath. Toooooooo funny.
I remember being a kid and going to the circus to see the knife swallower, amongst other attractions…
Different circus, different flavor of knife swallowing now.
S.P.Q.A.
“‘Before, even if you didn’t know what you were doing, you were safe because the general market was on the upside,’ said Joseph Tammaro of Brooklyn, a real estate agent and investor. ‘Now, when you buy foreclosures in today’s market with property values in decline in certain areas, you have to be careful because you might be catching a falling knife.’”
LMAO. What we’re seeing is knife swallowing by a bunch of amateurs. Not a pretty picture!
Not only can prices plunge on REO’s, but they can have bad titles, scary construction problems, mold, rats, cracked foundations, no water or plumbing, a ton of back taxes owed, IRS liens, etc. When prices fall you’re better off buying a house from someone who lives in it than a REO. When I sold real estate I wouldn’t represent a client who wanted to buy an REO, because the hidden problems are too numerous and scary to list. It’s too easy to get sued for problems you would have no way of knowing existed. Just like the house up the street from me that had a bad septic that had to be replaced to pass code. New owners bought it as an REO and faced a $20k bill to put in a new septic. Of course the bank never disclosed because they don’t have to in our state since they didn’t live in the property. Everyone on this site when the time is right to buy please, please, be very careful of REO’s.
Ms. Diaz,
The 15 minutes you spent looking like a big shot to family and friends is up. Can you really spend the money and have it in savings? Oh, I forgot, your house is a store of value. (not)
Hey Boca Bob, I sold a house in Delray for 99k in ‘97. 5 years later it sold for 175k. 2 years later 250k. I will feel much better when I find out it’s worth 110k today. I’ll have to check when I get time.
Is Boca collapsing?
Denial. Prices are dropping but no capitulation. Waiting for some of these forclosures to be recorded to set new price levels. Not enough pain yet for numbers to be realistic.
sometimes it’s like “Groundhog’s Day” on this blog. Is there no end to the deluded, greedy, screwed FBs, real estate agents, vote-mongering politocians and so-called “economists” in this country? When will they all capitulate, admit we were right and fade away? In the meantime we’ll have to placate ourselves with the déjà vu stories of their lunacies and their burnouts. I wish I wasn’t so addicted - it’s a gorgeous day out and the beach beckons. Time to buy some coffee from the ex-real estate agent behind the counter at Starbucks, and soak up some sun with the out-of-work mortgage brokers…
You have ’sun’? What is this ’sun’ thing of which you speak?
Getting a lot of rain Olympiagal? Do you ever make it out to Allyn and Belfair?
Yes, pretty areas. Do you know those areas? You were in Ft. Lewis, right?
Yes, stationed at Ft. Lewis.
I know the areas. Loved the areas. My ex husband grew up in Allyn. His family owns about 3 acres of land in Allyn.
Living in Vancouver, I don’t know, but I hear it is a magical orb in the sky with the power to blind people. Sounds made-up to me.
Orb…? In the sky…?
That’s crazy talk.
Warning and Disclaimer kiddies:
“Flipping…Don’t try this at home. These grown up FB’s are highly trained Experts ”
and don’t try it with a home, either…
Comment by Chip
2007-09-29 06:36:17
‘… and a loaf of bread is $5.00.’
You must mean until a loaf of ‘Wonder Bread’ is $5.00. A loaf of artesiany style bread— with hemp seeds, or flax flour, or exotic teensy wild berries gathered in the remote Andes, etc.— is already $5.00+.
That’s why I usually go to the Andes and gather my own remote berries, ’cause I am NOT paying 5 bucks for some flour and water just since it’s made by some cute hippie chick with ugly lumpy sandals.
Besides, I love making bread.
This isn’t OT, since good bread is the staff of life. Also, maybe I’ll come up with a good recipe and call it ‘Housing Bubble Blog Bread’, in honor of this blog. And then I’m definitely not off topic.
I tried making my own bread. It went horribly wrong. Tasted like wallpaper paste, and wife got annoyed at the huge mess I made. Most expensive bread ever, in terms of time and effort.
next time..make sure that the yeast is at room temp before mixing it with the water & sugar. The water s/b at 115 degrees as measured with a thermometer (sp?). Let the yeast, suger and water “proof” for ten minutes in a warm oven (not over 115 degrees). The yeast, water and sugar mixure should get a nice head on it, (like beer). Mix in other ingredients. Do not over knead the dough, let it rise in the warm oven, not over 115 degrees, for at least one hour.
suger = sugar
Thanks!
….and when you’re kneading, you know enuf’s enuf when it’s kinda shiny and elastic, when you can poke a hole in it with a finger and the hole closes pretty much quick
Beer! Beer!
Oh, and you have breadmaking skills, I see, Pen. Nice and clear instructions.
I used to make bread all the time in college, while hammered. I found the trick was to not let your friends steal the bread while it was cooling in the kitchen. Dyeing it green does not hellp with this.
I wonder if it’s a weather thing - Baked all our bread, made granola and did all that stuff when I lived in AK. Months of no sun and/or 20 hrs/day of dark seemed conducive to baking. Room temp water is indeed the key.
Hi Pen - good work I did the same digging - took about 1 minute on Mass Land Records - someone got defrauded here- I think it was the bank Ms. Masoud got her mortgage from - think Mom and Dad Masoud may have shared in some of that $712K? Here is the email I sent to the clueless Globe reporter. The internets are your friend lady…
Dear Ms. Blanton - I suggest that you check Masslandrecords.com before writing an article like the one that appeared today in the Globe.
Sana Masoud purchased the 2 family for $712,000 (!!!!! on $63,000 per year - really?) from Amira and Maisa Masoud. I don’t think it is a big stretch to surmise that these people are either her parents or other relatives. Again - 2 -family in Brighton for $712K? Massland Records also reveals that Amira and Maisa Masoud bought the property just 4 years before “selling” it to Sana Masoud for $437,800 (7/25/00 Book 25165, Page 116) (I’m no math wiz but that looks like a 60% profit). I’m going to be a little cynical here and guess that Sana Masoud and her family may have shared in some of the money that came from the bank (old fashioned fraud maybe?)
I am surprised that you didn’t mention whether you asked Ms. Masoud how on earth she qualified for a $596,000 1st mortgage and a $100,000 second (she refinanced the second late in 2006 - it’s now at $102,000 - again information easily found at Masslandrecords.com ) on $63,000 a year. It is a shame that lenders and mortgage brokers (who quickly make their huge commissions and dump these loans on what appear these days to be pretty reckless investors) give these loans out to people who clearly cannot afford them but I also think some digging is necessary before painting these buyers as victims.
Good work!
Great email, Jill. But it will be wasted. This “reporter”, and I use the term loosely, will not understand the logic that you are presenting.
I sent a similar to yours email to Kimberly.
I don’t abuse her, because that won’t get you anywhere. I prefer to just provide the info and leave it at that.
My email to Kim…sorry for the long post.
Hi Kim,
I hope you don’t mind me sending you these real estate related emails. If so, just let me know, and I’ll stop sending them to you.
I just read your article about the ARMs and the rate adjustments. Please do not take this email as an attack on you or Sana. I am just analyzing what you wrote and the situation is here in MA and in other parts of the country.
Just out of curiosity, I did some digging in public records..
Regarding Sana Masoud in Brighton with the $712,000 two family….
She bought it from Maisa Masoud who paid $437,000 on 7/25/2000.
The owner previous to Maisa paid $190,000 on 4/1/99.
From $190,000 to $712,000 in five years or so, talk about a rocket ride.
As an aside, Maisa Masoud bought two properties in Stoneham in October of 2004 for $360,000 each (probably anticipating the proceeds coming from the Brighton property).
Anyway, the point is, the problem isn’t just with the ARM products (which are pretty much crap, as we all know). The real problem lies in the rapid appreciation of property values caused by lax lending standards, low down payments, etc.
The notion of someone making $63,000 per year taking on a nearly 3/4 million dollar property is just not logical and the mathematics prove it, even given the potential rental income from the second unit. As I understand it, banks only add the rental income to the borrower’s income when qualifying, meaning they do not subtract the full rent from the mortgage payment and then do the qualification. This means that only about 30% or so of the rent gets counted towards the mortgage, taxes and insurance (a.k.a. PITI).
Given a $63,000 gross income, plus say $1,000 in montly rent (I’m using the rent of $2,400 per month times 42%, to be generous and it makes the math more straightforward) would give an annual income of $75,000 per year. Using 33% f gross for PITI, a person with an income of $75,000 per year should not have a PITI greater than about $2,000 per month.
Now, public records shows this Brighton property as having a tax bill of approx. $7,200. Assume $1,200 for insurance (just a guess). So that’s $700 per month for taxes (T) and $100 for insurance (I). Subtract that from the $2,000 per month for allowable PITI and that leaves $1,300 for the principal & interest (P&I). $1,300 divided by a factor of .0060761, which is the factor for a 30 yr fixed rate mortgage at 6.125%, gives a allowable mortgage of about $215,000.
Sana’s mortgage in public records on 12/30/04 was $569,600. I am pretty sure that this is only a first mortgage. There may be a second mortage. I am not sure whether there is or not. Judging by her payments that you wrote about, I suspect that there is. Based on a 30 yr amortization schedule at 7%, a payment of $4,350 yields a mortgage of $653,800, which is a big nut to crack.
So, Sana borrowed nearly 9 times her earned income plus passive rental income, when the recommended multiple is more like 2.5 to 3.5 times income. To put this in perspective, think of the following. If she was given a loan, with zero interest, it would take $1,800 per month for 360 months (30 years) to pay back $650,000. I have left out taxes, insurance, upkeep, etc. to make it as easy to see as possible.
The problem is that housing here is just too far out of reach for most wage earners.
Anyway, I would really like to see you write about this level of detail in an article or two. I think it would make for good reading for folks and might help others to think about the magnitude of these numbers before signing on the dotted line.
Thanks.
Pen
Pen,
Did you send this letter to the editor as well? You should, this is really well written. Anyway, in my letter to the Globe reporter, I pointed her to this site. Other than that I pretty much just told her that her reporting sucks, which is not nearly as constructive as what you did.
My email to Kim..sorry for the long post.
Hi Kim,
I hope you don’t mind me sending you these real estate related emails. If so, just let me know, and I’ll stop sending them to you.
I just read your article about the ARMs and the rate adjustments. Please do not take this email as an attack on you or Sana. I am just analyzing what you wrote and the situation is here in MA and in other parts of the country.
Just out of curiosity, I did some digging in public records..
Regarding Sana Masoud in Brighton with the $712,000 two family….
She bought it from Maisa Masoud who paid $437,000 on 7/25/2000.
The owner previous to Maisa paid $190,000 on 4/1/99.
From $190,000 to $712,000 in five years or so, talk about a rocket ride.
As an aside, Maisa Masoud bought two properties in Stoneham in October of 2004 for $360,000 each (probably anticipating the proceeds coming from the Brighton property).
Anyway, the point is, the problem isn’t just with the ARM products (which are pretty much crap, as we all know). The real problem lies in the rapid appreciation of property values caused by lax lending standards, low down payments, etc.
The notion of someone making $63,000 per year taking on a nearly 3/4 million dollar property is just not logical and the mathematics prove it, even given the potential rental income from the second unit. As I understand it, banks only add the rental income to the borrower’s income when qualifying, meaning they do not subtract the full rent from the mortgage payment and then do the qualification. This means that only about 30% or so of the rent gets counted towards the mortgage, taxes and insurance (a.k.a. PITI).
Given a $63,000 gross income, plus say $1,000 in montly rent (I’m using the rent of $2,400 per month times 42%, to be generous and it makes the math more straightforward) would give an annual income of $75,000 per year. Using 33% f gross for PITI, a person with an income of $75,000 per year should not have a PITI greater than about $2,000 per month.
Now, public records shows this Brighton property as having a tax bill of approx. $7,200. Assume $1,200 for insurance (just a guess). So that’s $700 per month for taxes (T) and $100 for insurance (I). Subtract that from the $2,000 per month for allowable PITI and that leaves $1,300 for the principal & interest (P&I). $1,300 divided by a factor of .0060761, which is the factor for a 30 yr fixed rate mortgage at 6.125%, gives a allowable mortgage of about $215,000.
Sana’s mortgage in public records on 12/30/04 was $569,600. I am pretty sure that this is only a first mortgage. There may be a second mortage. I am not sure whether there is or not. Judging by her payments that you wrote about, I suspect that there is. Based on a 30 yr amortization schedule at 7%, a payment of $4,350 yields a mortgage of $653,800, which is a big nut to crack.
So, Sana borrowed nearly 9 times her earned income plus passive rental income, when the recommended multiple is more like 2.5 to 3.5 times income. To put this in perspective, think of the following. If she was given a loan, with zero interest, it would take $1,800 per month for 360 months (30 years) to pay back $650,000. I have left out taxes, insurance, upkeep, etc. to make it as easy to see as possible.
The problem is that housing here is just too far out of reach for most wage earners.
Anyway, I would really like to see you write about this level of detail in an article or two. I think it would make for good reading for folks and might help others to think about the magnitude of these numbers before signing on the dotted line.
Thanks.
Pen
Excellent analysis Pen. I did come off as snarky but I’m afraid I couldn’t restrain myself (or rather chose not to). I did a similar search several months back in response to another article this reporter did (poor sellers mad that they couldn’t make a 100% profit on their sale) and pointed out the information available at Masslandrecords.com. I just cannot believe that she couldn’t take the time to check easily available public records - also that she couldn’t at least mention how ridiculous it is for someone making $63,000 being qualified for and choosing to enter into a 700K loan (she did take out a 100K second which she re’fid less than a year ago for 102K).
Well if the journalist is too stupid to figure out how ridiculous that loan amount was to income, guess we’ll see another $712k buyer shortly.
Curtsey and a standing ovation!
Everybody loves the Massachusetts Registry of Deeds , I researched the house as well. A few tidbits on the property. It was never worth anywhere close to 712k. It’s in a borderline neighborhood 2 blocks from a housing project, one block from a sketchy Store24 and right next to a main thoroughfare. Presently a two family one street away is listed on Zip at 579k after three price reductions and has a Zillow dream estimated value of 518k. Weirdest thing is that I lived in the house during my college years, the guy who sold it in ‘99 was my landlord…..
I wrote to her too, but your letter is way better.
Didn’t someone mention earlier that one of these fraudsters is a realtor?
Good catch on the Virginian-Pilot article. It seems every 5th house is for sale here now, and at prices way out of line with salaries. Denial is still heavy, but it is amazing how much things have turned around from the early days of the bubble blogs (05?) when no one would ever admit that anything could ever go down again. The comments on the condo story should be interesting. The Virginian-Pilot moderates them, so it takes a while for them to show up.
Ben,
Can you remove of my double posts, above???
Thanks,
Pen
….”adding the shortage of credit is killing projects Nationwide,especially condominium developments.”
Now you see there is a benefit of a freeze on credit in the markets that BB and Wall Street don’t talk about . More excess supply in builing won’t get built. How about many future FB’s will not go on the books as a bad loans because of the tight money market .Just think about all those companies that were going to expand with credit ,but now they are saved with the tight credit conditions regarding a contraction or recession upcoming in the market .
A tight money/credit market is a good thing .
There’s that dang five-letter curse word again!!!
“The median sales price of a condo in South Hampton Roads, for example, has dropped about $60,000 in the past 12 months, from $289,272 to $229,900, according to the most recent data.”
er…$5k a MONTH. Dang.
Hey Sana, for being bright enough to make $63K a year, you get an F for basic math. 712/63 is around 11. A 3rd grader could figure that out. 11 yrs of your income (all of it - no taxes, food, college kid on their own, no medical, no interest) just to pay for your house. I had a 10 yr old kid figure that made no sense. Can you spell FORECLOSURE?
Ms Diaz - I hope the criminals that took you get torture executed. But to refi something bought 17 yrs ago is inexcusable and no sympathy from me for losing your house.