Mike Mueller, Social Media.ist

This is part two of yesterday's post. I didn't announce that yesterday was Part I.

I just thought I'd let it happen.

Nothing gets by the watchful eye of Super Sharp Real Estate Agent, Susan Goulding! She called me on why the list stopped at M.

Could that be because she works in Tracy?

Susan who really knows Tracy, passed along this tip:

"FYI - Tracy has a $75,000 downpayment assistance program for low to moderate income earners. Property must be in the City's Redevelopment Zone -- 3% simple interest for 30 years as long as you live in the property and don't refinance. It's a fantastic program - eliminates MI for most 100% buyers."

So Susan Goulding, here is your list for California First Time Buyer Grants from N to Y

(You'll notice my email completely missed Tracy's program)

Once again...

I'm not sure if these are accurate or currently available but one of my loan officer friends sent this list and I thought I would pass it along.

Some of these might be grants, some might be loans, and some might be old and obsolete. I know, if I am working on a loan for a first time buyer, as a loan officer I always check and see if there are applicable programs available and if so what factors that program has. Sometimes it works out well - other times my clients are glad I read the fine print.

For instance, the city of Concord has a grant program for first time buyers. I pulled the information and on the surface it looked good. "a zero-interest, 45-year loan"

You can't argue with ZERO % right?

Down the page a bit I found these little nuggets...

• "The City loan carries shared appreciation when the home is sold."
• "When you notify the City of your intent to sell or transfer your FTHB home, the City of Concord has the option to designate an eligible purchaser who meets the income requirements of our FTHB program. This enables the City to meet 2002 requirements of Community Redevelopment Law, which requires this FTHB property to remain affordable for a total of 45 years."
• "There are resale restrictions recorded on the deed to the FTHB home. The Resale Restriction Agreement limits the sales price of your house when you sell. When you are ready to sell the home, the City will calculate the maximum future resale price, which is not equal to the full market value."

Suddenly ZERO % doesn't sound so perfect anymore does it?

So take it with a grain of salt but here are some possible programs that might help the new homeowner...

They say the devils in the details....

Make sure you are working with a True Mortgage Professional.

I'm not sure if these are accurate or currently available but one of my loan officer friend sent this list and I thought I would pass it along.

Some of these might be grants, some might be loans, and some might be old and obsolete.  I know, if I am working on a loan for a first time buyer, as a loan officer I always check and see if there are applicable programs available and if so what factors that program has.  Sometimes it works out well - other times my clients are glad I read the fine print.

For instance, the city of Concord has a grant program for first time buyers.  I pulled the information and on the surface it looked good.  "a zero-interest, 45-year loan"  You can't argue with ZERO % right?

Down the page a bit I found these...

• "The City loan carries shared appreciation when the home is sold."
• "When you notify the City of your intent to sell or transfer your FTHB home, the City of Concord has the option to designate an eligible purchaser who meets the income requirements of our FTHB program. This enables the City to meet 2002 requirements of Community Redevelopment Law, which requires this FTHB property to remain affordable for a total of 45 years."
• "There are resale restrictions recorded on the deed to the FTHB home. The Resale Restriction Agreement limits the sales price of your house when you sell. When you are ready to sell the home, the City will calculate the maximum future resale price, which is not equal to the full market value."

Suddenly ZERO % doesn't sound so perfect anymore does it?

So take it with a grain of salt but here are some possible programs that might help the new homeowner...

They say the devils in the details....

This isn't about Social Security.  It isn't about Medicare.  It isn't about the Graying of America.

 It's about a torpedo that's coming towards us.  It's silent, it's fully armed, and it's not on the radar.  But it will be very soon.

This is not a single family home.  It's an Assisted Care Facility cleverly disguised as a single family home.  You've seen them in your neighborhood too.  You won't find a sign out front.  It's a "stealth operation".  These homes are staffed by professionals and regulated by health officials.  They are owned by local "Investors"  and not by large corporations.

For the residents it offers them a great alternative to the often cold linoleum clad enclaves of the standard issue nursing facility.  Oh, and it's usually cheaper too!

Captain, I have an unidentified blip on Radar and it's closing Fast!

But here is what you don't know.  Hell, they don't seem to even know. Many of these local "Investors" bent the rules when they bought the home.  To maximize their cash flow they bought with little or no money down.  They would need their precious capital to rehab and convert the home for it's new use.  Cash flow is critical to any business venture.  To make the numbers work many of these investors used a form of the Payment Option ARM.  Since then , they've been making the minimum payment (more net income).  From a short term business standpoint there is absolutely nothing wrong with this plan.  Almost.

Emergency Evasive Maneuvers

They bought a couple of years ago.  Flash forward to today and we have a series of serious problems. 

FRAUD

They bought a SFR with the intention of running a business in it.  They committed Mortgage Fraud.  Plain and simple.  When they bought the home the application showed it as investment property.  That means a rental home.  That means collecting rent from a nice "Single Family".  (That's the important part of Single Family Residence).

It does not mean running a full time business within it's walls. 

Chances are that nobody will end up in jail for this, not the applicant , the loan officer, the appraiser, or the real estate agent.  What happened in the past is oft times brushed away.  It's the present and the future that they are more concerned with.  This time around you can bet that NO Underwriter will let this file pass across their desk.  "Not on my watch", said one underwriter I recently talked to.  You can't use a home loan for a business property.

COMPS

They bought a 3 bedroom / 2 bath home and converted it.  They split large rooms into smaller separate units in order to house more beds.  Since their residents are confined to wheelchairs they won't need to park their car in a garage.  Look, more bedrooms! 

Now they are going to have serious comp issues.  How can you compare properties accurately when this is now a 7 bedroom / No Garage 2,500 sq ft home surrounded by other tract homes that are the 3 bedroom / 1 bath and only 1,100 sq ft?

LOAN TO VALUE, STATED INCOME AND TAX RETURNS

Because they used a POA with a 5 year recast their payments are due to jump dramatically soon.   Due to declining values in even the best neighborhoods, their 10% equity that they had is probably gone.   The documentation they provided last time on their stated income loan isn't going to fly this time.  Full Doc this time.  Unfortunately there will be no hiding the fact that this is NOT a Single Family Home any longer.  They'll have to refinance with a Commercial Loan this time and that will put the kabash on their positive cash flow.

Three OPTIONS

Typically a homeowner in this predicament has the choice of options.  They can refinance, sell, or stay the course.  Unfortunately this is a business and not a homeowner.  Their future is determined by cash flow and revenue. 

A refinance is out.  They cannot refinance into a comparable commercial loan and still maintain positive cash flow.  It doesn't exist.

Sell?  Remember this is now a business and no longer a home.  They'll have a hard time selling this as a business at any price.  What would be in it for a potential buyer?

Stay the Course?  For how long?  If your business had a major operating expense jump 275% overnight how long do you think you could "stay the course"?  Not very long.

ABANDON SHIP!

When this speeding torpedo blasts a hole in the side of the ship and the Captain and his mates are rowing away, who's going to be caring for the passengers left behind? 

Where do they go? 

What kind of care can they afford? 

Who is going to help them?

My guess is that we'll be needing a new kind of Assisted Care then, specifically designed for Granny Dumping.