Well according to some so-called facts appearing in a recent New York Times article (by B. Stein), that meltdown is just is not happening. It is all a mass hallucination experienced by a falsely alarmed and grossly misinformed public. The article declares that of the ten-plus trillion dollars in outstanding mortgage loans, only less than fifteen percent of them (less than 1.5 trillion bucks worth) are subprime loans. [I.e., Subprime: Loans offered at an interest rate above prime to those unfortunates who are less than qualified for prime rate borrowing, in other words, sub prime borrowers, not sub prime loans.]
Subprime mortgages may carry interest rates of perhaps only 0.1% to 0.6% higher than prime, which seemingly tiny difference translates to thousands of dollars in additional costs to borrowers and higher profits to lenders). The bulk of all mortgage loans, the article goes on to insist are not subprime and therefore have a much lower foreclosure rate. I guess the conclusion drawn here is that if only half of the sub prime loans are in, or headed for, foreclosure'why worry about a measly little forty or fifty billion dollars being ripped from the country's coffers?
Nevertheless, that dinky little number is growing because of the folly of so many greedy lenders during the market boom of the first part of the new millennia. That is: ?Hey guys, let's loan out 90%, 100% and 125% of the borrower's home equity value and charge exorbitant rates, that can be hidden by low entry-rate payments, which will consume the borrower when the rates adjust and plow mercilessly into their life savings and pocket books in a few years.?
Well those 'few years' are up now and the market is down, and the number of naïve borrowers walking away from their mortgages is at an alarming high. Who can blame them? Why pay off a $300,000 loan on a house you don't want or need that may be worth only $250,000 today and less next week? Moreover, is it any secret as to who gets jammed into bankruptcy and/or foreclosure first in this kind of economy? Of course not: it's the disenfranchised that have the least financial wherewithal and recoverability.
None-the-less, financial wherewithal notwithstanding, as time chugs on, as it is wont to do, the higher echelon homeowners, breathing freely for now will feel the sting as well, as they soon come to realize the mortgage situations they to have gotten themselves into for the same reasons.
So?
So what?
How do these revelations and my clever retorts help anyone?
Well, let's discuss that. Let's talk about how you and I can help folks who find themselves in the maw of this mortgage-lending morass. What follows is one of many scenarios involving our own system of real property transfer: i.e., The North. American Realty Services, Inc. Equity Holding Transfer System? (PAT. PEND) (the NEHTrust?):
Help for the person threatened with or facing foreclosure
You can utilize our trust transfer program (the North American Realty Services Equity Holding Trust Transfer? (pat pend) (the NEHTrust?) to legitimately take-over any lender's existing mortgage payment stream (without a due-on-sale compromise). In the process, you can charge the outgoing party for it (if no money now, arrange for future payments or collateralize a promise to make part of the monthly payments). Then locate a resident hopeful to who will pay you to get into the property, and to whom you can give all homeownership benefits including income tax benefits. This party won't need much up-front money, or a high FICO score (the weaker the credit, the more the up-front costs, the higher payment, or the lower the percentage of ownership and profit sharing'in this arrangement eviction not a problem and claims of having 'equity' in order to force lengthy judicial process and free rent is not possible).
Still short of the cash you want? Bring in an investor (like me or our thousands of NARS Professional Network members) to pay some of the up-front money and/or a part of the monthly payments, in exchange for a piece of the action and a share in future profit from your long-term hold. During the term of the agreement (2 year, 5 years or ??) your resident lives in the property, pays all the bills, handles all the maintenance and other ownership obligations'while you just sit back and share in future appreciation, equity build-up from loan principal reduction and monthly cash flow. All of this and free property management. Not a bad way to generate Wealth and live comfortably.
How is it done? Simply stated, a property owner of record (mortgagor) places his property into a title-holding trust as the beneficiary, then subsequently naming you as a co-beneficiary and manager of the trust and its property. You then bring in a third co-beneficiary who wants a place to call home and who can handle your up-front fees and the monthly payments (with some extra to you each month). By this method, you are enabling the resident beneficiary to have all the same fee-simple bundle of rights in real estate ownership that they'd have if they'd had great credit, gotten a mortgage, paid a large down and went on title. In our scenario, due to their co-beneficiary status in the right kind of trust (Illinois-type land trust model), and their net leasing of the property under specific IRS guidelines, full income benefits are theirs for the taking (re. the underlying mortgage interest and property tax).
What about foreclosure assistance transactions, where the defaulting party wants to remain in the property and can handle it? Well this is usually a rotten idea, but if you do it our way, it can be a lucrative and honest way to help someone in need.
A homeowner who is nearing the point of losing his home can, in some cases, via the use of our systems, bring in a cash benefactor. The two then share in some portion of the equity build-up (from mortgage principal-reduction), along with a portion of the property's future appreciation potential, for, say, the next 3, 4 or 5 years (or longer if the parties agree).
The recipe for this scenario must be free of any form of unconscionability, and must also: 1) reduce the homeowner's payments for at least a year; 2) must not 'strip (deprive one of)? any of the homeowner's beginning equity; 3) must not be structured so as to result in a mandatory forfeiture of equity in the event of a subsequent default; and 4) all dealings must always be at no less than, say 80% of the property's verifiable true Fair Market Value.
So, how does anyone make any money this way, one might ask. Allow me to give you an example of a typical transaction of this type'and see for yourself if truly helping someone with onerous penalties and forfeitures can make an investor benefactor some decent money.
The Analogy:
?It is imperative that the homeowner-in-default satisfactorily demonstrate for the benefactor that the credit problem leading to the default was temporary in nature and with logical cause, and that it has since been rectified with a good likelihood of not recurring.
?The homeowner must provide a current credit report with explanations for each negative entry'a brief sentence or two for each one re. why the problem happened and why it shouldn't happen again.
?The homeowner must be given current comps (comparative market analysis) to sign and date, acknowledging his/her understanding of the true value of the property at inception, along with a statement on the form in his own writing, acknowledging an understanding of the direction that real estate values might be heading (up or down)
?It must be clearly stated in the contract that there is no guarantee of any specific ROI (Return on Investment)
?Let's say the subject property is valued at - $320,000
?And that the homeowner is 3 payments in arrears ($2250 each)
?The current loan balance is $250,000, including penalties and arrearages
?In addition to the amount to bring the loan current ($7,750), the investor benefactor deposits an additional refundable $5,700 with the trust, with which to create a Contingency Fund (i.e., for the potential of eviction and/or minor emergency repairs): this amount also includes $1,200 that is earmarked for making part of the monthly payment for a while, therefore reducing the homeowner's aggregate monthly (PITI) mortgage obligation by $100 for the first year (or perhaps by $200 per-month for half of the first year)
?The parties establish a Mutually Agreed Value (MAV) at inception in the mount of, say, $375,000 (10% less than verifiable FMV). Note that in the event that a property would have minimal equity at start, the loan amount becomes the MAV.
?Within the contract, all parties expressly acknowledge a clear understanding that the transaction does not constitute, in any sense, a loan of money, an obligation to repay other than by the disposition of the property; nor can the agreement create or contain interest consideration between parties. This is to say that the agreement is never to be construed as a loan, security agreement, equitable mortgage, partnership, corporation or association). Instead, the intent is for the mortgagor (the borrower of record), to temporarily vest its property in a co-beneficiary-directed, title holding land trust for maximum protection of the property, its title and the investor's financial interest (the investor being the co-beneficiary and co-director of the trust). The process is analogous to a long term Escrow.
?The documents must provide that in the event that the property would not support the ability to repay the investor's contribution at term, the agreement will be extended and no such repayment would be mandatory until such amount can be repaid out of the sale or later refinancing of the property.
?The documents are also to provide that at the trust's termination, the property's title is to return to the homeowner (borrower) of record, following his or her re-finance of the mortgage, or his or her arrangement for a sale to a third party. This is in order to repay the investor benefactor's original contribution, along with any agreed-upon share of profit that is above the Mutually Agreed Value at inception. Remuneration of the investor can be by any other means that is mutually acceptable to the parties.
?The documents must provide that in the event of a continued decline in the real estate market, the parties may mutually agree to extend the contract for another term, or the investor benefactor could agree to be cashed-out for an amount less that the original agreed amount, or perhaps with a smaller-than-anticipated share of profit.
?Lastly, it must be agreed that any subsequent default in payment obligations will be met with eviction from the property and a full value buy-out of the defaulting party's beneficiary interest in the trust'at full fair market value, as would be determined by the defaulting party by means of a certified M.A.I.* appraisal (*Member American Appraisal Institute). Should an offer by the non-defaulting parties be challenged and proven inadequate, then payment in full of the verified amount is to be made to the defaulting beneficiary by means of an unsecured promissory note to be retired upon sale or other disposition of the property at, or prior to, the trust's scheduled termination date.
Five years later?
Now, let us assume this hypothetical property is valued, after five years, at $400,000. This means that the investor benefactor is set to receive a return of his original contribution of $13,500, and half (could be any agreed-upon percentage) of the loan's principal reduction (say, $5,000). At that time, the investor benefactor would also be due the same percentage of the resulting accrued appreciation, which is over and above the starting MAV. Given a fifty percent (50%) equity sharing arrangement, this would constitute a total return of $76,200, for a net profit of $62,750 over an original contribution of $13,450 (4-500% return is not bad).
In contrast with the above, let's say there were to be NO appreciation at all over the five years of the agreement. Should that have been the case, our investor benefactor (and co-beneficiary) would receive a return of his original $13,500, plus half of the loan principal reduction ($5,000). They will also receive 50% of that disparity between the starting MAV and the true FMV (fair market value) of the property at inception (i.e., half of $32,500) for a total return of $21,200 for a profit of $7,700 (i.e., a 57% return on investment'still not bad).
In addition, the above scenario, the NEHTrust' provides all of the following benefits in this so-called 'down market?:
1.Transfer full ownership, including tax benefits'without title transfer to the buyer
2.Acquire (or sell) property of all types safely without cash or credit qualifying'or title transfer
3.Shield one's property from the prying eyes of neighbors, creditors and lawyers
4.Shield one's property from creditor claims or judgments, including IRS liens
5.?Sell (or trade)? income tax benefits to lease tenants in order to leverage higher rents while
greatly reducing the tenant's (tenant co-beneficiary's) after-tax rental costs
6.Take or allow loan-payment take over without a Due-on-Sale Clause compromise
7.Transfer real estate with one brief document, without escrow, title or lender involvement
8.Structure equity-shares and subject-to's safely and effectively without title transfer
9.Structure lease options look-alikes without potential for an ?Equity Claim' to forestall or thwart eviction
10.Structure lease options look-alikes without its being construed and adjudicated an 'executory' contract and with the necessity of a purchase option or option fee
11.Structure partnerships without cost or standard paper work or income tax reporting obligations
12.Avoid reassessment and property tax increases when transferring RE ownership
13.Avoid reconveyance (transfer) fees in most jurisdictions when transferring RE ownership
14.Convert realty to personalty, while still qualifying for 1031 Real Estate Tax LIKE-KIND Tax Deferred Exchange exemption
15.Avoid a property's involvement in Probate upon the death of the property owner
16.Maintain maximum simplicity of multiple property ownership (only one party signs all documents irrespective of the number of beneficiaries)
17.Eliminate dissention and disagreements among participants
18.Simplify tax-free Gifting
19.Avoid public disclosure of acquisition costs and sales prices (not transfer value appears on the transfer document
20.Avoid the threat of partition by a dissident member during a dissolution of a partnership or a marriage
21.Avoid the necessity of obtaining new title insurance when ownership is transferred
22.Eliminate RE related threats of spousal claims and sabotage in marital disputes
23.Acquire foreclosed-upon properties with simplicity and safety, without bank involvement
24.Avoid seasoning issues and double-escrows with Flips and Assignments
25."Condominiumize' small apartment buildings (1-10 units) without refurbishment, extra expense or special permits
26.Structure time-shares and fractional interest ownership investments, simply and safely'among the trust's beneficiaries
27.Handle foreclosure-bailouts and acquisitions without violation of local legislation in mot jurisdictions
28.Make BIG money fast and safely with tenant/buyers who may have minimal (but some) cash and/or poor credit
29.Effectively and comfortably manage out-of-area or out-of state income property through NARS 'ground partners' without management, maintenance, negative cash flow or personal involvement
30.Acquire, manage and/or sell over-encumbered and over-leveraged property for big profits
31.Hold ownership in, and live in, your home for years and still qualify for 1st-time homebuyer loan
32.Sail through lightening-fast closings with or without Escrow (due to there being no loan application process to contend with)
33.Enhance your credit strength and financial leverage by not showing an income property inventory on the mortgage app. (trusts show under 'stocks and bonds,? pg 2 of the form 1003)
34.Use your Roth IRA to acquire all or some of your beneficiary interests in real estate and never pay any income tax on your millions of dollars in gain.
Meltdown? What meltdown? We don't see no meltdown! OK, well we do, but we are going to profit handsomely despite and because of it
