One of the goofy goofy things we lived with was the notion that if you could prove that you were self employed 2 years,you had carte blanche when it came to you r loan program–that act vetted your income because our stupid tax laws encourage people not to make any money on paper.

-CJ

It’s amazing how often these calls come in. I had an “investor” I consulted with in 2006 reappear a couple of months back. After advising her to liquidate as many of her properties as possible, she proceeded to buy 4 more in Phoenix with the help of a “creative” loan officer.

She wanted to know what I could do to get her out of the Option ARM’s on her Jacksonville condos since they had popped up over 8% and she couldn’t sell them due to a 2 1/2 year supply of similar properties on the market.

Predictably, she was stunned when I showed no interest in working with her.

The funny thing is, true “investors” are licking their chops at the profits they’ll make with legit financing snapping up these homes at 50 cents on the dollar in the next 2-4 years.

Happy New Year everyone!

A look at Zillow would probably raise the red flag.

As a real estate agent, I would steer clear of this type of transaction.

Sounds like this potential borrower is living in ‘06 and not ‘08.

A point of clarification – wouldn’t the lender want to see financial statements for LLC in this case? And also, wouldn’t the financial statements have to be certified?

Great post. One of the things that has frustrated me the most about this mess is that the media and politicians seem to ignore that all these foreclosures are the people you describe. It isn’t little old ladies going into foreclosure. The bulk of them are being driven by these HGTV Flip This investors. Ironically, all the politicians seem to focus on is predatory lending. Talk about slight of hand. We aren’t in this crisis because of a predatory lending, we are in it because of irrational real estate investing.

I wish I only met these folks once a month. I get one every week but I cut my teeth working for investors and through 2005/2006 I made many 80/20 Four-plex loans via Aurora. Now my database is disgruntled with the “new market”.

Here is one I just learned about, I have never participated in this type of creativity.

Investors or loan officers find short sales or foreclosures. The loan broker secures a 100% private loan to buy the property. They secure the private lender by having a 3rd party deposit $100K in escrow to be released to private lender after 60 days if refinance cannot occur on the original distressed purchase. The person who puts the $100K up gets $10K for their 30-60 day loan. The investor gets a rental for zero down (GSE refiance at appraised value) and the LO gets big fat fees on both ends.

I just do not get creative enough to drive Hummers, BMW M5’s or 600 series Mercedes.

Great post!

Bryant

“Laws control the lesser man…Right conduct controls the greater one.”