Shaq has a plan to save Orlando from the mortgage meltdown. Sort of. The Orlando Sentinel says that word leaked out that Shaq was working on a plan to buy the troubled mortgages of Orlando homeowners and refinance them so that families could stay in their homes — and hopefully turn a small profit by doing so. The trouble is, the demand is overwhelming and Shaq doesn’t have anything set up yet. That’s not stopping him, though.
From the Orlando Sentinel:
The problem is, O’Neal does not yet have a concrete plan. He wasn’t planning an announcement, and word leaked out when he made an impromptu visit to Orlando City Hall last week.
For the people reaching out for help, the need is immediate. And because the news circulated across the country, calls and e-mails are coming from far and wide.
Even so, O’Neal will pursue the as-yet undefined plan, Cooper said. The two met to discuss how to proceed on Saturday and again Monday.
“He said, ‘Let’s just go out and help as many people as we can,’ ” Cooper said. “He’s sincere about it.”
For more information, contact Cooper by e-mail at uc3n1@cfl.rr.com
Thousands in Orlando want Shaq to help with mortgages [Orlando Sentinel]
(Photo: City of Orlando)
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@stevejust: It doesn’t matter what you’ve paid, how much equity you have, blah, blah, blah.
People buy discount notes and mortgages all the time. Investors have access to lenders regular homebuyers do not. Even IF you walk away or otherwise default on your payments, the investor owns the asset. They’ll just sell it or rent it out.
@stevejust: I didn’t know it cost so much there. Thats stupid. Move to KC. For 250,000 you can get a house you can put on Cribs.
@ceejeemcbeegee: Umm… yes, it matters what people have paid, how much equity they have, etc.,. The idea that fundamentals don’t matter is exactly how we wound up where we are. You don’t happen to work at Bear Sterns, do you?
@humphrmi: Converting the exotic ARMs at this point doesn’t help if by operation of making minimum payments, the pinciple has grown to more than the house was “purchased” for, and the house is now worth 14% less than that. Here, this will show you why Shaq can’t save the day:
[www.doctorhousingbubble.com]
@stevejust: When it comes to investing, no, that doesn’t matter much. Deals like this are primarily concerned with how much the bank is willing to lose on the house, the investors exit strategy, etc. YOUR payment, YOUR interest rate, YOUR credit isn’t part of this equation because YOU are not negotiating the deal, the investor is. Put it like this, if you could get a lower payment on your own house, why would you need Shaq? You can’t because you do not have the money, time, access to lenders, nor the knowledge to work the deal so that it’s lucrative and beneficial for all parties.
@stevejust: Nice article, the consumerist did a write up about this awhile back, it has one of my favorite graphs. You can clearly see we are just getting through the first wave of subprime resets with the option-arm resets just around the corner…
[consumerist.com]
@stevejust: Exactly. Last thing we need is another showboat basketball player with no fundamentals….
Now the WNBA players, they have great fundamentals.
Oh, and ceejee was talking about the thirdparty buyers/lenders/owners, not the people buying and living in the house.
@A.W.E.S.O.M.-O: I just bought my first home and they didn’t even bother verifying my employment. What problems are you having in getting a loan?
@donkeyjote: Thank you!
Buying your own home, you need to care about “the fundamentals.” Buying investment property elevates the game to a whole new level.
@donkeyjote & ceejee: I understand exactly what Ceejee was talking about. Unfortunately for all of those people holding all of those traunches of mortgages, they’re all going down like lead anchors no matter what the rating. There’s too many bad loans floating around. Just sayin’.
As for me, Ceejee, I sold my house in 2006 because it was SO PLAINLY OBVIOUS to me that the market was going to crash. If the median income family and mean income family can’t come close to affording the median or mean house value in a given geographic location — there is a bubble, and it must pop. And it has started to. But values will continue to decline until houses become affordable according to the traditional fundamentals (i.e., the people buying them have a prayer of actually being able to afford them). Here in Los Angeles, we still have about $100,000 more for houses to fall until they start to realign with those fundamentals. It would make me LOL if it weren’t having such a huge impact on the economy in general.
@donkeyjote: DAMN DAMN DAMN.
I forgot to add “Now the WNBA players, they have great fundamentals. Who cares if they can’t dunk“
I fail at the internets.
@jscott73: Indeed. I saw that post back in the day on this site. May I humbly suggest this as the best graphic to explain what’s going on from a national perspective?
[bp2.blogger.com]
All anyone needs to do is ask themselves how much more money people are making today than in 1998, and you can then see how much further home prices HAVE to sink before they reflect… I’ll say it again… the basic FUNDAMENTAL element of being affordable to the persons purchasing them.
@stevejust: I hear you. Hopefully, Shaq and his team know how to convert bad loans into good ones.
I’m in LA too, and folks here aren’t waking up quite yet. Mostly it’s people in the IE and Riverside County screaming “Help me, please”. But in LA County, it’s still overpriced.
@ceejeemcbeegee: Uhh… right, like having a lower mortgage than prevailing market rate that you can rent the property for?
So, let’s take that $2,000 a month payment on that house bought for $250,000 now worth $215,000. The average rental price for a 2 bedroom in Orlando is $927. Don’t have data on a three bedroom $250,000 house, but do you think you can get more than $1073 extra for the house because of an extra bedroom and a yard? If you do, maybe I want to start doing business with you because it would be easy to take your money.
And yes, investors don’t buy rental properties with 5% down, but the fact of the matter remains that you have to make significantly more money than the mortgage on the rental to cover the costs of maintaining the rental. So at the end of the day, investors are still dealing with fundamentals. They’re different than the owner-occupier’s fundamentals. But they still exist. That’s why they’re the FUNDAMENTALS.
@stevejust: You rent to individuals instead of couples or pairs. 600 a month per small room, and 900 for the bigger room (So 4 people), and you got 2100 a month.
@ViperBorg: Why do people hammer on oil executives when a MSNBC anchor pointed out that petrol companies were pumping out 8% profits while hedge funds put out 80%+?
@stevejust: If the investor buys that house with a $2000 mortgage, knowing that the market rent in only $1000, they are a moron. You are calculating the mortgage based on financing YOU can get thru a traditional loan at a bank. If I were to buy that house, I wouldn’t have a $2000 mortgage!
You say it’s “worth” $215K: define “worth.” Is that what’s owed on the note? Or what the comps say it’s worth?
If it’s what’s owed and it’s in foreclosure, I’d propose a short sale to the original lender and probably get it down to ~$170K-$185K, depended on my inspections and the comps. Why are they going to sell it to me for less? Because they want it off their books ASAP. They could put in on the market, but then they have to deal with realtors and the national average days on market is 240. So I’m helping them by buying the house, even if it’s at a discount.
I put $50K down and finance the rest, and my mortgage is ~$600/mo. And I only plan to pay the interest on the note? I repeat, I’m not getting a traditional loan. Private lenders lend money based on how much you’ll profit from your exit strategy, not just your earned income. And if I default, they get the house.
Now, I have a few options with this house.
Option 1. I have investors lined up to purchase the home at ~$200K. This investor has financing and they see the numbers (rent – mortgage = profit) work for them. I’ve made a profit. The bank sold the house. The investor has an asset. Everyone is happy.
Option 2. I keep the house and rent it out for ~$900. I’m making about $300/mo minus expenses. When the market takes an upswing, be it 5, 10, 15 years from now, I can “re-fi” my loan if I wish. Or pay it off. Or sell. I have options.
I will quote somethingawful once again:
Who do you blame for the mortgage meltdown?
“Are you having trouble making your mortgage payment? Do you have the same salary you had when you bought the house? If you answered ‘yes’ to both of those then it’s you. I blame you.”
@ceejeemcbeegee: My friend, the $215k is defined here as current market value. We’re going with present-day “comps.” In my example, the purchaser paid $250k for it, and has an outstanding loan balance of @$250k, even though they’ve been paying on it for two years, because of negative amortization.
If you’re getting short sales from banks where the bank is taking a $80,000 loss, let me know where to sign up. There’s a lot of houses I’d consider buying in LA at that kind of discount, even with the enevitable hassles of dealing with a short sale (in terms of delinquent taxes, etc.,). Maybe there are short sales that reflect an $80k loss to the lenders, but I haven’t seen any that big. At least not yet.
You took the $215k number and subtracted $45,000ish from that. That might be more realistic, but in my example that’s you getting the house for $205,000, not $170,000.
@ImCrying: There are a lot of stupid people in the world. Can stupid people be blamed for being stupid? Yes. But who’s dumber? The person who manages a blockbuster video and buys a $450,000 house, or the bank that lent the guy the money in the first place? You know who gets my vote? The people who supposedly went to school, got fancy MBAs, gained some sort of financial expertise, and should understand the business they’re in.
I can’t for the life of me understand why you’d blame the more ignorant party as between the two of them. Most people grew up in an era where banks wouldn’t loan people money if people couldn’t afford to pay the money back. They think that if they’re credit worthy and being extended credit, the banks know what they’re talking about. You think banks are too stupid to realize that?
I blame entities like Countrywide, WaMu, Bear Sterns and CitiFinancial 100% for the flippin’ mess they made. I kind of think people who don’t are kind of stupid.
@stevejust: They are not in LA, of course. Like I said before, the IE is most lucrative right now. Also Riverside, Kern, and Orange counties. And they ARE offering that much off, but the houses start at $1mil. $250K houses in LA are very, very, very rare.
Regardless of what I’m getting the house for, I’m ALWAYS going to ensure my mortgage is LESS than the rent rate.
Because you friend is upside down, why don’t you wholesale it or lease option?
Shaq seems like a really nice (although maybe a bit idealistic) guy. He’s also a volunteer police officer in his community too which I think is neat.
I’m not sure how this plan is going to work but if he can make some money and prop up some soon-to-be forclosures I say more power to him. I got your back, Shaq.
I see Shaq understands “markets” as well as McCain
@stevejust: Also, don’t forget that some of the affected homeowners weren’t even the victims of their own ignorance; some got truly conned.
@A.W.E.S.O.M.-O: For me it was the IL HUD and the FHA that looked-out for me when I bought a first home. You should look into those and the equivalent of the HUD in your state. I was able to get a loan at a reduced interest rate with only 15% down. The IL HUD also had areas where you could get discounts on your loan. Some areas were not horrible, just aging population such as Sycamore which is near Dekalb and NIU and an hour and a half from Chicago.
Just like everything there were numerous catches. I had a modest income that did not go above certain limits. Also your income could not increase more than a certain percentage from year to year over ten years. If it did you needed to pay penalties. There are mortgage brokers with experience with putting together loans under these types of plans and the free county legal services can point you to them.