Spot The Speculators #92 – “They took whatever money they got from the sale and immediately mortgaged a new house despite the fact that they don’t have jobs or savings or pensions.”

“Husband had a call from a relative recently. This family sold their max mortgaged house in the interior last spring so they could move to Hope and amazingly didn’t lose money on the sale. Of course they took whatever money they got from the sale and immediately mortgaged a new house despite the fact that they don’t have jobs or savings or pensions. He shared that they would like to have us for dinner but they don’t have a table to eat at and no money to buy one. He also said he was trying to look for work but didn’t have enough money to buy gas to drive to Chilliwack which is the only place in the region that might be hiring. He is early-60s with health issues. While I think he is on the extreme end of stupid, I wonder how many other folks are living similiar unexamined lives and trying to keep up appearances.”
Terminalcitygirl at VREAA 24 Nov 2012 7:57pm

Anybody who can’t see the speculation in this kind of behaviour, and tries to argue that this is just a couple looking to put a roof over their heads, really isn’t paying attention.
– vreaa

16 responses to “Spot The Speculators #92 – “They took whatever money they got from the sale and immediately mortgaged a new house despite the fact that they don’t have jobs or savings or pensions.”

  1. How does a family with no jobs or savings secure a mortgage? Something smells fishy, but I am not necessarily referring to the truth of the anecdote.

    • Most likely through a private lender. Do I have to repeat this every time an anectode like this pops up?

      • Why would a private lender take on such a risk?

      • Ask a private lender.
        I personally know NINJAs who bought houses through private lenders. Not sure what are the rules these days, but just 1 – 2 years ago, a private lender would give you a low-doc (often just liar’s) loan of up to $850,000 and allow you to buy up to 2 properties in Lower Mainland.

      • Ralph Cramdown

        Whaddya mean, why would they take such a risk? For the MONEY. Think about a loan at 8 or 9 percent interest, 50-60% maximum LTV, with two or three points in upfront origination fees, and specified liquid damages if they have to foreclose. The “hard money” lenders set terms such that they are ambivalent about whether you pay or they foreclose.

      • The interest is actually much lower than that. About 5%, sometimes less. At least it was. LTV used to be much higher too.

      • Ralph Cramdown

        Well, there’s variation in the private money market, from the ones who want to see your sources of income, and will lend at higher LTV and a lower rate, to ones who only care what the house appraises at and that it’s marketable. If I were in that biz I certainly wouldn’t lend my money at only 5% to someone who can’t get bank financing, but that’s just me…

        Private 2nd mortgages may enjoy a resurgence in popularity now that HELOCs aren’t as easy to get or as big as they used to be.

      • Whoa wait a minute bubbly… you mean a… “subprime” loan?

      • Ralph Cramdown

        There’s a difference between subprime and hard money, at least in the mindset of the lenders. Subprime is typically a large portfolio of underwritten loans (i.e. they look at your income, verified or not, and consider fereclosure an unpleasant PITA that some hopefully small percentage of the loans will go through). Hard money, or asset based lending, cares not whether you can make the payments but only about the value of the underlying asset, and has enough margin and fees built in that they make money even in foreclosure.

        That said, here’s a nice survey of some current subprime and hard money availability, courtesy of our friends in the mortgage brokerage industry:
        http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2012/11/caamp-mortgage-forum-2012.html

    • Down here we called it “subprime lending”. Not sure what you guys call it, but it is the exact same thing.

  2. [NoteToEd: Clearly, John Rambo’s experience of HopeHospitality doesn’t bode terribly well for this chap.]

  3. Terminalcitygirl

    Good question YVR, I think they may have secured the new mortgage before he left his job in the interior and he may be collecting CPP. I know they are also tied up with Monavie- a health drink pyramid scheme- so they refer to themselves as self employed but I’m sure they’ve never made any money from it. I honestly can’t say how they thought they could possible afford it or how the bank thought it was a good idea. They are banking on house appreciation, government benefits and inheritance to pay their future bills.

  4. How appropriate they moved to Hope! I guess that’s all they can rely on at this point.

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