Another set of morons buying in Harlem and paying more than rent on UWS

interesting -- they are paying 4k including 750 for charges so they are likely paying 1600+750 = 2350 per month post taxes. I would like to see the UWS 2br apt that rents for this that is likely as nice as what these people got

the equation is not always one sided for renting
Even in Harlem they will pay at least this amount for renting a comparable unit -- actually if you check comparable buildings -- eg Susans court the rents are higher for comparable space -- you can claim that makes no sense either and I could agree with you

however, the people are not as big fools as you make them out to be

These 2 are definitely not morons or idiots. Although I would not have made the same decision, I can respect their choice. It looks like they got an FHA loan, so they put 5% down, and pay a 5% or less mortgage rate. They are both wage slaves, and will be z
able to deduct all of the interest from their taxes. Their out-of-pocket monthlies should be less than $3,000.
Where on the UWS can you rent a sunny, doorman, fully renovated 1br+ office, 2 baths for less than $3,000?
I'm not saying there is no risk, but these are highly-educated, lovable, good-looking people with generous families ( who paid their dp.)
What are the chances that they will default? Slim to none. They love their apartment, they can afford it, they're not spending more than they would in rent.
In other words, it may not be a great deal, but it works for them. The name calling is getting old.

nicely put, Maly.

broken record time....

what happens if something in their life circumstances changes requiring them to move? one of them gets a great offer for a new job in another city?

they're underwater based on transaction costs assuming that they could sell for what they bought. no one seems to understand the fundamental difference in commitment between buying in this environment and previously. it used to be, hey, what the hell, if we need to sell, worst case is that we'll break even.

joedavis, this is the unit:

http://streeteasy.com/nyc/sale/407031-condo-257-west-117th-street-central-harlem-new-york

At 5% down and 5% mortgage rate, it's $3200 for the mortgage, of which $2600 is interest, so call it $1800 post-tax interest payments. The taxes are next-to-nothing and are presumably being abated. So I think they are "throwing away" $2550 ($1800 post-tax interest and $750 common charges) a month at the moment, likely increasing to $3000 as the tax abatement expires.

Can you do 1100 sq ft of comparable quality 1BR + home office renting on the UWS for $2500-$3000? Probably not. However, probably doable at $3500, definitely doable at $4000.

"what happens if something in their life circumstances changes requiring them to move?"

NYCMatt will scream over the unfairness of it all, how JOBS are the problem, blah, blah, and they will move onto his couch.

If you ask me, these people have no business buying. Seriously, if you're 35 and don't have a measly $30K saved up between the twose of youse and therefore have to have your parents help you, you are in no position to make a $600K purchase. If my parents were helping me pay for anything at age 35, I'd be ashamed to admit it to anyone, much less have it printed for all to see.

I can't for the life of me think of any good social purpose served by tax dollars subsidizing this purchase. At worst it is encouraging what may be an imprudent investment, but it just may be putting money in the pocket of someone who would have bought anyway. Either way, it's waste of tax money.

And, before anyone freaks out, if you want to spend 8000 of taxpayer dollars on a "good", why not say, put some doctors and nurses in walmarts, send some smart poor kids to special summer training of some sort, ec....not just put money in the pocket of some self-selected home buyer.

And if anyone thinks these micro-subsidies can save the housing market I say -- doubtful, and anyway, let's let the frigging assets come down in price (let's not subsidize demand), so....guess what...more new homebuyers could buy WITHOUT the subsidy.

With an $8,000 tax credit, their closing costs are close to nil. It's not irrational for people in their situation to assume nothing will go bump in the night, and before you throw stones, you can reflect that all the careful calculations we make are equally hopeful. You could get run over later today, and if you don't have a will, your carefully optimized assets will end up in the pockets of probate lawyers.

>>Where on the UWS can you rent a sunny, doorman, fully renovated 1br+ office, 2 baths for less than $3,000?<<

There's a big difference between prime UWS and Harlem. A sunny, doorman, fully reno'd 2/2 for less than $3,000 in Harlem isn't a long-shot at all.

issue isn't their closing costs on the way in, its the closing costs on the way out. when you're at their stage of life, change is part of the equation and is often good. equating the likelihood of needing to move with getting run over is irrational. lets assume best case their current combined income is $200K; nuts to be in hock for three times that + no doubt student loans as well.

Squid, I was responding to the OP, which claimed there were spending more than they would on an equivalent rental on the UWS. If you read my post all the way to the end, you'll see that I believe their payment is no more than they would pay in rent ( for the same thing.)

"what happens if something in their life circumstances changes requiring them to move? one of them gets a great offer for a new job in another city?"

CC: If that job offer appears, then they make a rational decision about what is more important to them: the better job (how much better), or their attachment to their apartment and the loss they might incur by selling it. These situations happen in life. There is no way to account for every possible contingency that might ever come up. It's impossible. These people graduated from good colleges with advanced degrees. To call them idiots, as the OP did, and to question their ability to make a sound decision about their own circumstances (which they themselves must understand better than others), is simply bizarre.

1. not trying to account for every possible contingency---point is that not assuming the possibility of some loss of principal in a market like this is not reasonable. suddenly the breakeven vs. renting looks quite different if it costs $60K in loss of principal. over three years, that's another $1,666 per month.

2. forgive me, but i think we've all met people who graduated from good colleges with advanced degrees who are not financially adept.

3. how can anyone buy in today's market with 5% down--which by their own admission wasn't even their own 5%? does that strike you as financially responsible?

As to the CC point about "how can anyone buy with only 5% down" focusing on the buyer, I would also note how absurd it is from the lender point of view in such a potentially risky market. ...but I know, we all know, the lender underwriting standards in this country are often a joke.

The student loans required for a Ph.D from Columbia are almost certainly substantial, so they get a pass on family assistance to buy at 35. Of the (very few, highly educated) people I know in their thirties who have bought, exactly one couple did not get financial assistance from their family, and they are in finance. Like it or not, with student loans compromising the ability of young adults to save money, this is the new reality. Getting the Ph.D likely required her to sit out of the job market for most of her twenties; for her there is a reasonable expectation that income will go up. There's an equally reasonable expectation that she will be able to achieve that higher income in New York. If that's where they want to be long-term and they're not planning on kids, this is a reasonable purchase for them.

Look :
NYC prices are insane for what you get
rents are somewhat insane too
all of this will correct
so not locking up and renting rather than buying is sensible
BUT if you like/love a particular place better than others, and are putting no money down and borrowing at 4.5%, you are making the same silly decision as a Prada bag vs a knockoff.
They may not make the decision you are choosing and it may not be financially optimized but they are not idiots

Incidentally, it is difficult to argue what is the financially optimal decision when you look at macro levels of uncertainty over many areas...if your jobs are highly secure, then you may know you will be in that spot for a while and if you like the spot and want to pay for it it is your call.
If this person has a 10 year+ horizon and wants to make this commitment over some rathole in the UWS for comparable net expense they are not idiots.

"What are the chances that they will default? Slim to none. They love their apartment, they can afford it, they're not spending more than they would in rent."

Unless they lose their source of income for more than a year.

Then, according to the consensus of this board, they're irresponsible idiots who deserve to be homeless.

"The student loans required for a Ph.D. from Columbia are almost certainly substantial, so they get a pass on family assistance to buy at 35."

Screw that. First of all, you don't need student loans for a Ph.D.: research and teaching assistantships cover you the whole way if you are not a spendthrift. Do some $15/hour job on the side if necessary. Second, you are a looser (please see http://loseloose.com before responding) if you're getting a Ph.D. at 35 with no savings. Standard track has you finishing undergrad at 22, and 5 years will get you to a Ph.D. at 27. Maybe you work first, and then you get your Ph.D. Whatever. That gives them 8 years of work life each. All they needed to do is each save $2K a year while they were working to get to $30K. Maybe they have student loans, but I don't see how adding $600K of debt when you don't have a penny to your name helps. Irregardless (don't even start on that word), you think these two paid for college themselves if mom & pops are still helping them in their 30s?

"Of the (very few, highly educated) people I know in their thirties who have bought, exactly one couple did not get financial assistance from their family, and they are in finance."

You do not need to be in finance to save up $15K each by age 35, especially if you are "highly educated". That's the type of money you can save each year with a salary of $100K. You ask me, people who get financial assistance from their families in their 30s are loosers. Nearly all the people I know are "highly educated", and mom & pops are not helping them out. And if they are, no f-ing way they would admit it. If anything, it's the reverse in the case of parents of modest means. You need to stop hanging out with loosers.

Speaking of the issue, one "highly educated" friend has parents who are now quite old, and decently well-off but not rich and well into retirement. His sister, in her 40s, gets help from mom & pops. Yikes!

It is insane that loans are still being given out with 5% down for a 600K loan.

Buying a place while requiring the parents' help on a 5% down payment is simply irresponsible.
If one of them becomes unemployed, the parents will surely be helping with the mortgage. Ms. Zahner works for a company that creates standardized exams, while Mr. Zahner works at a direct-marketing firm. I wouldn't bet on their job security, no matter what kind of advance degrees they got. Less income also means less tax savings for mortgage interest. 4K in just housing expenses is a lot for people who can't save a 5% down payment when the housing expenses was 2.25K.

"First of all, you don't need student loans for a Ph.D.: research and teaching assistantships cover you the whole way if you are not a spendthrift. Do some $15/hour job on the side if necessary. Second, you are a looser (please see http://loseloose.com before responding) if you're getting a Ph.D. at 35 with no savings. Standard track has you finishing undergrad at 22, and 5 years will get you to a Ph.D. at 27. Maybe you work first, and then you get your Ph.D. Whatever. That gives them 8 years of work life each. All they needed to do is each save $2K a year while they were working to get to $30K."

Spoken like someone who's apparently never spent more than 10 minutes in academia.

Research and teaching assistantships "cover the whole way" for a very small percentage of students.

"Do some $15/hour job on the side if necessary." Seriously? With a full courseload. I think not. In fact, many full-time Ph.D. programs don't allow outside employment. And even if they did, and even if you could spare a whole 20 hours a week for that crap job, I doubt that extra $175 per week is going to make a dent in anyone's budget. At that point, you've reached the point of diminishing returns with the "value" of the money versus the lack of sleep and focus to your coursework that will inevitably follow.

"That gives them 8 years of work life each. All they needed to do is each save $2K a year while they were working to get to $30K."

Who in NYC can start work at age 21 or so and immediately begin saving $2K per year, unless they immediately start making $70K?

"You do not need to be in finance to save up $15K each by age 35, especially if you are "highly educated". That's the type of money you can save each year with a salary of $100K."

Provided you start earning $100K right out of school at age 21.

No worries with these kids, NYCMatt. Mom & pops will take care of them for life.

Seriously, you think people at age 35 that don't even have $15K saved up are "responsible". Your savings of 1-years expenditures is admirable and responsible, just not fail-safe and not deserving of the charity of being saved by someone else if things go south. With these two, it's quite another story: I don't think these kids have anything close to that saved up, and they've locked themselves into $600K of debt.

BTW, you've stated that homeowners who lose their income for a year or whatever should have loan workouts whereby payments are reduced and interest is tacked onto principal so as to avoid homelessness. What should be done with renters that lose their income for a year? Would it be fair to have the equivalent applied: i.e., their landlord lowers rent and tacks the balance onto subsequent years?

"Ms. Zahner works for a company that creates standardized exams, while Mr. Zahner works at a direct-marketing firm. I wouldn't bet on their job security, no matter what kind of advance degrees they got."

Who among any of us can bet on job security anymore, for that matter?

Why don't we all just assume we can all lose our jobs at any moment? Then no one would qualify to buy anything.

"how can anyone buy in today's market with 5% down"

Why would you want to put any more down than absolutely necessary? Mortgage money is unbeleivably cheap and a cash safety cushion is more important than any time in recent history.

time for matt to tell us about how this is their retirement plan. the mere fact that these people wanted to be in the paper telling this story says it all.

that's precisely the point; this are very uncertain times and buying with no back up funds is irresponsible.

Agreed, in these times I'd much rather have cash in hand than tied up in some "mortgage" that could get bailed out, nationalized, or modified in the future. What advantage is there in tying up assets in equity except for the tiny reduction in interest payments?

"Seriously, you think people at age 35 that don't even have $15K saved up are "responsible". Your savings of 1-years expenditures is admirable and responsible, just not fail-safe and not deserving of the charity of being saved by someone else if things go south. With these two, it's quite another story: I don't think these kids have anything close to that saved up, and they've locked themselves into $600K of debt."

Look, I'm not defending their buying a $600K home. But I'm also pointing out that even RENTING in this city is expensive, and given that most people, just to survive, have to pay close to half of their earnings for rent doesn't leave much for savings. This is precisely why so many upper middle class people in New York City end up renting their entire lives.

"BTW, you've stated that homeowners who lose their income for a year or whatever should have loan workouts whereby payments are reduced and interest is tacked onto principal so as to avoid homelessness. What should be done with renters that lose their income for a year? Would it be fair to have the equivalent applied: i.e., their landlord lowers rent and tacks the balance onto subsequent years?"

I don't know. I never said I had all the answers. As a former landlord myself, I could tell you that if I had a good tenant in place, I'd do what I could to keep them in their home, but I have expenses too (as most landlords in this city do) in terms of paying not just for building utilities and taxes, but most likely my own mortgage on the building, and I certainly couldn't discount their rent forever. In my proposal for owners, the banks, in the long run, not only aren't losing any money, they're making MORE money by tacking the principal AND a portion of the interest on the back end of the loan. This kind of setup won't work for renters, unless they get hired at a job that paid significantly more than their previous job, to enable them not only to resume full rent payments, but pay back all their back rent.

I honestly don't know. But just because my solution doesn't work for one group of unemployed New Yorkers doesn't mean we should leave the other group out in the cold unnecessarily.

"Spoken like someone who's apparently never spent more than 10 minutes in academia. Research and teaching assistantships "cover the whole way" for a very small percentage of students."

Yah, that's why I got a Ph.D. from a "better" school than these two. Trust me, if you remotely tried to get through a Ph.D. debt-free, you could. I know dozens of people who came from podunk country where they scraped up the entire family savings to pay for the first quarter until they could arrange RA-ship / TA-ship / side-job. I know people who came from podunk country and decided to go to an inferior school that guaranteed a TA-ship the first quarter simply so that family didn't have to sell car and use up life savings and borrow from the local loan shark. Borrowing was not an option, and they just made do.

"Who in NYC can start work at age 21 or so and immediately begin saving $2K per year, unless they immediately start making $70K?"

People I know who are making, say, $90K a year and spending $1600 a month on housing save $15K a year without really feeling much pain. We're talking about saving $2K a year by a couple that has 2 Ph.D.'s from Columbia.

"First of all, you don't need student loans for a Ph.D.: research and teaching assistantships cover you the whole way if you are not a spendthrift."

Complete BS. Also those assistantships are often very hard to get, particularly at prestigious institutions.

matt has a post graduate degree in nothing from the university of nowhere. he knows not of what he speaks --- ever.

Matt: "Who in NYC can start work at age 21 or so and immediately begin saving $2K per year, unless they immediately start making $70K?"

I was saving 2k+ a year before I finished college just on a part-time job and finished in four years at age 22 with zero debt.

ChasingWamus: "Why would you want to put any more down than absolutely necessary? Mortgage money is unbeleivably cheap and a cash safety cushion is more important than any time in recent history."

If they had more money but only "chose" to put 5% down, then I can respect their choice, especially if their money was invested wisely somewhere else.

"Agreed, in these times I'd much rather have cash in hand than tied up in some "mortgage" that could get bailed out, nationalized, or modified in the future. What advantage is there in tying up assets in equity except for the tiny reduction in interest payments?"

I have to agree with you on this, ChasingWamus.

People today are learning a hard lesson about hanging onto as much cash as possible.

It was barely a year ago that I remember Suze Orman recommending that people pay off as much debt as possible (good), even at the expense of having extra savings (bad), because as long as they have good credit, they can use their untapped lines of credit -- be it home equity, or just a couple of high-limit VISA or MasterCharges -- as their "savings cushion" for an unexpected expense or even for unemployment (which until then, was usually no more than 3 to 6 months for most people).

Fast-forward to today, and the hard lessons we've learned about how while the bank can giveth, so can the bank taketh away in terms of credit lines.

Sunday: "I was saving 2k+ a year before I finished college just on a part-time job and finished in four years at age 22 with zero debt."

In which city, and during which decade did you do this?

Matt: "Why don't we all just assume we can all lose our jobs at any moment? Then no one would qualify to buy anything."

Some jobs have better job security than others. Don't know about companies that creates standardized exams, but I can't imagine job security is that great at a direct-marketing firm these days.

"This kind of setup won't work for renters, unless they get hired at a job that paid significantly more than their previous job, to enable them not only to resume full rent payments, but pay back all their back rent."

But that's the same situation as for owners. If more interest is tacked on, payments will go up, and they'll need more income to pay back all the extra money owed.

"I have expenses too ... and I certainly couldn't discount their rent forever."

I'm all for "screw-the-banks" and whatnot, but you should realize that mortgages are in the same boat. When a homeowner doesn't pay for a few months, there's an issue. You can try to work something out for a few years, but then add in foreclosure, and you're talking about losing "rent" for years. Many people think a mortgage is paid into some unknown morass known as "the banks". The truth is the mortgages are backed by money from people like you and me. A big portion of it is funded by pensions, local Norwegian cities, etc. suckered into AAA crap by stupid/slick bankers, all of whom cannot understand risk and only care about following the "rules" of putting money into save AAA-rated bonds. These is really people's retirement money in often cases.

The other portion of funding is that money YOU have sitting in our bank account or your money market account. That is being used to fund mortgages. It is very "hot" money (i.e., one that will be pulled at the slightest smell of any risk) that is funding these 30-year mortgages. What is it exactly that you'd like the bank to do with YOUR money when some homeowner cannot pay. Do you want them to tell the homeowner "don't worry for a while, 'cause we'll just call ol' NYCMatt and tell him that the money he has sitting with us is going to need to be locked-up, and oh-by-the-way, is at risk of loss if John Q. Homeowner doesn't pay us back in a few years"?

My point is that mortgage money is not very different from a landlord. Behind "the bank" are a bunch of people who have just as much need for the money as the landlord delaying rent for a few years.

Matt, Manhattan, 1990's

"Some jobs have better job security than others. Don't know about companies that creates standardized exams, but I can't imagine job security is that great at a direct-marketing firm these days."

I can't imagine job security in ANY sector of private industry these days.

And frankly, with the city budget shortfall and the impending budget axe posed to fall, I can't imagine job security in the PUBLIC sector, either.

and that's precisely why no one in their right mind should choose to take on $600K of debt when they have perfectly reasonable alternatives for living that don't involve any debt.

"I was saving 2k+ a year before I finished college"

For the record, I was saving $2K+ a year during my Ph.D.

"But that's the same situation as for owners. If more interest is tacked on, payments will go up, and they'll need more income to pay back all the extra money owed."

Over the course of a 30-year fixed mortgage, a period of a year or even TWO of unemployment will hardly make a difference in the monthly payment of the readjusted mortgage.

*****

"I'm all for "screw-the-banks" and whatnot, but you should realize that mortgages are in the same boat. When a homeowner doesn't pay for a few months, there's an issue. You can try to work something out for a few years, but then add in foreclosure, and you're talking about losing "rent" for years. "

All the more reason both banks and homeowners need to open the lines of communication early and often during a time of economic crisis, so foreclosure can be avoided altogether.

*****

"My point is that mortgage money is not very different from a landlord. Behind "the bank" are a bunch of people who have just as much need for the money as the landlord delaying rent for a few years."

Mortgage money IS very different from rent money. In my scenario, the "banks" would eventually not only get their money, they'd get MORE.

Matt, there's definitely less job security across the board in general. However, if they were in the healthcare industry for example, their chance of unemployment is MUCH less than 'direct-marketing.'

"Matt, Manhattan, 1990's"

Ah yes. Back in the days when you could rent a studio below 96th Street for $1000/month.

Not so today.

"For the record, I was saving $2K+ a year during my Ph.D."

For the record, were you married at the time to someone helping pay the rent/mortgage?

who makes up the difference in cash while the payments are deferred? how can you justify loaning more money against a property that is already under water?

"However, if they were in the healthcare industry for example, their chance of unemployment is MUCH less than 'direct-marketing.'"

LOLOLOL -- until Congress passes ObamaCare.

"who makes up the difference in cash while the payments are deferred? how can you justify loaning more money against a property that is already under water?"

It doesn't matter whether the property is underwater -- the bank will eventually get it's return on the mortgage PLUS more.

who makes up the difference in cash?

"Mortgage money IS very different from rent money. In my scenario, the "banks" would eventually not only get their money, they'd get MORE."

Sweet. I'll call your bank up and tell them to freeze your savings and checking account (you know, the 1-year-of-expenses-should-the-crap-hit-the-fan fund) since it'll be used to fund John Q. Defaulter's extra principal for the next 30 years. I'll then tell you how great it is because you'll be getting (hopefully) MORE money.

See my point? There's big difference between liquid money and the illiquid promise of payment in the future. The bank is making their decisions with "their" money; they are doing so with your money.

"Back in the days when you could rent a studio below 96th Street for $1000/month."

First, that's when these two people were in school Second, WTF are you doing below 96th street, especially today, if you are a student at Columbia?

The bank, by not paying out obscene salaries and bonuses for this ONE YEAR until "regular" people get back to work.

"For the record, were you married at the time to someone helping pay the rent/mortgage?"

No. Just simply spent less than my income.

adding to CC's comment, there's also a good chance they will end up defaulting any way. If they are not underwater yet, they certainly might be if the principle increases.

"Ah yes. Back in the days when you could rent a studio below 96th Street for $1000/month"
Matt, rent was cheaper then, but I was also making a lot less. In case you were wondering, I was single at the time and paying my own rent.

"See my point? There's big difference between liquid money and the illiquid promise of payment in the future. The bank is making their decisions with "their" money; they are doing so with your money."

See my comment above re executive compensation.

*****

"First, that's when these two people were in school Second, WTF are you doing below 96th street, especially today, if you are a student at Columbia?"

My point exactly. In the '90s, you could rent a studio above 96th Street for even LESS than that.

"No. Just simply spent less than my income."

Which was ... ??

"The bank is making their decisions with "their" money".

That should read "The bank is NOT making their decisions with "their" money".

"adding to CC's comment, there's also a good chance they will end up defaulting any way. If they are not underwater yet, they certainly might be if the principle increases."

Sunday, if you've been reading my comments on other threads these past couple of weeks, I've been focusing not on people having trouble paying their mortgages because they bought more than they could afford (especially after their exotic ARMs reset), but on people who DID buy responsibly and who currently can't pay because of the temporary problem of UNEMPLOYMENT.

"Matt, rent was cheaper then, but I was also making a lot less. In case you were wondering, I was single at the time and paying my own rent."

So was I. I remember the '90s. And in the aggregate, New Yorkers weren't making THAT much less back in the '90s.

"The bank, by not paying out obscene salaries and bonuses for this ONE YEAR until "regular" people get back to work."

No disagreement on the bonus issue in general, but that all peanuts compared to the mortgage mess. Bank bonuses worldwide add up to less than $100B (maybe $50B in total?). The amounts lost on the mortgage mess (bank writedowns) is like $2 trillion, not to mention the money lost by pensions and the like. Stupidity on one caused the other, but it's not like one is anywhere near being able to finance the other. When you are talking about trillions, then it's only when you pool everybody's money (i.e., your's) that you can start dealing with it.

""No. Just simply spent less than my income." Which was ... ??"

Maybe $1500 a month gross? Peanuts for taxes, social security not taken out, so you actually saw most of it. Of course, you were still horrified by the $200 or whatever that was taken out. What I wouldn't give to only have a 13% tax rate again. (Yes, I know how I could achive that again.)

Matt, if they still have equity, wouldn't they be using it? If they don't, then their chance of foreclosure increases regardless whether they bought responsibly or not and we probably have a 'slight' difference in definition of the word responsible.

Btw, what you call ObamaCare will probably increase the demand for healthcare workers. That's not to say that I agree or disagree with the whole plan.

"No disagreement on the bonus issue in general, but that all peanuts compared to the mortgage mess. Bank bonuses worldwide add up to less than $100B (maybe $50B in total?). The amounts lost on the mortgage mess (bank writedowns) is like $2 trillion, not to mention the money lost by pensions and the like. Stupidity on one caused the other, but it's not like one is anywhere near being able to finance the other. When you are talking about trillions, then it's only when you pool everybody's money (i.e., your's) that you can start dealing with it."

And what I'm proposing is essentially a one or two year deferred payment on a small portion of loans.

In the end, the banks would be making MORE money.

"Matt, if they still have equity, wouldn't they be using it? If they don't, then their chance of foreclosure increases regardless whether they bought responsibly or not and we probably have a 'slight' difference in definition of the word responsible."

IF they still have equity.

Many don't. Many have already tapped into what little they had.

that's the point, you idiot. you don't even understand what you're saying much less anyone else.

No, that's not the point.

Whether one has any equity left in their home has no bearing on whether they'll default as long as they're still employed.

CC, I like NYCMatt. He's got his opinions, is open to debating them, and has his reasons. I disagree with some of them, but no reason to bad-mouth him.

Really, WTF are you bringing to the table for me? Are you and I really going to spend doing my favorite rainy Sunday afternoon activity -- debating on SE? No, we'll just agree on everything, you know, take the "right" position. Boring.

For every NYCMatt on this site, there are dozens of you & me's. We NEED the NYCMatt's of the world.

*HUGS* to inonada. ;)

i have no problem with honest disagreement. matt makes up his supporting facts and then moves on when challenged. six months ago, he was talking endlessly about how irresponsible defaulting owners were. now, for some reason, he has gotten religion on this subject.

the thought that equity or lack thereof is not a factor in the decision to default is patently absurd. why would anyone default if they had equity; worst case, they would sell and pocket the difference.

not particularly interesting to debate with someone who has nothing to bring to the table.

"Whether one has any equity left in their home has no bearing on whether they'll default as long as they're still employed."

Not true. If they have no equity because they used it all to support their unsustainable lifestyle when they were employed, then they are probably going to default weather they have a job or not. The loss of the HELOC is like a massive pay cut that they aren't ever getting back.

I love you too, NYCMatt. Seriously though, shouldn't we be arguing at a bar instead of SE? That way, when it gets heated, we can actually punch each other rather than this "the pen is mightier than the sword" crap. A nice, old-fashioned bar brawl.

Matt, the more underwater they are, the greater chance of foreclosure. Of course there's a lesser chance for those with jobs. Besides, I thought we were talking about the unemployed...

I like Matt too. He has a good heart. No hugs necessary though.

"Matt, the more underwater they are, the greater chance of foreclosure. Of course there's a lesser chance for those with jobs. Besides, I thought we were talking about the unemployed..."

We ARE talking about the unemployed.

All things being equal, if one's employment remains constant, whether or not their apartment is underwater has no bearing on whether they can continue to pay the mortgage and maintenance (provided they got a FIXED RATE mortgage and weren't planning on refinancing or flipping to avoid an unaffordable ARM reset after a couple of years).

"now, for some reason, he has gotten religion on this subject."

Fine, then ask him why. He'll actually answer, I think, which is why I like him. People are complicated, change opinions over time, and make all sorts of decisions that are poor in my eyes. Heck, in some cases MOST people apply poor judgement (e.g., housing bubble of past decade). I like understanding their rationale, even if it may be contradictory, poorly-defended, whatever in my eyes. NYCMatt will put it out there. When he takes something to a certain point and cannot defend it further in your eyes, well fine, judge it for what it is yourself. But you're not going to get an answer from him by poking at him, if that's what you're looking for, I don't think.

Matt, how can you ask the banks to modify / defer payments on the underwater loans of currently unemployed borrowers which has a great chance of ending up in foreclosure. Ok, you can, but I can't.

my issue with him is the presentation of made up facts presented with phony authority. matt, co-op vp here, etc. ah well, it is pathetic--best to leave it be.

Yeah, CC, that's why he's so colorful ;).

"Matt, how can you ask the banks to modify / defer payments on the underwater loans of currently unemployed borrowers which has a great chance of ending up in foreclosure. "

That's precisely the point, Sunday. Unemployed homeowners who TEMPORARILY can't afford their payments are at significantly less risk of foreclosing (if you give them a temporary loan restructure until they CAN resume payment) than those who PERMANENTLY can't afford their payments -- even while employed -- vis-a-vis an ARM reset.

Matt, you are asking the banks to assume a risk that could force them to have to be bailed out again! If the loans are already underwater, even when the borrowers eventually get a job, they might choose to walk away if they are way underwater a year later. Of course certain states will allow you to do that more easily than others. Additionally, the new job might possibility pay less, a lot less.

"Matt, you are asking the banks to assume a risk that could force them to have to be bailed out again! If the loans are already underwater, even when the borrowers eventually get a job, they might choose to walk away if they are way underwater a year later. Of course certain states will allow you to do that more easily than others. Additionally, the new job might possibility pay less, a lot less."

It's either that or they all foreclose anyway.

Using my scenario, they could avoid MOST foreclosures altogether, in exchange for deferred profits.

Can we agree that these people shouldn't have had the option to buy because no lender should have lent money at 5% down in that area in this market?

jimstreeteasy -- taking 5% down and asking them to pay the mortgage such that they are paying equiv to rent post taxes is in effect renting to them -- think about it
except they are bonded to the place

Sunday, you seem like a sweetie, but hang around a little longer before you pass judgment on Matt. He's a nasty little rattlesnake. Fortunately his bite lacks poison, just as his arguments lack credibility.

I am so pissed I am late to the party...seriously, at first I thought this thread was about my wife and I bc we're buying a 2 bedroom in Harlem.

Anyways, I am currently a PhD student at Columbia, so I can give you the inside dope. Nearly ever PhD student at Columbia is full-time and is fully funded either by a grant or the company you work for or through teaching assistantships. It would be insane to pay for it on your own and even more insane to take out loans for it. Since this lady is in cognitive psych. its likely she has a teaching assistantship.

If you are fullly funded, you get a living stipend. Five years ago a stipend was about 24-26K / year, now its 28-30K, and you also can live in Columbia housing which was about $1000 for a 1bedroom. Although it was very difficult to get into CU housing, we've been here for more than 5 years and don't dare give up our crappy apt. bc it is cheap. Anyways, it would be possible to save up 2K per year from your stipend but probably not more than that. Although if you had unsubsidized undergrad loans, then you will have additional problems. It would be very difficult but not impossible to work an extra job and save up a significant amount of money while doing your PhD. You just could not have any type of social life or relationship with a significant other, haha.

joe--my question related to asset risk from the bank perspective; not sure how your answer related to my question

I had a friend how did phd in genetics for six or seven long lazy years at Columbia with the full stipend deal. He didn't remotely work as hard, ever, as say first year law students.

mmarquez, that certainly isn't the case in my field, and I work in academia so I know what I'm talking about. I agree that it's crazy to take out loans for degrees, but many people do so anyway. Those company funds? Many disappeared during the past year or so - don't assume that your fellow classmates are still getting them. Once you've started the degree, if it's a matter of a loan vs. getting your degree, you're likely going to finish the darn degree.

"Although it was very difficult to get into CU housing, we've been here for more than 5 years and don't dare give up our crappy apt. bc it is cheap."

And how about those who were not so fortunate to get into CU housing? Possible to pay for an apartment in this city on $30k, but not a particularly good one. Even with teaching assistantships, many grad students take out loans. There's a lot of quite justifiable alarm about the number of loans students take out these days.

"no lender should have lent money at 5% down "
"my question related to asset risk from the bank perspective"

What risk? FHA is backed by the taxpayers.

so does any of this support this couple taking out a mortgage for $600K?

jim -- the bank offering them this deal is stuck with a loan for the entire building that is in default unless they offer such deals
in effect they own the building and are renting

it is interesting that every discussion here regurgitates the same material at the end or dies
even the actors are invariably the same

jim - it really varies from dept. to dept. I am not in cog. psych or genetics so I can't speak too much about them. If you're doing experimental research things can be harder and take longer which is my case.. Some depts. pretty much guarantee stipends for your duration and others do not. IF you can get your own grant from the gov, then you can be in really good shape and relax. In my dept. it seems like at any given time at least a few of my fellow PhD students are worried about where their funding for next semester will come from.

evnyc - i was just saying that taking out loans to pay for an entire PhD at columbia would be ridiculous. And certainly not worth it. We're talking about 30 or 35K alone in tuition per year. Based on the article, I do not believe these people were in CU housing. Getting into couple's housing is even harder.

No, I never said all loans. I said there were likely some substantial loans and that during most of her twenties, the lady probably wasn't making much money. Ergo, very difficult to save unless one is an absolute fiscal saint. It is reasonable for expectations of future earnings to increase; therefore, in my little anonymous opinion I think this is a reasonable purchase for them as a couple.

Quoting myself:
"Getting the Ph.D likely required her to sit out of the job market for most of her twenties; for her there is a reasonable expectation that income will go up. There's an equally reasonable expectation that she will be able to achieve that higher income in New York. If that's where they want to be long-term and they're not planning on kids, this is a reasonable purchase for them."

And frankly, and assistantship is nice but not "a job" - your job is to be a student.

So what will it trade for in 2011 when it is in foreclosure?

Who's to say it'll go into foreclosure, Patient? If your crystal ball is showing you future with such clarity, perhaps you ought to set up shop.

evny - I'm not trying to argue at all about whether or not they should make the purchase. Good for them on leveraging a lot of mortgage, I hope they plan to stay for a really long time or that prices don't drop further. Personally, I think 4K is too much per month for living expenses but I don't know what their earning potential is or how hard it will be for her to get a job. Right now I would say that it is likely very hard to get a job.

I was just trying to give some insight into my experience as a PhD at Columbia. How much stipends pay, how much work is involved, if you probably have loans etc.

We're buying and currently our income is low compared to where it will be in the future, but we're planning on staying for a long time. I am sure 90% of the posters on this board would think that ours is a risky purchase if they knew the particulars but I don't really care.

Would you lend 97% of "value" to an educated, working, 34 year old couple that can barely save $10,000-$15,000. Seems odd. Where's the rainy day fund? How bout furnishings? What happens when one loses a job?

No, I wouldn't lend them the money and I don't think that FHA should either. After seeing how difficult it has been for us to get a mortgage with 20% down and good credit, I think that 3% down is ridiculous.

"Would you lend 97% of "value" to an educated, working, 34 year old couple that can barely save $10,000-$15,000. Seems odd. Where's the rainy day fund? How bout furnishings? What happens when one loses a job?"

This is why God invented co-op boards.

This just goes to show that none of you know what you are talking about. It is financed by the developer. You fools. Understand the facts before making judgment, not on SE, it's the retards free for all!

so it was 95% financed and from the developer. wow, this suddenly sounds like the least riskiest loan ever.

"Good for them on leveraging a lot of mortgage."

Some Ph.D student I met, top school, best place for person's field, is chatting with me June 2000 asking for a prognosis on the tech stock market. I says something like "Who knows, markets are unpredictable, fundamentals are silly, it'll all end in tears but who knows when and how; how come?" Turns out genius here had no money to his name but thought it a good idea to borrow $50K on credit cards to go long whatever was hot those days with leverage in a margin account. Didn't know quite what to say after I picked my jaw off the ground.

I guess I should have said "Good for you on leveraging a lot of margin".

Isn't that essentially leveraging leveraged money?