All Forum Posts by: Paul B.

And it's not just breaking the law on the front end that you need to worry about. It's what happens on the back end if the investment doesn't deliver what you promised. My understanding is that if it's proven that you either sold unregistered securities or had an unregistered offering (when such a registration was required), you can be held liable not only for the full amount of the investment, but triple damages, too.

It's VERY important to be on the right side of the law here.

My take is, if the numbers work (and if they're correct), the numbers work.

A house that rents for $650 where you're all in for $20,000 sounds like a no-brainer to me, too, unless it's in a war zone.

If there's a rental market for your X/1 properties, go for it, especially if you have no plans to retail the property.

Look on the bright side: one less bathroom to take care of!

You did the right thing. Never set foot in a property where you have unsupervised children. Never, ever. Same goes for your tradespeople, and getting behind schedule is the least of your worries.

I do think you need to determine whether the kids were really alone, though, or whether the tenants were just ducking you.

Find yourself a mentor. Not necessarily someone that you need to pay on a regular basis, but someone that you can bounce ideas off of, etc. Get plugged in to your local REIA.

Now that makes more sense, and it's clear that it's about FICO specifically. It's also about 2011.

As mentioned in the article, though, the range of scores available from FICO is the same. There's just a new model out there that takes into account the recent recession.

Interesting link, Bryan, and thank you for sharing.

This ruling does not have much to do with credit standards, though, and more to do with properly endorsing possessory collateral such as notes when it changes hands.

I will grant that this is sloppy, BUT (and this is slightly off your topic) it does not change the fact that 99.99% of foreclosures happen because someone didn't make their payments.

I'm not a credit score expert, but a few observations...

This article appears to be a year old (2010 vs. 2011), unless the author still hasn't adjusted to the new year.

Any article from ezinearticles.com needs to be taken for what it is, which is a marketing tool to get people to click their links at the bottom.

My understanding is that your credit score from the Big 3 is not the same as a FICO, which is a score calculated by Fair Isaacon (sp?) primarily for use in mortgage applications. While it's true that good credit scores with the Big 3 should give you comfort that your FICO is strong, too, they are not the same.

As a result, unless you see an article that states that "FICO is changing the way it calculates credit scores," I would take the article to mean there's some "new" credit scoring system out there, but it's not a change at FICO.

I'm sure unseating FICO as the 800-lb. gorilla in the credit market would be quite profitable, but I don't see it happening any time soon.

I've thought about this, too. Great topic.

I think there are a ton of people out there who have floating-rate mortgages and who would love to lock in a rate, but they can't because their credit/income is bad or the house has fallen in value.

What people really need is an interest-rate swap, which Bryan is trying to create individually using futures contracts.

As has been pointed out, for so long as the rate outlook is "higher rates ahead," doing this could result in not being ahead financially when the dust settles. However, that's actually OK in times when the yield curve is normal, since if you're trying to lock in any rate -- be it through the mortgage market, the futures market, or wherever -- you should fully expect to pay a higher fixed rate than today's short-term rate.

I've always been a little surprised that one of the big investment houses hasn't offered this product to consumers. It would be SO easy for them to offer interest rate swaps and pick up spreads along the way. I think the problems are that (1) most consumers would not understand the product, (2) the public perception of the big, evil investment bank trying to seduce the public into any swap contract could be bad, and (3) psychologically it would be tough for a consumer to start writing checks on Day 1 of the transaction to the big, evil investment bank for the delta between the variable rate and the presumably higher fixed rate, never really knowing (or understanding?) that the big, evil investment bank would have to write checks back to the homeowner should variable rates shoot up.

And of course, the easiest solution -- for most people -- to get a fixed-rate loan is just to refinance into a fixed-rate product, and the banks love nothing more than refinances because they generate lots of juicy fee income, ergo they have little incentive to solve the problem by doing interest rate swaps.

I love this question, though. It's something I've thought about trying to implement. GMTA, Bryan!

The lender never "promises" to do anything in their documentation. Moreover, it's right there in writing that the line can be called for any number of reasons. Just like it's in writing that the borrower "promises" to pay the loan (yes, I'm a broken record).

Additionally, the practice of taking as collateral the thing that money is being borrowed for seems well accepted. We do this with real estate, cars, even accounts receivable and, to some extent, inventory (although I never liked how a bank could take inventory as collateral when there is unpaid A/P attached to it).

And since "strategic default" (that is, breaking your promise to pay) is OK, all the better that lenders should have the real estate as collateral. If a lender makes a loan to buy a house on an unsecured basis, would you still support "strategic default," even though the borrower can pay? Don't make the payments and still own the property free of any liens?

For me, though, it's as simple as living up to the letter of the written contract. Nothing more, nothing less.

(And again, we're talking about people who can pay, but choose not to. I have complete sympathy for those who really do not have the money. Having been self-employed for 12 years, I know a thing or two about having AMEX put out a hit on me!)

Well, if we're going to just allow people to renege on written promises just because it no longer suits them, we may as well do away with contract law altogether, I guess. I mean, you're going to let people make you a promise in writing, then whey they don't want to live up to those promises any longer, you just say, "Meh?"

And I do not agree that lenders are pricing their borrower's ethics into their models. It's like you said, it's a financial transaction, not an emotional one. The lender assumes going into it that if the borrower can pay, he will. If we have to start adding people's philosophy on debt and obligation into the mix, it's going to get bumpy!

Not sure I follow about the lender not "promising" to lend the money. Hasn't the money already been loaned?

Perhaps because I've been a lender, I'm more sensitive to the issue, but if I ever found out someone made a "strategic default," I'd never loan him a nickel.

Like I said, it's called a "promise" and "promissory note" for a reason. If we chuck that out the window, it's game over.

My $0.02. YMMV.

(And an interesting thread...thank you for starting it.)