Some Silicon Valley Tech Workers Get Home Loans with No Money Down • Hacker News Board

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#121

Post by roymurdock » Wed, Jul 27, 2016, 5:17 PM UTC

JumpCrisscross wrote: post #106

jpmattia wrote: post #89

Earlier quoted context omitted.

> I have been asked to appraise private stock for lenders and render an opinion around its volatility and liquidity. That must be a ton of fun. How do they incentivize you and your operation to be conservative? Because they presumably only make money if you hit the number, which was the big problem with home appraisers in the housing bubble. They only way I can think of to cause correct behavior would be to ensure th…

I do think it is fun! My firm works with companies and their shareholders. Issuing a letter to a lender is something I do for clients as a professional courtesy. I receive no special compensation in connection with it, and strongly prefer to mark assets to market ( i.e. the last comparable trade or fundraising event) over model. The contents are less "this is where you should mark this asset" and more "this is where…

> The value isn't in providing a "right" number as much as turning a zero-information situation into an information-positive one

This should be the slogan for all market research companies. Good way to look at it.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#122

Post by CPLX » Wed, Jul 27, 2016, 5:21 PM UTC

GeneralMayhem wrote: post #98

CPLX wrote: post #56

Earlier quoted context omitted.

I find it hilarious that the answer to this isn't obvious. This is 2016. Tech workers are the American elites. Did you think elites were still guys with a monacle sitting in a drawing room that overlooks a coal mine or something?

The new elites are in tech, but they're not the rank and file. Making even $250k/yr may be top-5% for income and give you breathing room to make a few investments, but it will never make you wealthy . That's lifetime earnings of about $10m before taxes, so you likely wouldn't get to fuck-you money ever, let alone with time to use it. There's a very serious discontinuity somewhere around the $1m/year mark where you ge…

> it will never make you wealthy. That's lifetime earnings of about $10m before taxes

This thread has taught me that people in the valley or the HN echo chamber really sort of have no idea how most people live in this country, let alone around the world.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#123

Post by phamilton » Wed, Jul 27, 2016, 5:22 PM UTC

JumpCrisscross wrote: post #117

phamilton wrote: post #113

Earlier quoted context omitted.

I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash.

> I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash. That argument is good until it is not. Unfortunately, when it is not is precisely when one needs it.

When is it not liquid? Sure, it's highly variable and the value could tank, but when has an S&P 500 company had zero liquidity?

Edit: Additionally, salary falls in the same boat. If your stock in your S&P 500 employer tanks, you salary will tank too. Also, I'm talking about a "sell as soon as it vests" strategy, which makes it pretty much just a variable form of salary.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#124

Post by ihsw » Wed, Jul 27, 2016, 5:23 PM UTC

sybhn wrote: post #110

mywittyname wrote: post #40

Earlier quoted context omitted.

He doesn't need a mortgage, it's just financially savvy to have one. He avoids paying taxes on the sale of stocks to finance the home. Mortgage interest is tax deductible. His stocks will almost certainly yield more than the interest rate on the mortgage. He's getting a sweetheart deal from the bank. For him, selling stock is a PITA because he has special class of stock that grant him voting rights far beyond what a…

>He avoids paying taxes on the sale of stocks to finance the home. Can you elaborate on that?

Like-kind exchange? Not exactly sure what the parent was referring to.

https://en.wikipedia.org/wiki/Like-kind_exchange

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#125

Post by brebla » Wed, Jul 27, 2016, 5:41 PM UTC

Domenic_S wrote: post #109

brebla wrote: post #35

Earlier quoted context omitted.

Yes. Completely irrational. I can secure $60k+ in a matter of hours to purchase a new Tesla or Merc. Drive it off the lot and suddenly worth less than the loan. Real Estate, however, can take 45 days to close a loan when the projected value of the asset is surely positive. Antiquated and balkanized title process and (I suspect) unhealthy regulatory requirements are a bog. From there, I think it is simply inefficienci…

I'm on my 3rd house. The escrow length isn't just about the loan, it's also to give you time to complete inspections. Home inspectors -- especially in hot areas -- can be booked out for weeks. It also gives the sellers time to find a new place/get packed and moved. The lender gets their ducks in a row because they're going to package and sell the loan, and there are lots of compliance issues to jump thru to get it so…

The contingency period in the contract is parallel with the financing process. They are not intertwined - apart from the contract being contingent upon securing a loan. If the inefficiency results from compliance issues due to needing to rate, package, and sell the loan, then couldn't an enterprising banker market speed of closing and absorb moderately more risk by having the loan on his books for a few additional weeks? In a competitive market, cash offers (one less contingency, sure but also speedy closing) are preferred.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#126

Post by gdubs » Wed, Jul 27, 2016, 5:48 PM UTC

sybhn wrote: post #110

mywittyname wrote: post #40

Earlier quoted context omitted.

He doesn't need a mortgage, it's just financially savvy to have one. He avoids paying taxes on the sale of stocks to finance the home. Mortgage interest is tax deductible. His stocks will almost certainly yield more than the interest rate on the mortgage. He's getting a sweetheart deal from the bank. For him, selling stock is a PITA because he has special class of stock that grant him voting rights far beyond what a…

>He avoids paying taxes on the sale of stocks to finance the home. Can you elaborate on that?

If you want to buy a million dollar home using shares, you have to liquidate them and pay capital gains. By getting a mortgage you lower the amount of income you 'realize' on a year-to-year basis, lowering your taxable income. There are details on capital gains vs income taxes, etc, but in general I think the point was that the less income you realize in a given year, the less taxes you'll pay.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#127

Post by elgabogringo » Wed, Jul 27, 2016, 5:50 PM UTC

JumpCrisscross wrote: post #26

elgabogringo wrote: post #5

How does it make sense to tie up $1M+ at 1%? Are they turning around and selling the note to Fannie or Ginnie Mae? Unless we are Japan (and that's a slight possibility, but not likely IMO) this will be a total loser - not as bad as buying Spanish/French/Italian debt at negative rates, but pretty bad. Who else has friends going through all sorts of ridiculous acrobatics to buy houses in the bay right now? Where they a…

> How does it make sense to tie up $1M+ at 1%? Three things likely going on here: loss leading, promotion and a hunt for yield. Let's start with the hunt for yield. Yesterday's auction priced the 3-year at 0.87% and the 5-year at 1.15% [1]. We don't know the term of Zuckerberg'a mortgage. If it was less than 5 years, the bank might make a spread. If it's a loan with a longer term the lender could have made more by le…

All good points. I guess it's not Zuck's loan that troubles me the most, but the idea that similar lenders in SF are giving 100% loans and setting up inside tech companies.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#128

Post by orky56 » Wed, Jul 27, 2016, 5:51 PM UTC

balls187 wrote: post #104

aresant wrote: post #58

I'm going to counter the "math" in this thread Let's take the example of Nick eg: "Nick Merz knows how tough it can be. He’s a 41-year-old product designer at Apple Inc. whose wife also works there, and says they couldn’t figure out if they could afford to own a place anywhere near the company’s offices in Cupertino, where the median value is $1.8 million." Glassdoor check for sr product designer = base of $157,000 t…

> But problem for nick and others is that lenders want a 20% down payment because that gets skin in the game. Lenders typically charge PMI if you have LTV > 80%. Our first home was purchased with 0 down (perks of being military brat), and no PMI. Current home was ~10% down, with ~$500 in PMI (kind of a cluster-fuck--the mortgage broker said the loan had no PMI, but last minute it had PMI. We had 2 days before closing…

Have you tried making extra payments to get your principal up from 10% to 20% sooner? That's the ideal situation for someone with more disposable income but less in savings (or doesn't want to tie up more saving in equity). The main thing to note is that you need to get up to 20% as quick as possible. That's because 20% is based on the current appraisal value of the property, not the purchase price. With Bay Area and other real estate markets appreciating so much, it's a ticking time bomb to get out of PMI.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#129

Post by JumpCrisscross » Wed, Jul 27, 2016, 5:55 PM UTC

phamilton wrote: post #123

JumpCrisscross wrote: post #117

Earlier quoted context omitted.

> I'd argue that stock in an S&P 500 publicly traded company is pretty much as liquid as cash. That argument is good until it is not. Unfortunately, when it is not is precisely when one needs it.

When is it not liquid? Sure, it's highly variable and the value could tank, but when has an S&P 500 company had zero liquidity? Edit: Additionally, salary falls in the same boat. If your stock in your S&P 500 employer tanks, you salary will tank too. Also, I'm talking about a "sell as soon as it vests" strategy, which makes it pretty much just a variable form of salary.

> When [are blue chip stocks] not liquid?

Liquidity is a surface over the time in which a transaction must occur, transaction size and price. If you have a large amount to sell or buy (relative to the market), want it sold or purchased quickly (relative to the market) and/or don't want to eat more than an X% discount (if selling) or premium (if buying) (relative to the market), you will find the securities illiquid, i.e. not able to be turned into cash (or purchased) within your size/price/time parameters.

For a liquidator, time is usually same day or a few days. Size is fixed to the balance of the loan. That leaves price. In a turbulent market, the liquidator may end up selling your securities for pennies on the dollar - your collateral may insufficiently cover your balance. That leads to the lender eating a loss or the borrower coughing up cash. $100 of stock may cover less than $100 of balance; $100 of cash will always cover $100.

Retail margin lending is capped at 2:1, so a 50% discount would wipe out your collateral, but institutions and mortgages can go 5:1 and beyond, meaning smaller drops become dangerous faster. When everyone is rushing for the doors simultaneously, these price drops can be precipitous, if short-lived.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#130

Post by maxxxxx » Wed, Jul 27, 2016, 5:55 PM UTC

matt_wulfeck wrote: post #119

maxxxxx wrote: post #43

Earlier quoted context omitted.

There should be a cutoff for deductibility at some price. Let's say 300k or whatever. This would do make miracles for housing affordability.

With more laws comes more accounts and more loopholes. We need to overhaul the tax system, not pile more crap on top of it. Besides, the vast majority of people taking advantage of this deduction is the normal American. Not a business owner or speculator. You'd be ending the largest tax relief the middle class has.

That's why I proposed a cutoff at some rate. The middle class should be subsidized not some millionaires who have ten homes.