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URL:  https://boards.fool.com/hi-namkato-youre-missing-some-critical-issues-23741098.aspx

Subject:  Re: GA Deal I'm working... Date:  2/22/2006  1:22 PM
Author:  Dwdonhoff Number:  7646 of 14302

Hi namkato,

You're missing some critical issues;
ARMs are bad enough, but he has her in a neg-am, the most toxic loan yet invented.

"Toxic"? Are you sure you understand that word?

Lots of unsophisticated buyers do not fully comprehend what they can do to the buyer.

This is absolutely true, IN GENERAL.

As I've pointed out, this particular borrower is fully aware of the details, terms, and spirit of the program I've offered (and she has every freedom to turn the offer down.)

So the lady is doing 100% LTV, neg-am, she is losing equity daily.

How can she "lose equity" when she has none (or, to be correct, she has $2,500 of liquid equity that she's contributing to the purchase)?

As I explained before, but you somehow missed;
A) She lives in the home now, and her alternative is to leave,
B) I've arranged financing at payments BELOW what she would be offered, given her credit history, at MY OWN risk,
C) I've arranged the degree of leverage for her (zero down payment) BELOW what she would be offered, given her credit history, at MY OWN risk,
D) She has zero in equity now... but she DOES have (and greatly desires to keep) possession and the enjoyment of occupancy,
E) SHE KNOWS that in order to own the home everyone else would offer her MUCH HIGHER payment requirements, and MUCH HIGHER down payment requirements,
F) She fully understands that MY OFFER rolls the payments and down payment she WOULD HAVE HAD TO PAY (but no way could) to the end of her financing with me, AT MY RISK,
G) She is GRATEFUL for the offer (because she UNDERSTANDS it. It seems only those who don't understand it balk at it.)

THINK IT THROUGH!!! I am the one at primary equity risk!

This ONLY makes sense for me to offer because I also know how to solve the existing foreclosing lieholder's liquidity problems, and have the credit strength of my own to do so. I am able to borrow money fast (though at a high short-term cost) and acquire title to the property at sufficient discount that I can shoulder the risks I carry for thei borrower.

IN RECAP;
I am allowing her to stay AS AN OWNER instead of a renter, at LOWER payments than she'd get with her credit, and LESS down payment than she'd be allowed with her credit.

IN RETURN, she's providing me the reward for my risk in some amount of the FUTURE (non-guaranteed) appreciation equity of the home. We are COUNTING on her "down payment" and her "financing profits" to come from some future BUYER.

Make more sense now?

(The more I detail it out... the more insane I think I must be... LOL!)

Cheers,
Dave
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