No loans for Sellers with Undocumented Income

The exact reason No Income Verification loans were created in the first place is the exact challenge now facing numerous potential homeowners who no longer can get a loan - unless you know a R E A L L Y good mortgage broker who has a personal and private relationship with some good banks. Oh, and by the way - this is also the same reason Chris Daly's rental assistance law is diabolical. There's no way to account for undocumented income...

With more than $300,000 in combined annual income, tens of thousands of dollars in the bank and credit scores that top 800, Jennifer France and her partner would seem like ideal candidates for a mortgage refinance. But when they applied to swap an interest-only loan on their nearly $1 million San Carlos home for a 30-year fixed that locked in today's low rates, they were summarily denied. The reason: effectively, because both operate their own businesses.
"I was really surprised, I had been preparing to refinance for years," said France, a landscaper and gardener. "It's hard for the self-employed; that puts us in a bind."

While the amount they make is easily enough to qualify for the new loan, tax deductions for self-employed workers dropped their official income below the threshold that banks wanted to see. A few years ago, theirs would have been the ideal scenario for a stated-income or no-documentation loan, which allowed individuals with ample but unconventional sources of income to secure home loans. But after untold numbers of borrowers lied about their financial wherewithal to buy homes they couldn't afford, often with a wink and nod from mortgage brokers, nearly all lenders stopped offering what became known derisively as "liar loans." Now even the well-qualified borrowers for whom the products were first intended can't get them. [more]

Undocumented income makes it hard to get a loan [SFGate]
The Giant Pool of Money - Hands-down best description of the Credit Crisis [SFHomeBlog]
Daly's Draconian Renter's Relief Package Passes [SFHomeBlog]

Proposed Laws for SF Renters + Mayor Weighs In

From the SF Chronicle last Tuesday:

Three laws proposed by Supervisor Chris Daly on Tuesday would bar landlords from increasing rent to more than one-third of a tenant's income, would expand the rights of tenants who want to add roommates, and would limit the amount of so-called banked rent increases in which annual increases allowed under city laws are saved up and then imposed all at once. [more...]

I have been avoiding this post simply because the proposed law was put on the books by Chris Daly, who happens to be my supervisor, and I prefer to avoid giving him any unnecessary airtime. I'm really just waiting for 2010 when term limits finally oust him. However, this one hit more of a nerve than normal so I decided to break my personal code of silence and weigh in...

I don't really know where to begin with how wrong this is except to say, rental vacancies are already up, rental prices are already down, and San Francisco already has some of the most stringent rent control laws in the nation. Many of the owners I am talking to are already seeing their tenants negotiate for rent reductions, which they are giving, and last I checked, the landlords were affected just as much by the economic downturn as tenants - if not more so due to their debt liabilities.

In terms of limiting banked rent increases, lemme tell ya a true story. I lived in a rent controlled apartment on Larkin Street from 1992-1999. We were excellent tenants, and the landlord, being smart, never raised our rent in return. The last year I lived there, before I bought my first place, the building changed hands and the new owner raised our rent the entire banked six years allowed by law. We went from paying $1200/mth rent, (for a 4 bd, top floor flat with parking), to $1349/mth. Oh, and what we were paying thanks to rent control, was more than a $1000 below market rates at that time, even given the banked rent increase.

In addition, the other five units (it was a six-unit building) had been there longer than I: aka paying even further below market rent - and my downstairs neighbor, who I was very good friends with was paying $500/mth for the same size apartment because his roommate had been there for 25+years. Did I mention that downstairs neighbor paying $250 month in rent made a six figure income, most of it under the table? Sure, you could argue it was an isolated incidence in the city - only it's not.

Now, there has been quite some debate about the non-answer, reported in the Chronicle, which the Mayor's spokesperson gave in response to the proposed law:

It's not yet clear whether the proposed laws will have sufficient support at the Board of Supervisors, but Mayor Gavin Newsom - who advocates had expected to oppose the measures - appeared open to the ideas. "Renters deserve relief, too, and these are interesting ideas that are worth looking at," Newsom spokesman Nathan Ballard said. "But some of the ideas seem a little far-fetched."

So I sent Mayor Newsom a tweet today (yes, he is on Twitter), and apparently if you ask a good question, and are polite he, or I assume one of his aides will answer. I asked if he has a sense for whether there was any traction on Daly's proposed laws - he said he wasn't sure but to let my Sups know (no help there since Daly is my Supervisor) - then I asked if he was for, against or neutral to the law - to which he replied "Against" - then I asked if I could quote him, and he said "yes". Pretty unambiguous...

And if you are so inclined you too can find me on Twitter here.

3 new S.F. rent laws in the works [SFGate]