I’ve commented on this before at Inman News and other blogs, but it deserves it’s own post. Here is an exerpt from my letter to the editor:
To help borrowers qualify for a home loan and to get payments in line with a lenders loan program, it is necessary for the taxes and insurance to be dropped as a portion of the monthly payment. The term PITI (Principle, Interest, Taxes & Insurance) does not apply to throngs of borrowers across the country. For many today, the term is “I”. They only pay the interest, literally.
For borrowers that could not qualify under the lowered standard of just Interest only(but still pays taxes and insurance as part of the monthly payment) , some lenders dropped it lower and eliminated the taxes as part of the payment. The line in the sand was drawn: either qualify this way, or, no new home.
The lending standards of “low, lower, lowest” gave me a chuckle. It reminded me of the Seattle Mariner vetaran pitcher Jamie Moyer who baffles batters with his slow, slower and slowest wizardry of pitches.
But where does this leave the borrower? Obviously, they must budget for paying property taxes on their own. Taxes are not cheap. If a borrower is stretched to the limit without property taxes included in their mortgage payment what is the probability of budgeting and paying property taxes when due? Many probably won’t, or can’t.
Today, in the Orange County Register, county officials announced that property tax delinquencies have reached an 8 yr high while sending out bills to the sweet tune of $3.8 Billion in tax revenue, the largest bill for property owners in 15 yrs. Well, it’s not a big deal in Organge County. You can skip payments for 5 yrs before they can take your home—if the lender doesn’t beat them to it.