THE ART OF SLOW STRANGULATION
All the news about the college admissions scandals has highlighted the ongoing parental concerns regarding their children getting into their preferred school of higher education. All those helicopter parents and tiger moms are probably outwardly projecting a “holier than thou” attitude but I just bet some of them have considered doing the same thing to help their kids.
In my mind the scandal, which shows parents eager to toss good money into bad and illegal schemes, does nothing to shine the light on a much more important issue – for those young adults who are able to get into college (legally) how many of them and/or their parents can afford the tuition, room, board and books for four (or more) years without taking out loans? It is very troubling that student debt has become the main reason why even with a good education, many graduates are still not able to attain the American Dream. This debt is hampering their ability to qualify for mortgages and their ability to build sufficient savings for a downpayment. It is a form of personal fiscal strangulation as they start their lives.
I have an acquaintance who is now a doctor. She has accumulated debt in the amount of $500,000 to get that degree so that she can get a job that brings her $300,000 a year after a few years. Meanwhile she would like to buy a nice house in a nice area but she can’t afford the $1,000,000 price tag. She needs at least $200,000 for downpayment and then deal with the $800,000 mortgage that would be added on to her already debt heavy shoulders. With no recourse at this time, she rents. Her rent is $3,000 a month and maybe in 10 or 15 years she will be able to buy her own home. Course, she has other options. She can move out of state to a cheaper location, she could live at home, she could get married and perhaps her spouse’s income will help. She graduated from one of the top schools in California but with no parental help, she has a long way to go. It really is a story that makes us do the math and wonder: was that top school worth it?
The article above says student debt is $1.5 trillion. You want to see how it rises in real time? Click on this link for the U.S. Debt Clock: https://www.usdebtclock.org/ and go to the 3rd red section on the left, middle of the third line. Isn’t this CRAZY??!!
… AND SENIOR HOUSING WOES
I hate it when it doesn’t seem like I have good news on housing to report. Just call me Ms. Pessimistic. I just talked about how student debt is killing the younger generation. Harvard’s Joint Center for Housing Studies reports that housing for the over 65 age group seniors (that’s me, folks) are also in jeopardy as many struggle with either mortgage or rent. Hello? We live in a First World nation (or THE First World nation). What is wrong with this scenario when the young and the old are squeezed out of basic housing needs?
… AND THE UNINTENDED CONSEQUENCES OF STATEWIDE RENT CONTROL LAW
The State of California, in trying to relieve the affordable housing issue, passed AB 1482 as I mentioned in my October newsletter. Unfortunately, this law immediately gave rise to unintentional and unintended consequences. With an eye to January 1, 2020 when the law kicks in, Landlords are raising rents left and right and evicting people if they can’t pay the increased rent. I heard desperate tenants interviewed on the radio of having their rents increased from $1,650 to over $2,000 in one shot. Not only can they not afford it, they can’t find another rental that they can afford. So the City of LA, and some other cities, are now banning any no fault unjust evictions. This is greed at its worst and totally unconscionable.
DEBT TO INCOME RATIO
Finally, a little bit of better news. MBA, NAR, ABA, NAHB have joined and published a paper directed to the lending industry. They address their concerns that using the debt-to-income ratio as the main qualifier of mortgage sustainability could be kicking part of the population out of the lending equation. There are other things, they state, that lenders should put more weight into like credit background and cash reserves. Whether they will take these organizations’ concerns remains to be seen. Unless pushed into law, change, as we have seen, comes very slowly.
YOU HAVE QUESTIONS, WE HAVE ANSWERS!
VIVA ESCROW Q & A SEGMENT
(Real questions left on our website or emailed to us)
Q: If the house is in a trust and the trust is selling the house can the Successor Trustee pay the (3) sisters getting the house the money THROUGH the escrow OR.. do I have to pay the trust and let the trust disburse the money?
A: Escrow Officers are cautioned NOT to disburse to net proceeds to anyone other than the Seller, even with the Seller giving their written instructions. For instance, if the Seller wants escrow to remit 30% to one sibling and another 20% to another sibling and the balance to himself. The Department of Business Oversight, the regulator of Independent Escrow Companies, call this “reckless disbursement.”
In the question posed above, if the original Trustees have all passed away the Successor Trustee should have (1) applied for a tax identification number for the Trust and (2) set up a bank account under the Trust name. All proceeds from the sale should be made payable to the Trust and deposited into that bank account. As Escrow Officers we do not know the details of the Trust, who are the Beneficiaries and what other distributions the Trust calls for before the Beneficiaries get to split the money. Besides, the Successor Trustee should be (3) filing an income tax return for the Trust. So the answer to the question is, “No, the 3 sisters should not be getting their money through escrow. The Successor Trustee needs to finalize the Trust Estate per the Trust Agreement before he/she gives the distribution to the sisters.”
MY PUBLIC ANNOUNCEMENT FOR THE MONTH
I am doing my civic duty. What does it cost to go on a date? Do you have to take out a loan? Here is an analysis, broken down by state. Feel free to give this link to your unmarried friends and relatives
MY FUNNY FOR THE MONTH:
YouTube – our depository of fun and cute videos that make our time at the office so much more enjoyable. After work, that is. Click on this https://www.youtube.com/watch?v=yBJEP4lsRFY and watch Le Petit Chef create a dinner pour vous!
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Ah! The Intricacies of Understanding the English Language!
A thief who stole a calendar got twelve months.
When the smog lifts in Los Angeles U.C.L.A.
I got some batteries that were given out free of charge.
Juliana Tu, CSEO, CEO, CBSS, CEI, SASIP
“Escrow is my FOREMOST language!”
The opinions expressed in this blog are solely the author’s.