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Technology Stocks : Intel Corporation (INTC)
INTC 40.91+1.0%3:17 PM EST
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To: Saturn V who wrote (123727)12/28/2000 4:08:27 AM
From: Amy J  Read Replies (1) of 186894
 
Hi Amy,
RE: "I do not think that stock option exercise can be used for mortgage payments."

Vest stock options.

RE: "So how do people qualify for the hefty Silicon Valley real estate ? Mostly it comes from large down payments. Most Silicon Valley residents have benefited from the huge appreciation from their earlier dwelling"

But I'm talking about the first-time buyers, not the second-time buyers with appreciation from earlier dwellings.

Basically, here's how it works for most folks in my age group that I know:
- get married
- buy a house and a down payment is made
- mortgage is approved when both couples are working and their net worth is based upon vested stock options that have hit the moon (i.e. prior to the crash)
- junior arrives
- oops, didn't expect things to be this hectic. one person decides not to go back to work for a bit (thus, salary drops)
- stock market crashes
- oops, the mortgage is based upon two people working (not one) and it assumes a networth that's higher
- making mortgage payments were assumed to be done with the assistance of existing investments or covered calls on the vested stock options
- but the market crashed
- crunch time

That's how a lot of folks in my age group were doing this.

RE: "Where you can get into trouble is using margin to come up with the down payment."

Actually, it has absolutely nothing to do with margin. It has everything to do with not having a back-up plan and having mortgages approved back when both couples were working and (vested) stock options were at a higher valuation.

I really, really think the lending requirements should be tightened up. Who controls this?

RE: "you are still fine, since you are on margin for a very brief period."

A protective put can make that more secure.

RE: "Company employees tend to have a false sense of security."

I think a lot of folks thought things would come back up right away. Reality is now just sinking in.

RE: "Obviously most Silicon Valley companies need to have some kind of counseling, to prevent this situation from affecting employee productivity for long."

I definitely agree on this point!

Regards,
Amy J
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