Irvine Housing Blog

Just as only “special” people are allowed to own homes, only special people are allowed to manipulate a situation to generate cash, and to promiscuously enjoy the benefits that cash can provide.

I congratulate them for carrying off this fraud successfully. It shows that they have the math skills, the capacity to plan, the nerve, and the knowledge of how the system works to execute the scheme effectively. This assumes that it was deliberate. Alternatively, they may just have gotten lucky.

Either way, good for them.

Far too often the manipulation of the system to skirt laws and regulations to take advantage of the suckers ("those people” who don’t deserve to own houses) by predatory brokers, complicit appraisers, and weasel mortgage lenders, lets everyone in the smart people club rake off a nice chunk of change while pushing off any losses to the last putz in line, and smirking happily about what fools the hapless home buyers are who “shoulda known better”.

Caveat Venditor Motherf****ers! Maybe you aren’t that smart after all.

People like this make me sick. Thanks society, for encouraging this type of behavior and aggrandizing these idiots.

As I note in another comment to another post, this has all of the signs of acts taken with the intent to defraud creditors.  If they file bankrupcty and if (this is the bigger problem) at least one of their creditors challenges their discharge, it’s fairly likely that they will be denied their discharge.  So, they’d be on the hook for all of their debts, including all of the airfare they are charging to their credit cards, and potentially be subject to indictment for bankruptcy fraud (altho this is quite unlikely).

Possibly because this type of skankiness and immorality is so prevalent in the U.S. population, that people who do this stuff think it’s actually OK.

Or at least not too bad.

And, hey, everybody does it. Don’t they?

It’s amazing what people brag about. And it’s even more amazing that they have no concept that what they did is really and truly wrong

If it was a calculated fraud, why would they have agreed to be in a newspaper article?  They could have just said no to the reporter.

Apparently I just need to get transferred to Texas!  Read Laura’s post below…

Note that while their jobs “transferred” them to Texas, they seem to be commuting back to California quite a bit for work.  Guess it wasn’t so much as transfer as the article might imply…

Excellent observation.  One thing I’ve learned with the media—you have to read between the lines.  Here we have as clean cut a case of premeditated fraud and the media is using this couple as a sob story.  Are they that gullible?  Do they think we are?  Thanks for cross-posting.  I knew Texas had pro-homeowner BK laws, but you’ve laid it out in detail.

The NY AG is actively investing Countrywide and other lenders.  I predict we will see inditements, but not for a year or two until the investigations are over and the true nature of the credit freeze blows over the economy.

By diverting people into teaser loans instead of properly amortized loans those people could afford to maximze the Countrywide’s fee’s then reselling those loans as gold unsuspecting investors when Countrywide had prior knowledge that the lendee’s couldn’t afford the fully amortized payment constitues fraud.  The Company senior management pushed their brokers into selling these loans at the expense of lower, affordable loans to maximize profit, just like Ken Lay and Co at Enron; hence Mozillo is legally liable for the actions of his brokers.

“Mr Mozillo conspired to break the banking system ” Umm-m, is there any evidence Orangzillo conspired to break the banking system?  Wouldn’t it be more realistic and reasonable to assume he was trying to make money?  But conspiring to break the banking system?  That initial statement decreases from the credibility and validity of the rest of your argument, which makes alot of sense.
Did Orangzillo knowing make bad loans?  It seems obvious to us in hindsight, but unless there is written evidence documenting his direction of such behavior.  If he was smart, and I don’t think anyone is accusing the guy of being stupid, he never documented anything which he knew to be illegal.  He may not have even given verbal direction and instead just let it happen once he saw which way the wind was blowing.

Maybe my dad wrote the article.

Just bc you disagree with me doesn’t make it BS. I don’t live in NC, so it will take me a few days off work to come up with the links, but I’ll post them as soon as I can get it done.

I did, check it.

I like the description including the “wood floor on the Fist Level”.

I thought this sounded like a zen kung-fu flick.

“Wood Floor On Fist Level”
Hmm, a whole level dedicated to a special sexual practice. Those homeowners must be real perverts.

Or is this a description of a heightened wooden floor, maybe for acoustical or storage purposes? Then “fist level” might be a synonym for a height of four to five feet, the level at which boxers hold their fists. Damn, those realtor descriptions are hard to understand for us outsiders…
:D

Besides the Fannie My Community, there’s also the DreamMaker Opportunity, the Freddie 100%, The Flexible 100%, the FHA 97% (but allows rolling closing costs into loan), & several other local programs that 1st time homebuyers can qualify for to get 100% financing.

& I would also be interested in who “these people” are?

OOps, sorry. I meant FHA.

Totally agree with the “monthly payments” statement.  This March our 2nd car will be paid off.  2003 model with only 45,000 miles.  I will be driving this or years to come and have no “monthly payment”.  Cha ching!

Isnt a HELOC considered recourse?  Wouldn’t the banks be able to come after skeks other assets?

You think Diana has any real data? 

Diana, I dont have anything against you personally but you seem to constantly BS on the comments.  What makes NC have a bubble when one can buy cheaper than renting?  Even if the GRMs were lower 5 years ago, wouldn’t it be possible that it was mispriced 5 years ago and now is at a more correct price for the given market?  Setting aside the above comments, you also have not backed up your statements regarding FICOs and conforming loans.

I should have posted my comment at the bottom.

I repeat..... anyone who thinks the Inland Empire couple who HELOCed their house and then bought a house in Texas did this out of stupidity, is naive, as another poster on another blog pointed out.

This couple committed deliberate fraud, and it’s too bad they can’t be prosecuted.

They took a massive amount of cash out of the house in CA , AND bought 2 extremely nice new vehicles, then bought a very nice 3,600 ft house in suburban Houston for $238,000K, a gift compared to Los Angeles or Chicago prices for something similar.

Don’t you think the job transfer to Houston is very fortituous for them, as is the ability to pull a massive amount of cash off the house via a no-down mortgage and HELOC?

Homestead law in Texas protects their home there and one vehicle per person should they bankrupt out of the $800K-plus debt on the Inland Empire house, which of course they will.

You can be pretty sure they were aware of all this when they HELOCed their CA house and bought the house in TX.

Don’t think for a New York Nanosecond that they were naive or stupid in all this. It looks to me like calculated fraud, and they will get away with it.

As one commenter on Doctor Housing Bubble’s blog (not me) remarked, there is a method to this couple’s madness.

Mainly, Texas has homesteading laws that protect your principal dwelling and one auto per person from creditors in the event of bankruptcy. Texas has some of the most liberal and corrupt bankruptcy laws in the nation. Back in the Dust Bowl days of the 30s, it was commonplace for a bankrupt Oklahoma farmer to scrawl the initials GTT, or ‘gone to Texas’ as he vacated his bankrupt homestead and departed for the land of perpetual debt forgiveness just to the south.

So don’t think this couple’s happy job transfer was an accident or that they didn’t plan to shirk their debt in CA, as well as their car loans and other obligations. I’m sure that every move they made was completely calculated with the thought in mind that they would extract the max free money possible from the house in CA, knowing that they could take it to Texas and set themselves up in a safe, untouchable situation while the creditors and neighbors in their old Inland Empire neighborhood took the hit for their fraud.

Don’t think for a minute this couple didn’t intend to commit fraud.

They will default on the debt on the CA house, and probably the car loans, too, but they will get to keep their new suburban Houston home- a very good deal for the money at $283,00 for 3,600 sq ft!! They will have their nice new cars and and one hell of a nice house, and cash to spare.

The ease with which they managed this is the ruin of our country.

hello irvine renter,

been avidly reading you blogs and learning so much. recently I came across this article by Michael Farrell from Annaly Investment group, it was recommended read by none other than Jim Cramer on his show.  Was wondering wether you had come across it…

http://www.annaly.com/homeprice-underappreciation.pdf

have a read really good stuff…

What if I actually want to live in my prison for the next couple of decades? And if I am paying down the principle on my 30 year fixed at a 15 year rate? And if $90/sqft were a reasonable price for a quality 2004 construction? And if I had reached 45% equity of the 2004 purchase price?

I’m sorry, but bubble-mania is not a conservative trait. Simple math abilities, and Economic logic should keep people out of trouble. But there’s always a percentage that get caught in these bubbles. For those who chose to show some responsibility, and forgo the Lexus and Caribbean trip in order to pay down their reasonable mortgage, these happenings are quite a spectacle. But I believe that Real Estate does have a fundamental value that does not go down over the long term. Having a nice place to spend most of my time is more important than making a million in a short time, and blowing it all on cars and hookers.

“Comment by Mr Vincent
2007-12-18 10:44:28
“Corona appealed to them because of its quality of life and regional cachet.”

LOL! Which real estate agent fed them that line of bull?
“

I bet it was Holly Nguyen (Realturd).

ROFL!!!!

Look at the other side. This will help deflate the bubble faster. Sell by 2010 and you get a break. Try to hold out past that and you’re screwed. More people will put their houses up.

For $82 a Day, Booking a Cell in a 5-Star Jail

Many of the self-pay jails operate like secret velvet-roped nightclubs of the corrections world. You have to be in the know to even apply for entry, and even if the court approves your sentence there, jail administrators can operate like bouncers, rejecting anyone they wish.

“I am aware that this is considered to be a five-star Hilton,” said Nicole Brockett, 22, who was recently booked into one of the jails, here in Orange County about 30 miles southeast of Los Angeles, and paid $82 a day to complete a 21-day sentence for a drunken driving conviction.

“Anyone who purchased in the late 80s or early 90s knows the feeling of being imprisoned in their house.”

I bought in early ‘90 after an early dip in prices and won’t forget the feeling in ‘92. Being down 15% hurts. Fortunately I didn’t have to sell and by ‘98 was finally above water. 8 years of pain was long enough but this time will be worse, for those who are in prison.

Oh, but if you have knowledge that the individuals you are selling the loans (stated income, gardners claiming to own landscape companies) to do not have the resourses to pay, then sell the payment stream (SIV) as a AAA quality, then you are commiting fraud.  You are selling a turkey (the loneee) as a dressed up bird!

The truly unethical trend now is mounting student debt.  The AARP and their friends in congress and the banking industry have conspired to enslave a generation in favor of the new gerentocracy.  Prop 13 is the hood ornament on this hearse driving the finances of everyone born after 1980.

I think it’s called “Pimp your cell”.

or maybe that’s “Pimp your cellmate.”

I tend to flip the channel pretty quickly.

Charles Dickens has excellent portrayals of actual debtors prisons. As Mr. Micawber used to say in David Copperfield, “I have every confidence that something will turn up.”

It’s the whole how much are my monthly payments gonna be bullshit. Some people just don’t look at the bigger picture and see how much they are going to pay over the life of the loan. I think of this everytime I drive by a rent-to-own business. It’s for the people who suck balls at math.

“would you be able to “flip your cell”?”

Post of the day!!

...or does that fall under “coveting”...?

gotta have stainless!

Yeah, they refi to pay off cc debt and then run it up again I bet. Stupid fooks. So sure they took the money and ran. And you know what? The banks lent to them!

What kind of flipping? The funny stuff seen on TV where they tear shit up and put new shiny shit in? Or just buy and hold and sell?

actually, he’s right, and this is his indirect way of taking the blame.

the ‘98 ltcm/ruble meltdown was where the fed first started taking on its recent role as fomc-bartender.  the events of ‘98 were directly linked to deep-seated problems created by the vacuum left in the aftermath of the soviet collapse.  the soxx index was actually pretty low and sanely valued at that point, and the dollar was remarkably strong against housing and commodities.

4.) Call the 800 government bail-out number for assistance.

Nope.  Not a shrink.

I heard that term used in an article I read somewhere and thought it was so great that I stole it for my own purposes!

Kind of a kitchen “NO EXIT”??

You know, I think that credit card companies and the rest would really turn us into slaves if they could.

When my son was in the army, he bought a cheap car.  He HATED the army and couldn’t wait to get out.  He went to a car dealership and got roped into driving an expensive (by my standards, not by TonyE’s) truck off the lot.  He called us, told us what he had done and I went off like a volcano.  One of the things I said to him was, do you want to be a slave?  Do you want to stay in the army forever?  Didn’t you say you wanted to go to college?

He took the truck back, got out of the army and got almost straight As.  He actually listens to what his parents say, bless his heart.  Now he’s working for a year in his field and applying to grad school.

Seeing how the average person acts, I can see lots of people selling themselves into debt slavery, if it were allowed.

Hehehehehehe!!!!!

When I bought my Irvine home in the spring of 2000, I worked my a$$ of to pay down the mortgage. Allot of the time I felt like I was in debtor’s prison. I wasn’t easy. So why should these people have the opportunity to bail out like that. Thats not right. If your stupid with your money, it’s your fault.

It may lack ethics, but it doesn’t sound illegal. Should it be? That is another question…

Mr Mozillo conspired to break the banking system by running a corrupt corporation that specialized in using inflated aprasials to procure loans to people whom they knew couldn’t afford the payments, taking rediculous fees off those transactions and then selling these loans as grade A investment material to unsuspecting buyers, thus relieving themselves of any liability for the losses occuring when the turkeys stopped paying on the notes and making 100’s of millions in the process.

(read Enron… smartest people in the room for comparison.  Countrywide is the Enron of the mortgage industry)

Other than that, I suppose he’s a great guy

Alo?  Alo?  No se habla Ingles.  Senor Skek?  He go away.  He not here no more.

Adjustable, still open.

That’s a hilarious idea.  I bet I’d get a nervous phone call from the banker…

Is it an adjustable rate?

Is it still opened?

You might want to tap it all out for a week and see if they freak out!

IR - How about using a song from “Chris Isaak Christmas?” He has some good ones!

Do these people actually get to keep their house in Texas?

Wow, lucky them if they do:

1.  Buy a house in CA
2.  Use a HELOC to buy a house in Texas
3.  Foreclose on CA house and make the get-away to Texas
(oh yeah buy a lexus and a suburban with your HELOC to make the get-away)

They should have pre-paid for their kids college tuition while they were at it.... maybe they did !

Priced_Out_IT_Guy -

The homeowners borrowed money that they never planned on paying back. 

Just like everyone else who wanted something for nothing; they pulled out all the cash and pissed it away on Caribbean vacations and credit card bills (i.e s*** they don’t need).

Now they are whining because they don’t want to have to pay it all back and even had to nerve to call the 800 number for bail out assistance.

They may not have done enough to be arrested and put in jail; but that’s only because we don’t have any statutes outlawing stupidity.

The horror. Probably formica too.

I would imagine that people that are so stupid that they borrowed more money than they could pay back at rates they could not afford are probably too stupid to fill out the government paperwork required to qualify for the program........

The “old saying” is an Americanization of Keynes’ line:

“If you owe your bank a hundred pounds, you have a problem. But if you owe a million, it has.”

Which was added to by The Economist magazine in the early 80s:

“If you owe your bank a billion pounds everybody has a problem.”

By absolute chance, we opened up a HELOC at the absolute pinnacle of the market—June 2006.  Add to that the fact that the appraiser was very generous with his comps.  I dare say, our HELOC today is at about 140% LTV!  Of course, we haven’t touched it…

...and greed is not the love of money?

and maybe some granite?

The Fed has only proposed changes to the rules for mortgage lenders today.

Or are you talking about the plan from Bush? In that case, the bailout is so extreme. the requirements are too strict to qualify many people at all.

“I’m trapped in a nice house, quartz countertops, stainless steel gourmand appliances, a low rate 30 year fixed, comfortable payments and plenty of equity even if the market drops 45% or more….”

Now THAT’S what I call the American dream!

Everyone thought he was so brilliant for not letting the markets seize up after the S & L crisis, but I think he’ll actually be remembered as the worst Fed chairman we’ll ever have.

who are “these people” exactly? my parent’s made less than the median their whole lives, & they still deserve to own a home as much as anyone else responsible with their credit.

Don’t tempt fate, Tonye…

1 Timothy 6:10
For the love of money is a root of all kinds of evil.

Any idea where we can find this data Diana?  It would be great reference material for comparison purposes.

These guys are stone cold winners.  They cashed out huge, and should now “sell” the place to the bank.  Just quit making the payments and stash the cash in a London bank to wait it out.  Live rent (and HOA / taxes / Mello Roos / maintenence / insurance) free for six to nine months. 

Hell, they could even buy the place back for the $629,000 on the first using $125,000 of the cash out refi.  Then they’d have the same house back, owe $500,000 on it and have $225,000 sitting in a Euro mutual fund.  This screams WINNER WINNER WINNER all over it (well, except for the stupid lender).

I think its the “love” of money that is the root of all evil.  Money itself is not evil. 

http://www.bartleby.com/100/774.193.html

They may be deadbeats, but they are deadbeats who vote.

Hmm.. eons ago we opened a HELOC.  The limit went up to 80% LTV.  We never reached it.

How in the world could anyone get a HELOC to 100% LTV?  I feel like I missed the boat somewhere in there.  I could have transfered the title to my wife, taken out ungodly amounts of cash.  Walked on it, rented a place and next year I would be able to buy a house with cash.

Damn.... I really blew this one.

I’m trapped in a nice house, quartz countertops, stainless steel gourmand appliances, a low rate 30 year fixed, comfortable payments and plenty of equity even if the market drops 45% or more....

Did Orangzillo do anything illegal?  What would you put him in prison for?

“magical thoughts”
My dad uses that term.  Are you a psychologist?

1000 license plates = 1 lb of granite

I bet they’d have a show on cable about it.

If the cell walls or floors are made of granite stone does that count as gourmet?

Thanks Alan, I needed a good laugh today!

“A house may be a temporary trap but it is not a prision, you certainly don’t have to worry every time you bend over in your house.”

Fannie Mae has a program called “my community mortgage” which allows first time homebuyers to purchase at 100% BUT.  Your income need be less than the area median income.  This is not a typical approval, it is a special HUD regulated program

should these people be buying homes anyways?

There was no law-breaking by the home owner here. Yes there was rampant fraud by appraisers, brokers and lenders during the boom, and many people can be blamed, but lets be rational. This home owner didn’t rob a bank and steal the 350K at gun point. The home owner made out, the broker made a fat commission, and the lender’s stock went up. Now the music is over and the bag holders are who ever has shares in the first and second mortgage. There’s no justification to have such hatred targeted towards the home owner.

“Corona appealed to them because of its quality of life and regional cachet.”

LOL! Which real estate agent fed them that line of bull?

What are you talking about?  You cannot do 100% conforming approvals.  There may be an investor other than fannie or freddie that purchases 100% loans, but they do not.  Even during the height of the purchase boom, they neve purchased these loans.

What do you mean they don’t require credit scores?  I addressed this comment later on in this thread.

Ah yes.  Justify your mistakes.  The sign of a real mature person.  And I had such faith in Greenspan.  I sure was misguided.

“Conforming approvals can only be generated at 90% LTV for SUPERIOR credit. This is regardless if it’s a purchase or refi. If you have spotty credit (between 620 to 680) You are at 80-85% max with PMI. If you are below 620 forget about it. You may be capped @ 70% LTV”

That is not true.

Confomring can still be had @ 100% & up to 65% DTI.

Conforming loans do not care about FICO scores.

Diana,

I am curious as to where you are getting your info?  Fannie and Freddie most certainly go by the middle of the three FICO scores.  Both companies look at the borrower’s total financial outlook, LTV, assets, job history, self-employed vs wage earner, and FICO score.

My desktop underwriter denies loans every day because of low FICO scores.

would you be able to “flip your cell”?

The mortgage must be defined as a “purchase money loan.” Even if you just refinanced to lower your rates and did not take out cash, your loans are now no longer purchase money loans.  You are no longer protected by the homestead law.

Oops!

If there was an American debtor’s prison, I am sure it would be decorated pretty nicely. Every cell would have granite counter tops and marble tiled floors.

Diana,

They do not increase the conforming limit every year...it has been 417k since 2005 and they just voted to keep it at 417k again for 2008.

FHA and VA loans are not enough ammo to save people.  Conforming approvals can only be generated at 90% LTV for SUPERIOR credit. This is regardless if it’s a purchase or refi.  If you have spotty credit (between 620 to 680) You are at 80-85% max with PMI.  If you are below 620 forget about it.  You may be capped @ 70% LTV

Of course its not fair but good ‘ol Uncle Sam has just decided that these equity cannibals should be rewarded for splurging on hooters and scooters.  With one exception, every single U.S. Senator voted in favor of the FHA reform bill that elimnates forgiven debt income on all short sales until something like 2010.

There is a lot of disgust over the people who bought the lexus after a forclosure, or the people who did the big cash out refis and frittered away the money.  The Lexus example above shows that bailout or not, walking away or not, these people will go on making bad financial decisions.  You might think that after the foreclosure, they would reconsider their lifestyle, but they don’t.

To understand why the spendthrifts benefit the financially responsible, try this article:

http://www.efficientfrontier.com/ef/103/hell4.htm

It essentially says that in a country that is aging rapidly (most of the western world), how much you save relative to your peers is what matters.  The people who do not save make it easier for the people who do save to afford retirement.  These Lexus types will be the ones working at 70 or 75, because they have no choice.  By working longer, they increase the number of available workers, reduce inflation, and make it easier to afford retirement if you did save.

So, for my money, they can walk away, or they can stick with it.  Let them ‘buy’ their Lexus.  Live it up!  They are making things easier for me in the long run.

The fact of the matter seems to be that if you are a crook or if you are a responsible borrower, you are both welcome in America. None of you has to endure prison time or public disdain. It all depends on thick you can let your skin grow. Besides it looks like quite a financial advantage to be a crook in America provided you udon’t drop the ball on the consequences and manage those like Mrs. Oorupuza and her family did. JUST DON’T grow a conscience, will ya?!

I think all the debtor prisons should have 5 burner stoves but no pots and pans to put on them.

Many people have asked me about the new Fed bailout policy for those trapped by subprime loans, and why the hedge funds and banks were willing to go along with it.

Here is the analogy that I used:

“Imagine a drug dealer pushing his product on his growing clientele.... only to find that the dosage and toxicity of his product was killing off his clients.  At one point, the dealer would realize that he had to reformulate his drugs to a lower dosage and toxicity too keep his clients lifelong addicts without actually killing them off prematurely.  This formulation change would be followed by a press release… telling everyone how wonderful he is for making the change for the “good” of his clients, even though the welfare of his clients was actually furthest from his mind.” This is basically what is happening now.

Of course, another way to look at this is with the old saying that I mentioned around 7 months ago:

“Borrow a dollar and the bank owns you… borrow a million dollars and you own the bank.”

Clearly, the subprime borrowers own the bank at this point, since the fate of the banks is now clearly in their collective hands.

Food for thought.

I wonder if the prisons will have gormet kitchens and romantic fireplaces ?

I just want to make a clarification. Fixed rate loans will not themselves prevent a real estate bubble, but they will moderate it.

Bubbles will probably happen no matter what restrictions there are. But its really a matter of how bad the bubble becomes.

This last real estate “up” cycle started in the late 90s. That is perfectly normal and to be expected. And I do think a bubble did take place after 9/11 and lower interest rates.

But, the real problem and huge bubble started in 2003 when wacky-jacky lending was used more extensifly to qualify people who would not have qualified using the old standards. This also caused prices to inflate even further.

If 30 yr fixed full doc with verifications by the lender was the only game in town, then this would have been just a normal “up” cycle + minor bubble for real estate.

An “up” cyle for real estate just serves to bring prices back in line with trend.