Monthly Archives: June 2010

Sheila Bair: The Home Mortgage Interest Deduction Inflates House Prices

Count Sheila Bair among the critics of generous U.S. housing subsidies.

Irvine Home Address … 12 SANTA RIDA Irvine, CA 92606

Resale Home Price …… $959,000

I want to break free

I want to break free

I want to break free from your lies

You're so self-satisfied I don't need you

I got to to break free

God knows, God knows I want to break free

Queen — I Want to Break Free

FDIC's Bair questions housing tax breaks

Count Sheila Bair among the critics of generous U.S. housing subsidies.

Bair, the chairman of the Federal Deposit Insurance Corp., said in a speech Monday that Congress should consider paring back federal tax deductions for homeowners. She said these subsidies helped inflate house prices, harming the very consumers that many of the programs aimed to help.

Bair took aim at federal tax deductions for mortgage interest, local property taxes, and capital gains on house sales (in certain circumstances). She said these taxpayer subsidies for homeowners, taken together, "are about three times the size of all rental subsidies and tax incentives combined."

Even that probably understates the case. Consider the hundreds of billions of dollars the feds are spending to support Fannie Mae (FNM) and Freddie Mac (FRE) in the name of making mortgages available, and the limited-time-only tax credits that have helped to prop up house prices over the past year.

Whatever the tab, though, Bair said the problem is the same: Government subsidies for property owners push up the price of houses, undermining so-called affordable housing programs run by the likes of Fannie and Freddie.

Bair rejected the notion that laws like the Community Reinvestment Act, the 1977 law that encourages lending in low-income areas, fed the housing crisis.

Risky loans "were made in large volumes because for a time they were highly profitable and because Wall Street would buy them and securitize them," she said. "It's as simple as that."

But she said policymakers have a duty to better educate consumers and to reform securitization, the process that Wall Street uses to turn loans into bonds salable to pension funds and other risk-averse institutional investors.

Along the same lines, she said, the government should reconsider popular tax deductions that helped the U.S. homeownership rate hit an all-time high of 69% during the bubble in 2005. That number stayed in the mid-60s throughout the 1980s and 90s. It was recently 67%, the Census Bureau said.

"Sustainable homeownership is a worthy national goal," Bair said. "But it should not be pursued to excess when there are other, equally worthy solutions that help meet the needs of people for whom homeownership may NOT be the right answer."

Letting the bank deal with it

The owners of today's featured property now have a Newport Coast address. Since they couldn't sell this one and get their money back, they have decided to let the bank deal with the problem.

The property was purchased on 6/1/2004 for $978,000. The owners used a $782,400 first mortgage, a $100,000 second mortgage and a $95,600 down payment.

On 9/30/2005 they obtained a $176,100 HELOC which allowed them to extract most of their down payment. They quit paying in early 2009.

Foreclosure Record

Recording Date: 03/23/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/24/2009

Document Type: Notice of Default

Irvine Home Address … 12 SANTA RIDA Irvine, CA 92606

Resale Home Price … $959,000

Home Purchase Price … $978,000

Home Purchase Date …. 6/1/2004

Net Gain (Loss) ………. $(76,540)

Percent Change ………. -7.8%

Annual Appreciation … -0.3%

Cost of Ownership

————————————————-

$959,000 ………. Asking Price

$191,800 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$767,200 ………. 30-Year Mortgage

$194,074 ………. Income Requirement

$4,025 ………. Monthly Mortgage Payment

$831 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$80 ………. Homeowners Insurance

$50 ………. Homeowners Association Fees

============================================

$4,986 ………. Monthly Cash Outlays

-$975 ………. Tax Savings (% of Interest and Property Tax)

-$956 ………. Equity Hidden in Payment

$352 ………. Lost Income to Down Payment (net of taxes)

$120 ………. Maintenance and Replacement Reserves

============================================

$3,526 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,590 ………. Furnishing and Move In @1%

$9,590 ………. Closing Costs @1%

$7,672 ………… Interest Points @1% of Loan

$191,800 ………. Down Payment

============================================

$218,652 ………. Total Cash Costs

$54,000 ………… Emergency Cash Reserves

============================================

$272,652 ………. Total Savings Needed

Property Details for 12 SANTA RIDA Irvine, CA 92606

——————————————————————————

Beds: 4

Baths: 3 baths

Home size: 2,535 sq ft

($378 / sq ft)

Lot Size: 5,504 sq ft

Year Built: 1997

Days on Market: 43

Listing Updated: 40308

MLS Number: S616538

Property Type: Single Family, Residential

Community: Westpark

Tract: Othr

——————————————————————————

According to the listing agent, this listing may be a pre-foreclosure or short sale.

This property is in backup or contingent offer status.

Corner lot in newer area of Westpark. Highly upgraded home, with downstairs bed & bath, gourmet kitchen, laminate wood floors, granite countertops, cathedral ceilings, custom paint, mirrored wardrobes, and a spacious loft – library/office/media/play room. 3-car garage w/ built-ins for extra storage. Large, professionally landscaped yard is great for entertaining. Excellent full community amenities & close to to shops, dining, schools, and toll roads.

Fed Study Finds ‘Real’ Homeownership Rate

If you don't consider underwater loan owners true home owners, the home ownership rate drops significantly.

Irvine Home Address … 54 DESERT WILLOW Irvine, CA 92606

Resale Home Price …… $960,000

What you think

What you feel now

What you know

To be real

Cheryl Lynn — Got to Be Real

Fed Study Finds ‘Real’ Homeownership Rate

The U.S. homeownership rate, already down two percentage points from its 2006 peak of 69%, could fall by another five percentage points over the coming years to levels last seen in the mid-1990s, says a staff report from the Federal Reserve Bank of New York.

The study looks at the number of homeowners who are underwater, owing more than their homes are worth, and excludes them from the official homeownership rate calculated every quarter by the Census Bureau.

While the official figure stood at 67.2% at the end of last year, the authors produce their own estimate of an “effective” homeownership rate. The difference between the official and effective homeownership rates, or what the authors dub the “homeownership gap,” is around 5.6 percentage points for the nation as a whole, which means the effective rate of homeownership is closer to 62%.

newyorkfed.org

That homeownership gap is much bigger in cities that have seen big home-price declines. In Las Vegas, for example, the gap stands at more than 40 percentage points. So while Sin City’s official homeownership rate stood at 58.6% as of August 2009, the effective homeownership rate was closer to a paltry 14.7%. (That estimate uses the Case-Shiller home-price index to predict the number of underwater borrowers; estimates from the Federal Housing Finance Agency’s price index, which have less-severe price declines, produces an effective rate of 19.3%.)

In Phoenix, the effective homeownership rate stands at 40.6%, compared to an official rate of 68.8%. Las Vegas and Phoenix had peak homeownership rates of 65% and 74.7%, respectively, during the middle of the last decade. That means Phoenix, in less than five years, has gone from having one of the highest homeownership rates in the country to having one of the lowest effective rates of homeownership.

newyorkfed.org

Other cities with double-digit homeownership gaps include San Diego, Los Angeles, San Francisco, Miami, Tampa, Detroit, and Washington, D.C.

The effective rate of homeownership doesn’t imply that all underwater borrowers will lose their homes; instead, it suggests that they won’t act as traditional homeowners do. Government policy over the past two decades focused on growing the rate of homeownership for public policy reasons: Homeowners, the argument went, were more invested in maintaining not only their properties, but also their communities.

The effective homeownership rate serves as a “good guide to the future path of the official rate” because many underwater homeowners are simply renters-in-waiting, write authors Andrew Haughwout, Richard Peach and Joseph Tracy of the New York Fed. “Unless house prices increase substantially, many negative equity homeowners will in fact convert to renters in the years ahead, and the measured rate of homeownership will decline toward the effective rate.”

Some underwater borrowers, of course, will return to positive equity simply through the scheduled debt pay-down process. The study estimates that 36% of negative equity borrowers will recover their equity within three years, while 51% will be back “above water” within five years. That will speed up or slow down depending on what happens to home prices.

But homeowners will need to build up equity in order to move, which requires cash both for paying transaction costs associated with selling the old home and for a down payment for the new home. Absent any increase in home prices, it would take at least five years for 90% of borrowers who are underwater today return to a 94% loan-to-value. Moreover, the median mortgage in that group of borrowers would take 12 years to reach a 94% loan-to-value, without any home-price appreciation.

Peak buyers who lost it all

Today's featured property was purchased on 1/27/2006 for $1,315,000. The owners used a $951,750 first mortgage and a $363,250 down payment.

These owners lost $363,250 of their own money, and their credit is trashed.

Foreclosure Record

Recording Date: 04/06/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 11/18/2009

Document Type: Notice of Default

Irvine Home Address … 54 DESERT WILLOW Irvine, CA 92606

Resale Home Price … $960,000

Home Purchase Price … $1,315,000

Home Purchase Date …. 1/27/2006

Net Gain (Loss) ………. $(412,600)

Percent Change ………. -31.4%

Annual Appreciation … -6.9%

Cost of Ownership

————————————————-

$960,000 ………. Asking Price

$192,000 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$768,000 ………. 30-Year Mortgage

$194,276 ………. Income Requirement

$4,029 ………. Monthly Mortgage Payment

$832 ………. Property Tax

$550 ………. Special Taxes and Levies (Mello Roos)

$80 ………. Homeowners Insurance

$175 ………. Homeowners Association Fees

============================================

$5,666 ………. Monthly Cash Outlays

-$976 ………. Tax Savings (% of Interest and Property Tax)

-$957 ………. Equity Hidden in Payment

$352 ………. Lost Income to Down Payment (net of taxes)

$120 ………. Maintenance and Replacement Reserves

============================================

$4,205 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,600 ………. Furnishing and Move In @1%

$9,600 ………. Closing Costs @1%

$7,680 ………… Interest Points @1% of Loan

$192,000 ………. Down Payment

============================================

$218,880 ………. Total Cash Costs

$64,400 ………… Emergency Cash Reserves

============================================

$283,280 ………. Total Savings Needed

Property Details for 54 DESERT WILLOW Irvine, CA 92606

——————————————————————————

Beds: 5

Baths: 4 baths

Home size: 3,200 sq ft

($300 / sq ft)

Lot Size: 5,372 sq ft

Year Built: 2006

Days on Market: 185

Listing Updated: 40340

MLS Number: S600246

Property Type: Single Family, Residential

Community: Columbus Grove

Tract: Alex

——————————————————————————

Plan 3 Alexandria. This is the largest and finist model in Columbus Grove. Coupled with the Irvine School District. Every conceivable upgrate. Over $100k in landscaping. This is absolutely spectacular.

upgrate? finist?

60-day-Delinquent Loans Fall for First Time in Two Years

The ever-increasing delinquency rate broke its stride with the first statistical blip this month.

Irvine Home Address … 74 LINHAVEN Irvine, CA 92602

Resale Home Price …… $710,000

Here is a little song I wrote

You might want to sing it note for note

Don't worry be happy

In every life we have some trouble

When you worry you make it double

Don't worry, be happy……

Ain't got no place to lay your head

Somebody came and took your bed

Don't worry, be happy

The land lord say your rent is late

He may have to litigate

Don't worry, be happy

Look at me I am happy

Don't worry, be happy

Bobby McFerrin — Don't Worry, Be Happy

Modifications rise sharply on some mortgage loans

60-day-delinquent loans fall for first time in two years, Fannie and Freddie say

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Loan modifications through the government's Home Affordable Modification Program tripled in the first quarter compared to the fourth quarter, according to data that covers loans held by Fannie Mae and Freddie Mac, the Federal Housing Finance Agency said Tuesday.

Also, loans 60 or more days past due fell for the first time in two years, dropping by nearly 23,800 to about 1.7 million in the first quarter, according to the FHFA's latest quarterly Foreclosure Prevention & Refinance report.

Overall, the FHFA said various efforts to keep homeowners out of foreclosure, including loan modifications, short sales and deeds-in-lieu, rose 75% in the first quarter compared with the previous quarter, to a total of 239,000 completed "foreclosure prevention activity" efforts.

Permanent mortgage modifications through the government's Home Affordable Modification Program rose to 136,000 at the end of the first quarter, up from 43,000 in the fourth quarter. Homeowners must successfully complete a trial modification period in order to make their modification permanent.

About 66% of modifications completed in the fourth quarter reduced borrowers' monthly payments by more than 20%.

Meanwhile, cumulative refinance volume through the Home Affordable Refinance Program rose 53% to nearly 291,600 at the end of the first quarter, up from 190,180 in the fourth quarter. The program allows existing Freddie and Fannie borrowers who are current on their mortgage payments to refinance and reduce their monthly mortgage payments at loan-to-value ratios up to 125%.

The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 federal home loan banks; the numbers in the report don't reflect the Federal Housing Administration's efforts to prevent foreclosures.

A broader view

Overall, the total number of homeowners receiving restructured mortgages since April 2009 increased to 2.8 million; also, half of homeowners unable to enter a permanent HAMP modification get an alternate modification with their servicer, according to a separate report Monday from the Department of Housing and Urban Development and the Treasury Department.

The 2.8 million figure "includes more than 1.2 million homeowners who have started HAMP trial modifications and nearly 400,000 who have benefitted from FHA loss- mitigation activities," the report said. "Of those in the HAMP program, 346,000 have entered a permanent modification, saving a median of more than $500 per month," See HUD and Treasury's monthly housing scorecard.

"The good news is the industry is doing more than the government modifications," said Faith Schwartz, senior adviser for HOPE NOW, a private-sector alliance of mortgage servicers, investors, mortgage insurers and non-profit counselors. "They start with the government mods to see if they fit."

Treasury Secretary Tim Geithner said in a news release Monday: "The Administration's housing policies, combined with actions of the Fed, have lowered mortgage interest rates, helped stabilize home prices and reduced the rate of foreclosures, repairing some of the damage caused by the financial crisis to the financial security of millions and millions of American families."

Separately, the percentage of loans in foreclosure or with at least one payment past due was a non-seasonally-adjusted 14% in the first quarter, down from 15% in the fourth quarter of 2009, according to a Mortgage Bankers Association report in May. That works out to about 6.2 million loans somewhere in the delinquency or foreclosure process. See story on 14% of mortgages delinquent or in foreclosure.

Amy Hoak is a MarketWatch reporter based in Chicago.

Typical Irvine Ponzi

Atrocious borrower behavior is the norm here in Irvine. We were the home of subprime lending, and apparently many of our residents experimented with a variety of toxic financing.

  • Today's featured Ponzi bought this property on 11/13/2001 for $485,000. The property records show a $502,000 first mortgage, but I suspect that was a $402,000 first instead.
  • On 5/19/2003 they obtained a $63,400 HELOC.
  • On 1/26/2004 they got a $100,000 HELOC.
  • On 2/1/2005 they refinanced the first mortgage with a $634,500 Option ARM with a 1% teaser rate.
  • On 3/23/2005 they obtained a $80,000 HELOC.
  • On 8/10/2005 they opened a $100,000 HELOC.
  • On 11/3/2006 they refinanced the first mortgage for $688,000 and obtained a $85,000 HELOC.
  • Total property debt is $773,000.
  • Total mortgage equity withdrawal is $288,000 based on their purchase price.
  • Total squatting time is only 6 months.

Foreclosure Record

Recording Date: 04/15/2010

Document Type: Notice of Default

Irvine Home Address … 74 LINHAVEN Irvine, CA 92602

Resale Home Price … $710,000

Home Purchase Price … $485,000

Home Purchase Date …. 11/13/2001

Net Gain (Loss) ………. $182,400

Percent Change ………. 37.6%

Annual Appreciation … 4.3%

Cost of Ownership

————————————————-

$710,000 ………. Asking Price

$142,000 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$568,000 ………. 30-Year Mortgage

$143,683 ………. Income Requirement

$2,980 ………. Monthly Mortgage Payment

$615 ………. Property Tax

$267 ………. Special Taxes and Levies (Mello Roos)

$59 ………. Homeowners Insurance

$145 ………. Homeowners Association Fees

============================================

$4,066 ………. Monthly Cash Outlays

-$722 ………. Tax Savings (% of Interest and Property Tax)

-$708 ………. Equity Hidden in Payment

$260 ………. Lost Income to Down Payment (net of taxes)

$89 ………. Maintenance and Replacement Reserves

============================================

$2,985 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$7,100 ………. Furnishing and Move In @1%

$7,100 ………. Closing Costs @1%

$5,680 ………… Interest Points @1% of Loan

$142,000 ………. Down Payment

============================================

$161,880 ………. Total Cash Costs

$45,700 ………… Emergency Cash Reserves

============================================

$207,580 ………. Total Savings Needed

Property Details for 74 LINHAVEN Irvine, CA 92602

——————————————————————————

Beds: 4

Baths: 2 full 1 part baths

Home size: 2,478 sq ft

($287 / sq ft)

Lot Size: 6,937 sq ft

Year Built: 1999

Days on Market: 43

Listing Updated: 40315

MLS Number: S616662

Property Type: Single Family, Residential

Community: West Irvine

Tract: Othr

——————————————————————————

This property is in backup or contingent offer status.

Highly upgraded home in West Irvine! Very private yard, extra long driveway, Granite countertops.

Will Congress Fix Our Mortgage Loan Problems?

This week starts a showdown on mortgage-lending rules. How strong the protections will be for consumers will depend upon how successful lenders are at softening the rules proposed by Congress.

Irvine Home Address … 67 WATERSPOUT Irvine, CA 92620

Resale Home Price …… $750,000

We are young, heartache to heartache we stand

NO PROMISES, NO DEMANDS

Love Is A Battlefield

We are strong, no one can tell us we're wrong

Searchin' our hearts for so long, both of us knowing

Love Is A Battlefield

Pat Benatar — Love is a Battlefield

New Mortgage Rules: Battle Looms in Congress

Jun 21st 2010

This week starts a showdown on mortgage-lending rules. How strong the protections will be for consumers will depend upon how successful lenders are at softening the rules proposed by Congress. Up for grabs are rules for: loan repayment; appraisals; how much skin lenders must have in the game; and suing a lender for fraud or poorly underwritten mortgages.

Most of these rules ultimately will affect the cost of mortgages and the types of mortgages pushed by lenders. One of the key rules that mortgage lenders want to soften is the rule requiring lenders to hold a 5 percent stake in loans that are bundled and sold with other loans. Those bundles are the mortgage-backed securities that imploded and caused the financial disaster.

By requiring lenders to hold a stake, Congress believes that they will be more cautious about their underwriting. When lenders had no skin in the game they were very careless with their underwriting, allowing "liar loans" and other exotic types of mortgages that are now the most likely to default.

Some lenders worry that these stricter rules will make mortgages more expensive for consumers, especially loans with terms other than 30-year conforming fixed-rate mortgages. But consumer groups support "encouraging the market" to choose to sell those safer products, according to Barry Zigas, director of housing and credit policy for the Consumer Federation of America. He thinks these rules are "very important and reasonable" to prevent a repeat of the "economic disaster" we all just experienced. Sounds like the right way to go. Hopefully lenders will not be able to soften these rules during the process of reconciling the bills between the House and Senate this week.

Under these new rules you will need to push more paper to get a mortgage, but it probably won't be much different than what we are seeing in today's very cautious mortgage market. Banks may become even more diligent about collecting the documents that prove your income. Self-employed people without two years of provable business income likely will find it nearly impossible to get a mortgage under the new rules.

Another major rule lenders would like to change involves how lenders are compensated. Under the new rules, lenders no longer can pay commissions based on the rate or type of loan you choose. This form of compensation encouraged mortgage brokers to steer people into higher interest loans or more risky loans for which brokers received better compensation. This change is critical to protect all consumers. It would be a travesty if lenders kill this new provision this week.

The good news with the new law: The burden of proof would shift from the consumer to the provider of mortgage services, to prove that the fees they charge are justified. Under the old law, the consumer had to prove that the fees were not justified. This change will make it much easier for consumers to shop and compare mortgage loans.

Mortgage lenders will be limited in their ability to charge fees if you refinance or pay off your loan early. Also, lenders would have to prove that it was in your best interest to refinance. They won't be able to push you into a new loan just because they will benefit from new fees or get a great commission.

Another key provision that lenders hope to kill is the ability to sue your lender under certain circumstances. Right now, lenders want to delete or revise language that will allow borrowers to to sue lenders for violations of underwriting standards. The law as now written will allow you to sue your lender or mortgage investor if you can prove the loan was written fraudulently or poorly underwritten. Some in the industry say this will make mortgage investing too risky.

One other key issue up for grabs is the rules on appraisals. Real estate agents and brokers want changes in the current rules on ordering appraisals. These new rules were established after the mortgage market collapsed because there was so much evidence of game-playing in the appraisal marketplace. But real estate professionals say the rules have gone too far, and too often an appraiser is assigned who does not understand the local real estate market.

In this case, I hope something is done to correct this problem. I live in one of those types of developments where the homes inside the development are upscale and very different from the surrounding neighborhoods. Many home sales have fallen apart because appraisals came in well below true market value when they were done by appraisers who were based hundreds of miles away from my community and didn't understand neighborhood differences. Some tweaking is definitely needed to improve the current appraisal mess.

HELOC Fraud?

  • The owner of today's featured property paid $848,000 on 10/28/2005. She used a $650,000 first mortgage, a $113,050 HELOC, and a $84,950 down payment.
  • On 1/3/2007 she obtained a HELOC for $135,000 from Greenpoint Mortgage Funding, and on 1/18/2007 she got a HELOC from IndyMac for $196,000. The timing of those two HELOCs looks suspiciously like parallel processing and mortgage fraud. Both loans are delinquent.
  • Total property debt is $981,000
  • Total mortgage equity withdrawal is $217,950.
  • Total squatting time is at least 17 months.

Recording Date: 07/07/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 03/26/2009

Document Type: Notice of Default

I don't know if both of those final HELOCs was fully funded and outstanding, but the timing looks suspicious. It is possible that she changed her mind on the first HELOC and only used the one from IndyMac, but I rather doubt it.

Irvine Home Address … 67 WATERSPOUT Irvine, CA 92620

Resale Home Price … $750,000

Home Purchase Price … $848,000

Home Purchase Date …. 10/28/2005

Net Gain (Loss) ………. $(143,000)

Percent Change ………. -16.9%

Annual Appreciation … -2.6%

Cost of Ownership

————————————————-

$750,000 ………. Asking Price

$150,000 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$600,000 ………. 30-Year Mortgage

$151,778 ………. Income Requirement

$3,148 ………. Monthly Mortgage Payment

$650 ………. Property Tax

$317 ………. Special Taxes and Levies (Mello Roos)

$63 ………. Homeowners Insurance

$105 ………. Homeowners Association Fees

============================================

$4,282 ………. Monthly Cash Outlays

-$763 ………. Tax Savings (% of Interest and Property Tax)

-$748 ………. Equity Hidden in Payment

$275 ………. Lost Income to Down Payment (net of taxes)

$94 ………. Maintenance and Replacement Reserves

============================================

$3,140 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$7,500 ………. Furnishing and Move In @1%

$7,500 ………. Closing Costs @1%

$6,000 ………… Interest Points @1% of Loan

$150,000 ………. Down Payment

============================================

$171,000 ………. Total Cash Costs

$48,100 ………… Emergency Cash Reserves

============================================

$219,100 ………. Total Savings Needed

Property Details for 67 WATERSPOUT Irvine, CA 92620

——————————————————————————

Beds: 3

Baths: 2 full 1 part baths

Home size: 1,949 sq ft

($385 / sq ft)

Lot Size: 4,000 sq ft

Year Built: 2005

Days on Market: 507

Listing Updated: 40238

MLS Number: S562006

Property Type: Single Family, Residential

Community: Woodbury

Tract: Wdpt

——————————————————————————

According to the listing agent, this listing may be a pre-foreclosure or short sale.

This property is in backup or contingent offer status.

Approved Short Sale!! Best Buy In Woodbury! Home Is Model Perfect! Light, Bright, Airy & Tranquil with Upgrades Galore: Granite Counters, Plantation Shutters, Custom Paint, Romantic Fireplace In Living Room, Cathedral Ceilings, Bamboo Flooring, Security System, Built-In Office, Interior & Exterior Surround Sound. Fabulous Master Bath with Spa Tub & Separate Custom Shower. Home Is Tucked Away in a Quiet Corner of the Community with Great Sunset Views. A Must See!

Will House Prices Double Dip?

Banking and housing analyst Meredith Whitney has been very accurate with her past predictions. Now she is predicting a double dip in home prices. Is she right?

Irvine Home Address … 14 LACONIA Irvine, CA 92614

Resale Home Price …… $650,000

We get dressed up and we go out, baby, for the night

We come home early burning burning, burning in some fire fight

I’m sick and tired of you setting me up, yeah

Setting me up just to knock-a knock-a knock-a me down

I’m goin’ down…

Bruce Springsteen — I'm Going Down

Meredith Whitney Predicts Double Dip in Housing Market: Is She Right?

By Patricia Orsini Jun 23rd 2010

Could a double dip in the housing market be on the way? That's what influential banking analyst Meredith Whitney told CNBC's Squawk Box yesterday.

And while the news is not all gloom and doom, Whitney — one of Wall Street's best-known bears — sees what she calls some "scary" behaviors by consumers that will continue to keep home prices low and a full housing-market recovery far into the future.

Whitney — who rose to fame by predicting Citigroup's problems in 2007, long before others saw them coming — has been admittedly bearish for the past year as others looked for the good news in the economy. She cites several reasons for her continuing feeling that the housing market and the rest of the economy will not be trending up anytime soon, including the fact, she said, that the state and federal governments will be shedding close to 2 million jobs.

What's behind Whitney's prediction for housing?

Adding to her skepticism of a recovery, said Whitney, is that more and more, people are choosing to not pay their mortgages, which is something she would not have predicted a year ago.

"What has happened in the last year," she said, "has been the government and banks have provided a lot of mortgage modification programs, and a lot of consumers have been smart enough to say, 'I can get a better deal on a modification program if I wait two, three, six months. So I will pay the things I need to pay the most — my credit card bill, auto bill, even home equity.' And they've been not paying their mortgage."

This has created, she said, "a massive, rotting pool of assets on bank balance sheets that have provided the consumer excess cash."

The amend-pretend-extend policy has fostered moral hazard and caused more people to default, and as a result of their not making payments, they can spend money in the economy. Does this seem like sustainable economic growth to you?

That cash has allowed people to spend more freely in stores and restaurants, creating the feeling that the economy is, while not completely recovered, moving forward.

Just the opposite, said Whitney, who expects a double dip in housing to be inevitable. Those delinquent payers will soon have to answer for their actions, she said. In the second quarter, banks were becoming more aggressive about foreclosing on delinquent borrowers, she said. More houses on the market means still-low home prices.

"How can house prices grow?" she asked. "There's no other way to look at it, they are going down again."

It is difficult to argue with her conclusions. People are not working and the squatting stimulus can't go on forever; eventually, we have to pay for all this.

She wouldn't go so far as to commit to a double-dip recession, but a tough housing market has never been good for the economy. She concedes that news in credit card lending, and hiring in large corporations, has been good this past year. But she doesn't believe it's enough when so many people are still out of work.

Indeed, today a report on housing sales for May showed that sales of new homes sank 33 percent — the slowest sales pace since records were kept in 1963 — after tax-credits for homebuyers expired at the end of April.

While no one expected May's housing numbers to be great, the more optimistic watchers of home sales predict that sales will level out as the summer buying season takes hold. But Whitney points out some underlying problems in the U.S. economy that have yet to be reconciled, with a still-uncertain job market and continuing personal debt. Without buyer incentives, it could be another tough year for the housing market.

A double-dip recession? There's a chance, said Whitney. But a double-dip in the housing market? "No doubt," she said. What's most scary is that what she is telling us isn't anything we don't already know. The job losses, the mortgage defaults, the high personal debt are things we have been talking about for two years. It's how you read those signs. And Whitney's track record in reading those signs is pretty darn good.

Chronic Unemployment?

Lenders have been willing to work with people with equity in their homes rather than force a trustee sale. The result has been years of squatting for some delinquent borrowers.

  • Today's featured property was purchased for $408,500 on 2/22/2002. The owners used a $326,800 first mortgage and a $81,700 down payment.
  • On 3/9/2004 they refinanced with a $328,000 first mortgage and a $150,000 second mortgage.
  • On 2/8/2005 they refinanced with a $396,000 Option ARM with a 1% teaser rate. This refinance required them to pay off a significant portion of their second mortgage.
  • They have been squatting for at least 27 months.

Recording Date: 03/09/2010

Document Type: Notice of Sale .

Foreclosure Record

Recording Date: 01/05/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 12/09/2008

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 08/25/2008

Document Type: Notice of Default

Foreclosure Record

Recording Date: 07/01/2008

Document Type: Notice of Default

The balance of the first mortgage plus late fees stands at $502,000. The bank is content to allow this owner to squat since they are consuming their own equity to do so. Since banks are trying to withhold inventory anyway, I expect they will allow this owner to stay there until their equity is fully consumed before they foreclose.

Irvine Home Address … 14 LACONIA Irvine, CA 92614

Resale Home Price … $650,000

Home Purchase Price … $408,500

Home Purchase Date …. 2/22/2002

Net Gain (Loss) ………. $202,500

Percent Change ………. 49.6%

Annual Appreciation … 5.3%

Cost of Ownership

————————————————-

$650,000 ………. Asking Price

$130,000 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$520,000 ………. 30-Year Mortgage

$131,541 ………. Income Requirement

$2,728 ………. Monthly Mortgage Payment

$563 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$54 ………. Homeowners Insurance

$50 ………. Homeowners Association Fees

============================================

$3,396 ………. Monthly Cash Outlays

-$463 ………. Tax Savings (% of Interest and Property Tax)

-$648 ………. Equity Hidden in Payment

$238 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves

============================================

$2,605 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,500 ………. Furnishing and Move In @1%

$6,500 ………. Closing Costs @1%

$5,200 ………… Interest Points @1% of Loan

$130,000 ………. Down Payment

============================================

$148,200 ………. Total Cash Costs

$39,900 ………… Emergency Cash Reserves

============================================

$188,100 ………. Total Savings Needed

Property Details for 14 LACONIA Irvine, CA 92614

——————————————————————————

Beds: 3

Baths: 3 baths

Home size: 1,800 sq ft

($361 / sq ft)

Lot Size: 3,083 sq ft

Year Built: 1988

Days on Market: 93

Listing Updated: 40323

MLS Number: S609561

Property Type: Single Family, Residential

Community: Westpark

Tract: Othr

——————————————————————————

According to the listing agent, this listing may be a pre-foreclosure or short sale.

3 Bedroom and 3 Bathroom Home located in San Carlo Park. Hardwood Flooring and Berber carpet.

In preparation from my vacation, I created posts through July 6th. These are a combination of news stories and property profiles without my commentary. I plan to resume posting with my commentary on July 7. I will return with a renewed energy for this fun and creative endeavor. Until then, I will be off the grid enjoying life on a Northwoods lake.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter