Epic HELOC Abuse

The behavior of the owners of today's featured property is so bad, it warrants a special look.

Irvine Home Address … 36 PARKCREST Irvine, CA 92620

Resale Home Price …… $915,000

There's a lady who's sure all that glitters is gold

And she's buying a stairway to heaven

When she gets there she knows, if the stores are all closed

With a word she can get what she came for

Ooh, ooh, and she's buying a stairway to heaven

Led Zeppelin — Stairway to Heaven

I have profiled this property before, and the HELOC abuse is extraordinary. I wonder if the owners were buying their own stairway to heaven.

Bought at the bottom, abused HELOCs, gamed the system, and squatted for 18 months

The owners of today's featured property are representative of all that is wrong with home owners in Irvine. They did everything wrong, and they are being strongly rewarded for their bad behavior.

  • The property was purchased on 8/20/1997 for $349,000. The owners used a $279,100 first mortgage and a $69,900 down payment.
  • On 1/3/2000, the owners celebrated the millennium by opening a $150,000 HELOC.
  • On 4/28/2003 they opened a $200,000 HELOC.
  • On 1/5/2004 they obtained a $353,500 HELOC.
  • On 4/22/2004 they got another $145,000 HELOC.
  • On 2/25/2005 they refinanced with a $661,000 first mortgage.
  • On 2/23/2006 they obtained a $344,000 HELOC.
  • On 9/18/2006 they obtained a stand-alone second for $390,000.
  • Total property debt is $1,051,000
  • Total mortgage equity withdrawal is $771,900.
  • Total squatting time is at least 18 months.

Foreclosure Record

Recording Date: 06/03/2010

Document Type: Notice of Default

Foreclosure Record

Recording Date: 03/26/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/21/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 06/25/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 04/20/2009

Document Type: Notice of Default

These owners extracted about $100,000 per year for the 7 years they were stripping the property. When the ATM machine was finally turned off, they managed to game the system for 18 months… so far. Since they are still back at the NOD stage, they will be in the property until at least October, and since this one is in jumbo loan territory, they will likely be allowed to squat for much longer.

What would you do with $771,900?

What would you do with two years or more without a housing payment?

Irvine Home Address … 36 PARKCREST Irvine, CA 92620

Resale Home Price … $915,000

Home Purchase Price … $349,000

Home Purchase Date …. 8/20/1997

Net Gain (Loss) ………. $511,100

Percent Change ………. 146.4%

Annual Appreciation … 7.7%

Cost of Ownership


$915,000 ………. Asking Price

$183,000 ………. 20% Down Conventional

4.80% …………… Mortgage Interest Rate

$732,000 ………. 30-Year Mortgage

$185,169 ………. Income Requirement

$3,841 ………. Monthly Mortgage Payment

$793 ………. Property Tax

$175 ………. Special Taxes and Levies (Mello Roos)

$76 ………. Homeowners Insurance

$170 ………. Homeowners Association Fees


$5,055 ………. Monthly Cash Outlays

-$930 ………. Tax Savings (% of Interest and Property Tax)

-$913 ………. Equity Hidden in Payment

$336 ………. Lost Income to Down Payment (net of taxes)

$114 ………. Maintenance and Replacement Reserves


$3,662 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$9,150 ………. Furnishing and Move In @1%

$9,150 ………. Closing Costs @1%

$7,320 ………… Interest Points @1% of Loan

$183,000 ………. Down Payment


$208,620 ………. Total Cash Costs

$56,100 ………… Emergency Cash Reserves


$264,720 ………. Total Savings Needed

Property Details for 36 PARKCREST Irvine, CA 92620


Beds: 4

Baths: 2 full 1 part baths

Home size: 3,000 sq ft

($305 / sq ft)

Lot Size: 4,927 sq ft

Year Built: 1997

Days on Market: 111

Listing Updated: 40248

MLS Number: S607304

Property Type: Single Family, Residential

Community: Northwood

Tract: Bain


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

This property is in backup or contingent offer status.

Fabulous opportunity in the guard gated community of Northwood Pointe. 4 spacious bedrooms plus extra large bonus room/office. Formal living room and dining room. Kitchen with double oven, cooking island and breakfast nook. Super sized family room with fireplace and built in entertainment center. Corner lot with great curb appeal. A short walk to award winning Canyonview Elementary and Northwood High. Enjoy community pool, parks and trails. Close to shopping, dining, entertainment, 5 fwy and toll roads.

31 thoughts on “Epic HELOC Abuse

  1. lowrydr310

    The property was purchased on 8/20/1997 for $349,000. The owners used a $279,100 first mortgage and a $69,900 down payment.

    Wow, can you imagine if these owners were responsible and just left things right here, or maybe refinanced their low balance to a lower rate?

    I have a friend who bought a home in Aliso Viejo for a similar price in 1998. He never extracted any equity and probably owes very little now. The funny thing is that during the boom years he still took his share of vacations, but paid for them with cash that he earned. Since his mortgage was relatively low, he had some extra money to spend on vacations or other treats, and now as this mess is unwinding, he still gets to keep his house.

    We tend to focus on the hardcore abusers here (of which there are plenty) however there are still many responsible folks.

    PS- I can easily see the 1997 prices returning within 4-5 years. I don’t care how low interest rates are, thing just aren’t getting brighter. Next up: massive tax increases which will strain our economy even more.

    1. OrangeRenter

      Not sure I agree with you.

      These folks got to spend an EXTRA $100,00 per year from 2000-2007, have saved another $90,000 over the past 18 months (no payments), and can probably go rent for 1/2 the $5k monthly outlay on a place just like this.

      Not a bad deal!!!

      1. lowrydr310

        The monthly mortgage and tax on a $270K balance is less than half of $5000, but you are correct. I’d gladly take $700K in cash, and would welcome the credit hit (who needs any credit with $700K in the bank?)

        On the other hand, who would have known that banks would have continued allowing reckless serial refinancing even at the peak of the bubble and indefinite squatting? I’m guessing that wasn’t really a long term strategy for most people – it was probably more along the lines of living for the moment and not thinking much at all about the future, and they just happened to get lucky.

  2. Jim

    During the bubble, I was just astonished by the number of people who explained their HELOC or Refi with the rationalization, “We’re just taking out some of our equity.”

    (This was all too often followed by, “And with the lower interest rate, our monthly payment actually decreased.” Yeesh!)

    Which reminds me of the Psych prof who defined “rationalize” as “to tell yourself rational lies.”

    1. flyovercountry

      A big part of the payments going down in a refi can be that the loan term keeps getting extended. Pay on a 30 year loan for 4 years, refi, and you go from a loan with 26 years left to a 30 year loan again.

      But if all you are focused on is payment, you don’t notice or care.

  3. econ101

    Geez I am like the first poster’s friend. I purchased a small condo in 1998 and didn’t take part in all of this nonsense during the housing boom. Seeing people like this makes me feel like such a sucker for being responsible. I should have bought a sports car when I had the chance.

  4. IrvineCitizen

    Wow. Unreal.

    I don’t understand how you for from Notice of Sale back to Notice of Default. I understand the recission part. They did a refi. Then a new NOD then NOS. So then what happened? There’s no new recission so the didn’t refi – did they get current then miss two payments again?

    This is epic abuse. How do you piss away almost 800K of cash?

    1. Sue in Irvine

      Well they do have a large family. Look at the picture of them. Maybe they all had to go to college to learn how to manage finances (unlike mommy and daddy).

  5. tonye

    (1) That house is white on white… yikes…

    (2) Why do people set up big offices like that in their houses? Is it because at work they are peons and they need to be the Boss in their own home?

    (3) “Fabulous Opportunity”??? WTH?

    (4) I think we missed the boat. I should have sold the place two years ago and pocketed 800K… or better, I could have HELOC’d ourselves big time and pocketed a cool mil… Instead all we got is a low mortgage payment and very good FICO scores… but with an extra mil in the bank I wouldn’t care about my FICO score. huh?

  6. Freetrader2

    OK, everyone, where are the posters who are going to explain to us all how this ‘owner’ was a ‘victim’ of the fraudulent ‘banksters’???

    Come on guys, we know it can’t be the fault of the borrower. They are victims here of the sleazy machine. Poor dears. Shall we pool our resources and try to raise the money to help them get current? How about we all agree to raise our taxes for these poor victims?

  7. Laura Louzader

    Are the taxes being forgiven on the HELOC gifts these people got? I say “gifts” because they will surely bankrupt out of this debt. It sounds insane, but they probably didn’t save a dime of what they pulled out of this house, but most likely blasted it all on clothes, cars, jewelry, expensive vacations and restaurants, and all the other consumer goodies available.

    If you think you can’t blast nearly $800K on overpriced consumer baubles, just walk down Michigan Ave in Chicago or any other high-end retail strip, wondering how to spend a massive amount of money in the shortest time possible. Believe me, if you gave me $5M and said, Laura, go down on Michigan and spend all this money in 4 hours on nothing but non-essential luxuries, I could get the job done. It sounds like fun. I could probably do it in an hour on Rodeo Drive in Beverly Hills, a relatively easy drive from where most of you live.

    People like this are discovering that cars, clothing, boob jobs, jet skis, and fancy electronic gadgets aren’t equity. Neither, really, is even good antique furniture and fine jewelry, when everybody and her best friend is trying to unload the stuff on Ebay and Craigslist to buy food and make the house payment.

    1. newbie

      I would find it hard to personally spend $5 million in 4 hours on non-essentials. Most of the millionire friends are quite frugal (I should of said all of them). Other than the house and kids’ education and church, they don’t spend all that much on themself.

      1. Laura Louzader

        Yes, hon, that’s why they’re millionaires-because they are the kind of people who can walk into a mall with $500 to spend and come out empty-handed because they know want they want and need, and know what a short shelf-life the thrill of dropping money on luxuries really has.

        I mean, just because I COULD drop untold gobs of money on baubles in an afternoon, doesn’t mean I WOULD.

        I have met many of the people who spend like this. Have relatives like this- people with very high incomes but who spend beyond them and have a net worth of -$1,000,000. People who have fur coats, fine jewelry, expensive cars, but couldn’t survive a month if they lost their jobs. Who have 40′ boats and go on expensive vacations twice, but who need their credit cards to buy groceries.

        How is that so many lottery winners and lavishly paid entertainers and athletes with incomes of $500K a month end up bankrupt by the age of 35? You’d just think that a football player who got paid $15M a year in his prime or a singer with an income of $700,000 a MONTH would be able to put a few dimes aside, wouldn’t you. These are the people the high-end retailers love.

        On the other hand, I have known people who never made a dime over $45,000 in their lives who had decent (though not fancy) houses paid off by age 43, had no debt, and had a net worth of $2M by the age of 60. They buy their clothes in resale shops, clip coupons, drive 11-year-old cars, grocery-shop at Aldi’s and Family Dollar, and live in unfashionable neighborhoods. A number make their living as bus drivers, postal workers, and office managers. Their lifestyles look boring, but they never have financial problems.

        1. newbie

          Audi. Brings back memories. The best canned clam chowder soup at any price, but happened to be the lowest price at Audi 18 to 20 years ago.

          Looking back at ex-VP Al Gore claiming those who made $100,000 were millionares because in 10 years their salary would total 1 million dollars. Non-sense logic, but their penison plans are worth over a million, especially govt gones with COL adjustments.

          My parents near retirement bought a big show home in RPV (3500 sf on one floor, 0.4 A). Really nice, but it was taking so much money and time for repairs that they sold it to move into back into a small home. They brought at a low, then triple the purchase price, then near back to near the low for 5 years, then sold at near twice the purchase price after 15 years. Now it about 5 times the original purchase price. They didn’t make much money on the house because of all the repairs, but it was nice to live it. That house was one of the very FEW luxury purchase in their life.

    2. tonye

      What an interesting proposition… gimme 5 mil and go blow it.

      I guess I would buy myself ten acres in Virginia City, NV. Put up a luxo prefab double wide home with a nice big porch. A nice four car garage/shop metal building. 9KW solar panel cells. Dig a well (or build me a big ass tank for potable water). A small water recycling plant for toilets and irrigation.

      A firing range right off the porch so I could do target practice right off the porch.

      Perhaps pave the 1/8 mile road up to the property.

      Wire the cable up the road and install a picocell in the property with a backhaul antenna. Direct TV likely.

      Buy some nice guns.. a couple of four wheel drive Hondas too.

      Somehow. I just can’s see that I’d spend more than 2 mil though…
      Off the grid.

      1. Anonymous

        Ha ha – I am too cheap. If I had to spend 5 mil in 4 hours, I would
        1. Work 24/7 in advance to figure out exactly what I wanted
        2. Have a bunch of RE agents lined up to buy multiple entry level rental properties with the 3 million in the 4 hours
        3. Buy some boring thing (ex. money market or something) with the remaining 2 million to cover lack of tenants, repairs, taxes, etc
        4. Then kick back for the rest of my live, and live on the rental proceeds …

        The trouble with a 5 million dollar mansion for yourself is the cost of maintaining it …

    3. Freetrader2

      I believe that under current rules, all the HELOC money will be taxable to these individuals. I think they will owe the tax, bankruptcy or not, but it might take awhile.

  8. Shevy

    Despite what many politicians believe, these people did not lose, if they were responsible they would have $700,000+ more than their neighbor that is renting, the banks did not lose, most of them are just servicing the loans and they were packaged off and sold to the renter neighbor that was acting prudently and investing in a retirement account that got suckered into buying this triple A rated package. The true victims are the responsible prudent people that have lost money in retirement accounts, possibly lost their jobs, and are now going to see their taxes go up to pay to clean up this mess created by those that prospered from this scam. Wait until these people that are being rewarded for this behavior reach retirement age, IHB readers will be paying for their retirements one way or another too. People that can’t manage their money for housing sure as hell can’t manage to save money to retire without massive assistance.

    I’m not sure which system abuser I blame more, the one that pulls $700,000 out of their home or those that purchased during the transition/post fundamental valuation period by bidding 10 or 20% above the most recent comp between 2003 and 2006 to out bid potential buyers that were trying to responsibly purchase within a reasonable range of rental parity. The post 2003 non-HELOC abusers more easily identified as victims, yet those that they out bid gave up their dream of home ownership in exchange for a responsible rental and will likely be further victimized through a hit to their retirement and higher taxes to pay for the clean-up.

    1. newbie

      Shevey, You’re absolutely right.
      The borrower-victim is really the victimizer. He has $770,000 plus at least 9 months of free rent. $700,000 can buy a nice condo or small house in that area.

      The bankster-victim is another victimizer. Collect fees upon the origination, more fees upon the CDO, more profits upon bank stock going up (with their free options), bonus all during this period, then retention bonus for seeing us through the downturn. The banks-shareholder are passing the bill for the losses to the govt, so in-turns passes the bill to the taxpayers. Rents who did not get to party as stuck paying for the bill. It’s like going to a restraunt and purchasing the lowest priced meal and then being stuck with the neighboring table’s bill who charged to the max for food and expensive drinks and took doggie bags home.

    2. tonye

      How about the developers? They are the ones that drove the thing in the first place. As soon as they realized that money was cheap they shamelessly raised their price to nosebleed levels. The price of new homes then drove the price of resale homes.

      How about the real estate agents and other “professionals”? They fed the fire all along by creating a frenzy.

      Somehow, the buyers to me are the least to blame. They were clueless idiots.

      You know, lowering the boom on the buyers (which should be done) without lowering the boom on the banksters and real estate “professionals” seems a hollow victory.

      The builders got their comeuppance. Many of them are broke.

      1. Shevy

        1) Developers, I’m not sure how much blame can be placed on them. If one builds widgets and people are willing to pay $3 when they are worth $1 and all of a sudden everyone and wants to buy widgets for $3, why would you stop building or sell them for only $1?

        2) Buyers, agents often say “a property is worth what someone is willing to pay” of course this needs to be coupled with the ability to purchase, which was given out much too liberally between 2000 and 2007. Unfortunately it’s true; the developers would not have been able to take advantage the situation if people made smart and educated decisions. That being said, it’s not rocket science to figure out if one can rent a home for $2000/month, it’s not worth $600,000+. Many buyers that purchased during this time were greedy; others were just clueless and/or trusted the wrong people.

        3) Agents, I think agents have to take responsibility; they want to be viewed as professional’s yet if you asked an agent about rental parity most of their eyes would glaze over. Many more are telling people that because a house that was worth $900,000 is now worth $750,000 it’s a great deal even if it’s out of line with incomes and rental parity.

        4) Lenders- They need to take a lot of the blame for doing Wall Street’s bidding. They should never have been given the tools to create the destruction they have, ie. stated income loans, 0 down loans, neg. am loans, etc.

        What’s sad is that based upon current policy it appears that we’ve learned little from this.

      2. Laura Louzader

        tonye, the buyers had no excuse for being clueless. There were many warnings that things were getting out of hand by 2003-2004, and many financial columnists warned of the traps awaiting borrowers in the “exotic” loan products that proliferated at this time.

        You can feel sorry for some relatively poor and extremely uneducated person who really couldn’t understand these tricky mortgages or wade through about 8 pages of baffling verbiage in 6 point type. But it’s difficult to understand how so many people with 4, 6, or 8 years of college in a demanding scientific discipline could claim ignorance. Most well-educated people at least know to consult a third-party expert when they’re entering into a major business decision, and it amazes me that the same people who wouldn’t think of making another type of contract, say the acquisition of a business, would sign onto these loans without getting a qualified attorney or accountant. It really floored me to hear of a chemist in Wisconsin, a guy with a Master’s Degree in a discipline requiring proficiency in math and logical thinking, and his equally well-educated wife, thinking they could actually afford a $750K house on an income of around $100K, and their surprise when the loan reset and their payments tripled. Did they not READ their contract?

        I never saw so many well-educated people with real education, and proven business savvy in their other endeavors, act with so little regard for risk, and then claim victimization.

  9. wheresthebeef

    This is truly disgusting. I wonder what part of OC’s economy was being kept afloat from nonsense like this. During the boom years, people were spending money like water. It is becoming very clear now where this money originated from. Like was said, the responsible people will ultimately be on the hook to mop up this mess. I’m still waiting for the MSM to print stories about idiots like this instead of the usual sob story BS where the evil banks conned Joe Blow into buying an overpriced house.

  10. Mark

    This homedebtor’s tax meeting at the H&R Block office is going to be a real doozy.

    “This just in – office cubicles destroyed and windows smashed at local H&R Block office. Film at 11.”

  11. Mark

    Honestely somebody should interview these jerks and find out what they really spent the money on?

    Vacations to MachuPichu and Monaco, sports cars, courtside Laker’s tickets, trips to New Zealand, what?

    These people we’re rich!!!

  12. IrvineCitizen

    Mormons. Dad worked out of his house as a day-trader for 15 years. 10% went to the church, the rest to putting a bunch of kids through BYU.

    End of story.

  13. nefron

    Maybe the money isn’t blown at all. Maybe it’s tucked away in a Swiss bank account or something…

  14. theyenguy

    As I look at the article and the statement: “The behavior of the owners of today’s featured property is so bad, it warrants a special look”,

    and as I look at the lyrics “she’s buying a stairway to heaven”,

    I have to relate yes, yes, yes it’s bad behavior …. but I don’t scream, nor yell, nor weep, as I believe the stairway to heaven was provided by God from eternity past.

    Who am I to complain, as God, is all knowing; and he knew from before the dawn of creation that such abuse and disaster would occur, and in fact he had a hand in letting it happen.

    Did God appoint some to be epic heloc abusers? I must say yes he did !!

    Perhaps one might enjoy my linked article: You won’t find low priced homes in neighborhoods with better schools — Orange County isn’t Cook county — Did God appoint some to get a silver spoon and others the hood?

    The bible in Acts 17:26 states that God appoints the time of one’s life, and the boundaries of one’s habitation.

    So if by God’s decision, one gets appointed to epic heloc abuse, do I have the right to complain or weep?

Comments are closed.