Irvine Housing Blog

I finally know someone who is truly “strategically” defaulting.  I know plenty of people who have defaulted, but I wouldn’t define any one of those as strategic.  Those families all had much stronger forces causing the default unrelated to their underwater position (divorce, income loss, bought a house 4x+ their income, used a neg-am loan, etc.). 

A family I know has just missed their first mortgage payment after trying to find an alternative resolution with their lender for months.  They bought a house they could afford in 2006 and have been doing fine financially, but their OC house is down nearly 40%.

Just an anecdote I thought I’d share.  I have a couple other similarly situated friends that just haven’t found the will to stop making payments.  We’ll see how low long they hold out…

I have learned a lot listening to Bruce’s radio show. Unlike many in the real estate industrial complex, I think he is well intentioned.

But I have to agree that the notation of higher down payments not reducing default rates is fantastical.

IR:

Thanks for the North Korea towers update!

I was about to request one, but you beat me to the submit button. Makes me laugh all day.

Some ideas for the next update:

- have HoAs increased since opening?
- what is the occupancy rate?
- what is reception at auction?
- any liens or construction-related lawsuits?

Regarding Bruce Norris’ comments: they don’t make any sense. Who does he actually represent when he says “we”? Is it RE investors as he claims, or 6 percenters (realtors), who need another bubble inflation?

Anybody who claims zero-down is the same as 20% down is a demagogue who believes that all opinions are equally valid to the public, regardless of supporting data.

summary of comments from owners of the north korean towers. source.

i haven’t heard from any of the losers(literally) from north korean towers for a while.

a comment from “dr e”(e for ecstasy?) in 2006:
“I guess you can view Marquee as an Ivory tower. People at the top will always have people commenting about them.”

it took 5 long years to prove this guy/gal was a complete dumb-ass. many of us knew he was a dumb-ass in 2006, but in 2011 all doubt has been removed.

This is apparently happening more and more…

From Wall Street Journal the other Day:

“Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.

In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.

It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest “

Surely this will cause an even bigger drag on the recovery ?

http://preventingforeclosure.org/news/new-california-short-sale-law-having-unintended-consequences/

The recently passed California Senate Bill 458 which disallows second lien holders from pursuing a deficiency judgment on a seller after a short sale seems to have been well intended, but in practice it is killing some short sales according to real estate agents.
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I was half way through the SS approval process for a buyer when this law hit. Caused the file to go back to the start with both lenders. Finally got approvals for the first and second last week and we are in escrow. Looks like the loan owner walks clean.

Charlie Rose interviewing Warren Buffett on Sept. 30, 2011:

When will the economy improve? If we create more households than houses ...

Are we entering a second recession? We won’t enter a second recession ... my portfolio of 70 businesses is doing fine, just not galloping.

When will American economy start growing again? A lot of times when people talk about growth, they really mean inflation.

We have a deficit of 10% of GDP. That’s a lot of stimulus.

The American economy is really strong, though it may take 5 years to see it.

The Europeans tried an experiment. The imperfections have become manifest. [To succeed, 17 countries would need a shared culture.]

It’s always easy to tell the other guy to adopt austerity.

I’ve never called the President. Occasionally he calls me.

Do we need a third party? I don’t know how that works.

Charlie Rose with Warren Buffett

You could have continued the lyrics…

“If this ain’t love, you’d better let me know”

Perfect representation of the mentality of some former and current homeowners, especially those who bought in the middle of the last decade.

A little off-topic, but I have been an avid reader for a couple of years now, and have held off buying for a while now in part based on the fantastic knowledge I’ve gained from this site.  This situation has just arised, and would love to know what others think.
We have been looking for a house for quite some time but have not found the one yet.  In the meantime, we have been renting a decent house that meets our current needs but is not a long term solution.  We signed a 1-year lease, but are currently month to month.

We have suspected the owner of the house has not been paying the mortgage, but could never prove it.  Well, last week the notice of trustee sale showed up, along with a debt collection notice; the loser has not paid since January of 2010, all the while cashing our rent checks, and owes somewhere around $32,000.  Yes, he is aware, and yes he knows that we know.  That is a fantastic positive cash flow swing, not paying that amount while collecting more or less the same in rent…

What options do we have?  Legally we know we’re in a tough spot, but having to move to temporary housing while we continue to look for a house to buy is a pain.  We paid the last month up front when we signed the lease which would be aplied to this month if we do decide to leave, so we have not technically paid this month yet as we decide what to do.  He has already told us this is the last month of the month to month arrangement if we don’t pay.

He has a real estate license in Arizona, currently inactive, but the state board does not investigate ethics complaints, but he is not a member of AAR, which does investigate ethics claims.  Naturally.

He claims to be a CFP, but the College of Financial Planning has no record of him.  He does work for/as a financial planner, and I plan on filing an ethics complaint directly with his employer, not that it will do much good.

I did go directly to his bank today, lease and 2 years worth of utility bills in hand to prove residency but they shook their heads and said sorry, there’s nothing they can do at this point.  I suspect, but cant prove, he is claiming this house as a primary residence and failing to tell the bank of the monthly rental income.  Again, a great scam.

Until the bank takes posession (the auction is scheduled for mid-December) I know we have to continue to pay him, as distasteful as that is, or move, as inconvenient as that is.  Given how much the note is for, and how underwater he is given current sales in the neighborhood, I dont think it will actually be sold.  So, are there any avenues worth pursuing or should we just pack up and move?

A little off-topic, I realize, but since we have tried to play it safe and rent while looking for a house to buy, and since this is taking place in Phoenix, I figure I am not the only reader here who has seen or heard of this before.

It is frustrating to play by the rules, only to see so many others take advantage and game the system like this guy is doing.

And if this isn’t enough, we moved out of the previous house we were renting for the exact same reason. 

It may not be the best time to buy, but the costs and hassles of moving to another rental sure make buying a little more appealing, if only there was something even remotely close to our needs and cost preference.

Low-end homesellers asking for ’09 prices
http://lansner.ocregister.com/2011/10/03/low-end-homesellers-asking-for-09-prices/127293/

Our previous rental went through foreclosure.  When we revieved the NTS, we contacted our landlord and negotiated to get our security deposit back by deducting $500 per month in rent.  We also changed the rent due date to the day after the trustee sale gets continued.  The landlord wanted to list the home for sale as a short sale and wanted us to show the home, so we negotiated $200 off the monthly rent for this.  It took about 9 months for the bank to foreclose and by that time we had recouped our security deposit and were not out any money. Under Federal law, banks have to give renters 90 days notice.  It took about 2 weeks for the bank to contact us and another 2 weeks for them to make a cash for keys offer.  Mesnwhile, we are not paying rent to anyone.  We negotiated $10,000 to move out in 4 weeks (again, a rent free 4 weeks).  Being foreclosed on as a renter isn’t so bad…