Login
Subscribe
Recent Comments
- Lee Campbell on Uncovering the History of the Secret Garden
- Kelja on Uncovering the History of the Secret Garden
- Sylvia Walker on Irvine Housing by the Numbers - May 2012 Update
- Casual Observer on Irvine Housing by the Numbers - May 2012 Update
- Astute As It Comes on Open House Review: 35 Bella Rosa
- Sylvia Walker on Open House Review: 35 Bella Rosa
- Darin on Open House Review: 35 Bella Rosa
- Sylvia Walker on Investors Are Busy in Irvine's Low-End Housing Market
- Casual Observer on Investors Are Busy in Irvine's Low-End Housing Market
- irvine_home_owner on Tustin, but Irvine Schools
Recent Posts
- Open House Review: 34 Redwood Tree Lane
- Uncovering the History of the Secret Garden
- Closed Sales from 5/10/2012-5/16/2012
- Open House Review: 52 Secret Garden
- Irvine Housing by the Numbers - May 2012 Update
- Paired Living with Privacy in Woodbridge
- Beige Ruth Sisters
- Closed Sales from 5/3/2012 to 5/9/2012
- Open House Review: 35 Bella Rosa
- Investors Are Busy in Irvine’s Low-End Housing Market
Categories
Archives
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- Rest of archives
Browse Homes
Irvine Homes
- Airport Area Homes
- El Camino Real Homes
- Northpark Homes
- Northwood Homes
- Oak Creek Homes
- Orangetree Homes
- Portola Springs Homes
- Quaill Hill Homes
- Rancho San Joaquin Homes
- Turtle Ridge Homes
- Turtle Rock Homes
- University Park
- University Town Center Homes
- West Irvine Homes
- Westpark Homes
- Woodbridge Homes
- Woodbury Homes
Newport Beach Homes
- Newport Coast Homes
- Crystal Cove Homes
- Corona Del Mar / Spyglass
- East Bluff / Harbor View Homes
- Lower Newport Bay / Balboa Island
- Balboa Peninsula Homes
- West Bay / Santa Ana Heights
- West Newport / Lido Homes
Other Cities
- Aliso Viejo Homes
- Anaheim Hills Homes
- Brea Homes
- Costa Mesa Homes
- Coto de Caza Homes
- Dana Point Homes
- Huntington Beach Homes
- Ladera Ranch Homes
- Laguna Beach Homes
- Laguna Hills Homes
- Laguna Niguel Homes
- Lake Forest Homes
- Mission Viejo Homes
- Orange Homes
- Rancho Santa Margarita Homes
- San Clemente Homes
- San Juan Capistrano Homes
- Santa Ana Homes
- Tustin Homes
- Villa Park Homes
- Yorba Linda Homes
Contact
.(JavaScript must be enabled to view this email address)
Foreclosures
Housing
- Talk Irvine
- IHB Forum Archive
- OC Housing News
- Coto Housing Blog
- Housing Kaboom
- Patrick.net
- Housing Chronicles
- Housing Doom
- Dr. Housing Bubble
- Manhattan Beach Confidential
- Burbed
- SoCal RE Bubble Crash
- Professor Piggington
- Real C'ville
- Westside Bubble
- Bubble Meter
- Portland Housing Blog
- Sacramento Land(ing)
- OC Register Blog
Econ/Finance/Other
- Calculated Risk
- The Big Picture
- Economist's View
- Mish's Blog
- Matrix
- Bakers' Stock
- ML-Implode
- Eschaton
- Best Mortgage Rates
- Crackerjack Finance
Latest REOs
- $199,900 :: 3125 Watermarke Pl, Irvine CA, 92612
- $349,900 :: 10 Greenleaf 16, Irvine CA, 92604
- $439,900 :: 61 Olivehurst, Irvine CA, 92602
- $889,900 :: 14 Upland, Irvine CA, 92602
- $429,900 :: 56 Great Lawn, Irvine CA, 92620
- $465,000 :: 212 Garden Gate Ln, Irvine CA, 92620
- $329,000 :: 1006 Terra Bella, Irvine CA, 92602
- $579,900 :: 8 Star Thistle, Irvine CA, 92604
- $398,900 :: 191 Lockford, Irvine CA, 92602
- $750,000 :: 69 Lakeview 6, Irvine CA, 92604
It appears this guy Ponzied very close to 2010 rental parity.
There must be a larger more important Ponzi story that explains what happened and will continue to happen for the forseeable future.
Mortgage delinquency at record high, but borrowers falling behind at slower rate
The increase in mortgage delinquency was a surprising and unwelcome sign for economists expecting the recent improvements in the economy to translate into fewer homeowners falling into trouble.
On a seasonally adjusted basis, about 10 percent of borrowers were delinquent on their mortgages during the first three months of this year—a record, according to the survey by the Mortgage Bankers Association. That is up from about 9.1 percent during the same period last year and 9.5 percent during the fourth quarter of 2009.
The key point that stands out to me is the decline in new mortgage applications. It would appear that the pool of knife catchers is beginning to show some signs of exhaustion. The tax giveaways pulled in future demand to the present and now demand is on the downslope while shadow inventory continues to grow. It’s obvious where this is going to lead prices even if the interest rates are left at 0 for “extended” periods of time.
Unfortunately, it won’t be until August when the July closed sales figures are released that the drawing forward of future demand will be fully realized by members of the media.
Until then, expect to continue reading rosy reports about increased home sales. Though it is too late for new buyers to go into contract on a house and get the $8K rebate from the government, new home buyers who signed contacts back in late April are in no rush to close before July 1st.
So August’s numbers will reflect a sharp drop… but an expected sharp drop. Expect some people to downplay July’s poor sales figures.
By September, though, it will be pretty clear that the housing market has not recovered, and then there will be some measure of panic for sellers.
You ask: “would you lend to this guy knowing his history?”
My answer: Yes I would - if it was not my money I was lending. If I am paid a commission for getting the loan on the books, why not?
Banks don’t even loan their own money to people. They get to create all of their loan money out of thin air and collect interest on it. Pretty awesome gig if you can get it.
Sad thing is with all that equity extraction and considering the housing bubble has been crashing, he is still able to list the house at market price and not a short sale. That just tells you:
1. The magnitude of house price inflation from 2000-2006.
2. The housing crash in Irvine has not been enough to bring price down to fundamental, and Irvine house price is still dangerously inflated.
Perhaps this reflects my naivete, but the HOA’s on this place total over $400 a month! Who wants to spend that much money each month for… a community pool? Some landscaping? These HOAs are one part of Orange County living that I may never get used to.
The basic Woodbridge master HOA fee is about $80/mo. That pays for the lakes, tennis courts, pools, parks, etc. It’s actually pretty reasonable considering all the facilities for residents.
The other $350/mo must be for the condo sub-association since this is an attached home. I guess that pays for exterior maintenance and maybe insurance, but it seems like a lot. That’s one reason I prefer single family homes even though you do the maintenance yourself. Condo owners get nailed for 2 association fees.
Some people like me even actually like doing that crap. Give me some tall grass, a lawn mower, a weed whacker, some pruning sheers and a six-pack of PBR and I’m all set for an enjoyable Saturday afternoon!
This is a really great post.
Personally I would not be able to handle the stress associated with this debt-upon-debt strategy. I know myself. The shear worry about the future would bring about a nervous breakdown.
The line above that struck me was “avoidance mechanism” of the lenders, borrowers and govt re: these bad loans.
I was watching “Hoarders” on A&E last night. These people fill their houses with collectables not to mention a lot of junk and waste. It’s a psychological condition. They pay a price, but the behavior pays off in provider the “hoarder” a level of comfort. One family’s houses is so full of junk and invested with bedbugs/insects that they have to pitch a tent out in the front yard as winter approaches.
It’s very common for “Hoarders” to close the doors to rooms in their homes that are full to the ceiling with old clothes, junk and waste. It’s an avoidance mechanism. They just don’t want to deal with it.
I think there are some parallels for Ponzies because Ponzies too are somehow able to successfully compartmentalize these collections of debt - and they keep piling on more. Then they close the doors and try to live in the “comfort” you described, ignoring the reality about how unsafe and insecure they are making their lives/homes.
A&E says there are over 2 million “hoarders” in the US today. Not all are poor. Some are/were wealthy and well-educated. This is a very small percentage of the total US population (ca. $380 million).
I wonder: How many Ponzies are there today in the US?
We Americans always find something to do in excess - whether it’s borrowing to appear richer than we are, or hoarding crap for the security it provides.
But the best example is food. We eat in complete excess. 2/3rds of us are overweight and 1/3 obese! We want all the pleasure food provides, and then we complain about the drawbacks.
I know SO WELL what you’re talking about- I fell into credit cards to finance my lifestyle through law school.
I was a working engineer before law school, accustomed to a certain lifestyle. Then I quit to go to law school and worked part time, and while student loans paid for the tuition, credit cards financed my lifestyle when the part time paycheck fell short.
I now have just under $10K in credit card debt that I’ve been paying off rapidly (started off with well over 20 upon graduation). I did the whole 0 interest balance transfer thing by opening up new credit cards. I now have 7 credit cards, only 2 of which carry a balance, with a total credit limit of something like 65K which is absolutely ruining my credit.
If I had not been so fortunate as to have a good job out of law school, I would have been screwed. Bad. On the other hand, at least it would have been dischargable debt rather un-dischargable student loans (thank you President Bush! We really miss you!) It’s wonderful that I can go out, purchase $65K of worthless crap from best buys and costcos and walmarts in a month long spending binge, and then simply declare bankruptcy. The fact that I borrowed $60K to try to educate myself will hang around my neck for the rest of my life. Great setting of priorities, asshole.
I was a financial idiot in my 20s, and I entered law school with credit card debt and an auto loan. I graduated with $140K in student loans, $22K in credit card debt, and a $10K auto loan.
Failure to find an immediate job shredded my belief that “debt was normal” and my “monthly payments were manageable.” I had a ton of free time, and I started reading basic personal finance books. It really is amazing that I could attain such a high level of education, with so little understanding of personal finance.
It’s been about 8 years now, and I’m down to $89K in student loans with no credit card or auto debt.
Pre-Reagan, the student loans were forgivable upon BK. One resident was extermely upset that other residents were BK, getting a great position and the banks lending money to them, but he was paying off his loan. Banks are willing to lend inspite of prior bad credit if they think they can get their money back in th future. That scam was also being used for lawyers.
How does this apply today? Banks are lending to borrowers with little to no chance of paying off the loan, because the banks know that someone else will be holding the bag, taxpayers.
As back in the 1970’s, cocaine was though to be a great drug of choice for the yuppies, esp WS yuppies. It gave a high of invincibility and felt good. Too bad it was very addictive and cocaine rages. Speaking out against cocaine was almost taboo. It was just that evil crack that was bad. HEW, house flipping, all Ponzi schemes, were good. Stimulated the economy. I saw very little creation of real goods from housing inflation. Both made the partakers feel good for a while and society to clean up the mess. Only this time, they are demanding the taxpayers pay for another fix.
IrvineRenter, Good personal story. Hope others are wise enough to learn from your mistake.
CC are recourse loans.
Perspective, in CA you could of rolled your CC and student loans into a HEW and then walked away. The leanders were very helpful to arrange these transactions.
When I hear these stories about ‘I was such an idiot in my twenties…’ I am reminded of my late uncle who taught me two rules early in life:
1: If an item is a necessity, you buy it, whatever its cost - for cash. If it is not, you dont get it even if offered free. Wisdom is all about knowing which is which.
2: never try to help a man who is in debt and asks you for help: by his very nature, he will not tell you all the debts he has. You will inevitably throw good money away.
His father (my grandfather) was a banker in the 1920’s and taught him that.
That’s true, but don’t forget the oppressive structures and ideologies we establish to maintain the wealth and balance of power.
A stupid man makes mistakes and doesn’t learn from them.
An average man makes mistakes and learns from them.
A wise man learns from the mistakes of others and avoids those mistakes.
A wise card player knows when the deck is rigged and either out smarts them or moves to a new game.
I understand the idea, but I prefer maxims with more balance. What is a necessity? Water, rice, a tent?
It’s better to say, you likely don’t need it, if you have to borrow money to obtain it. So only borrow money if your reasoning can survive a very high standard of analysis.
es, your story made me cringe—especially the “accustomed to a certain lifestyle” line, which you use twice. How about this lifestyle: you were a student. You should have lived like one. When I was a child, I learned from my parents, who lived within their means. When I was in college, I lived within my means. I worked after college, and lived within my means. Then I went to graduate school. Guess what didn’t change? Yup—I still lived within my means. What is so hard about this? I have to admit it saddens me to read your words, and know there are MILLIONS like you.
Take responsibility for your actions. You brought it upon yourself, and you should pay your debts.
We tend to forget that Ponzi is a family name. Imagine trying to get a respectable job and having an employer wonder, “Can I send a guy named Ponzi out to meet clients?” You would have to change your name or settle for a job in banking or real estate.
Fractional Reserve banking is a Ponzi scheme. The Social Security system is a Ponzi scheme.
And yet the majority think that the USD is strong and will not fail.
Humanity is a Ponzi scheme. It’s unfortunate but true.
Why is humanity a Ponzi scheme?
Because when you get too old to hunt/fish/make shelter/feed yourself, the youg’uns do it for you
IrvineRenter: “a Ponzi Scheme is also any debt where the payment of debt comes not from wage income but from borrowed money from new lenders”
This statement makes any refinancing look like as Ponzi Scheme.
Also, unsustainable mortgage does not always mean fraud. It is necessary to separate victims from criminals.
“This statement makes any refinancing look like as Ponzi Scheme.”
Yes, it does because generally, it is. Any cash-out refinancing used for anything other than home improvements is Ponzi borrowing in my opinion.
IMHO, major home improvement project is bad investment. For example, I will not be surprised if $80K major kitchen remodel will add less than $60K to resale value.
There are other ways to invest this cash. For example, I know dentist who bought new x-ray machine for his business. Better service, more satsfied customers.
Would you prefer dentist, who spent money on custom kitchen cabinets, stone countertop and ceramic tile backsplash? Well, the choice is always yours.
Debt, if managed properly, is not automatically a bad thing. The key is moderation.
I’ll give you an example: Imagine an area where monthly costs of buying a house (in total, including taxes and insurance and repairs and HOA fees (if any)) are less than the cost to rent a similiar place. Unless you are a very short term resident, or have such lousy credit that you can’t qualify for a loan, only a fool wouldn’t take out a loan to buy a house.
This was supposed to be a reply to Cynic above.
I will be buying with cash. According to you, I am a fool. For some reason, I am not bothered.
It looks like Irvine will be named the safest city in America yet again:
“Irvine Is on track for not only its sixth straight safest large city crown, but also the lowest overall crime rate in the community’s history, according to preliminary FBI statistics.”
This is an impressive accomplishment considering Irvine is only 40 miles from LA, and adjacent to cities that are not neccesarily safe. Irvine is an enigma in every way.
Whenever I see someone who looks like they don’t belong in Irvine, often I see Irvine police following them around. Kudos the police.
Irvine is just short of a police state. You hear about their gestapo like HOAs, the police that follow everyone who’s skin is darker than a pair of dockers- it looks about as much fun to live in as a a Wal Mart.
COSTCO….
There are no WalMarts in Irvine.
And, yes, the IPD is on the totalitarian side of things.
http://www.governmentvideo.com/article/45930
I guess one of the things that makes Irvine ‘safer’ is that the residential communities are buffered from others by industrial parks. The only place this is not quite true is in Northwood which is next to Tustin.
Interesting observation… never thought of it before. Historically Irvine has been an “island” with the El Toro Marine base, Tustin Helicopter base, northern hills/canyons, SNA Airport, coastal hills and UCI almost completely encircling it. Couldn’t have planned it any better.
Well, make it that Tustin borders Walnut, W Irvine, and Northwood. However, these Irvine “villages” border Tustin Ranch which is just as nice and safe as Irvine. More buffer to it
Also, more expensive housing is another hoop to jump.
Its funny to me how most of Irvine is a very conservative politcal base, yet it is one of the most socialistic places to live. High HOA’s (just like a social-good tax) and police and HOA nazi’s who strip freedoms.
Well, it’s because conservatives want less government! ROFLMFAO! Yea, republi-fascists only want less government when it comes to THEM, smoke a doobie and go to jail. Get a hooker, go to jail.
The sad thing is, people are giving up their freedoms every single minute for “security”, the reality of that is, you deserve NEITHER.
Hopefully. one of your sons or daughters gets shot by the Nazi’s because they “believe” he did something wrong and didn’t stop, or better yet, your mom or grandmom gets busted for smoking pot to alleviate everyday pains. I really want the majority of oppressive people who live in Irvine to suffer in direct proportion to those whom they oppress. Stop making crimes out of things that are by GOD’S design, not crimes. Oh yea, sorry, I can only mention God if I’m in Mariners or Saddleback…so sorry.
Hypocrites.
Irvine has no soul whatsoever.
Rancho Palo Verdes (CA) is having a crime wave.
http://www.palosverdes.com/rpv/citymanager/statistics/2008/RPV_Crime_Stats_Calendar_Year 2008_Part_1_2.pdf
Apparently their 2 police cars on patrol are not cutting it.
RPV Homicides 0, rape 1, robberies 12, burgarlies 116, theft 311 for 2008 and about the same for 2007. Apparently the citizens are not spending enough to reduce crime.
How many police cars does Irvine have on patrol?
Ponzi Scheme—- Mortgage Scheme—- What ponzi scheme(s)—I don’t know of any!!
Nick Gardner writes in the Sunday Australia Telegraph article Revealed: The Home Loan That Could Save You A Fortune:
ING Direct, Australia’s fifth largest lender, is preparing to sell loans that have no fixed term and no requirement to repay any capital along the way.
At current rates, the interest-only loans would cut repayments on a $300,000 mortgage by $5000 a year.
“People are needlessly being denied the chance to buy a property while prices spiral rapidly out of their reach” ING Direct CEO Don Koch said. “There is an urgent need to provide more affordable options and borrowers should be able to choose whether they want to repay the capital, or not.”
Mr Koch wants to position the bank as a “mortgage partner for life”, with borrowers carrying the same interest-only loan from property to property for as long as they wish, accumulating equity from rising house prices as they go.
Then, as they near retirement, they could sell their property for a big enough profit to pay off the original loan and buy a smaller place outright, leaving them mortgage-free. Or, they could keep the mortgage going and repay the original capital from their estate, after death.
Banks already offer interest-only loans, but borrowers often are allowed to keep them only for five to 10 years. Then they must start paying the capital.
But ING says this preoccupation with paying off the loan is unnecessary.
“There is no economic reason for banks to insist on regular capital repayment,” Mr Koch said. “It just makes the loan more expensive for the borrower.
Financial comparison website InfoChoice CEO Shaun Cornelius said the move was a welcome innovation: “Depending on the size of the loan, it could add hundreds of thousands of dollars to a borrower’s cash flow over their lifetime.”
The Australian interest-only loan makes sense, in a way, for the lender, but only because of Australian lending rules. To the best of my knowledge, lenders do not make fixed rate loans in Australia. All loans are tied to a benchmark interest rate set by the Reserve Bank of Australia. So, what we have here in a interest-only loan whose payments fluctuate based on the prevailing mortgage interest rates. That’s not a terrible deal for the lender, because it means that—unlike with American fixed rate loans—they aren’t taking the interest rate risk. The borrower is. As long as the property is effectively secured with a low enough LTV ratio, the bank is set for life—they earn an acceptable profit above the cost of the funds they have to borrow to finance the loan.
Since mortgage interest expense is not tax deductible in Australia, it is less clear why this is a good deal for the borrower, but in the current, relatively low interest rate environment, it could look good for awhile, until interest rates start to rise. In the long run though, it would only make sene if the cost of the interest and of the other aspects of property ownership were less than the cost of an equivalent rental.
IR: “I remember feeling pwned by Ponzi.”
LOL! Any blog that works ‘pwned’ into the articles gets a big thumbs-up from me!
OK, ‘fess up, which games do you play?
-Darth
My confession: currently League of Legends plus every Blizzard game since Warcraft 2, and used to play the grand soul-sucker of them all, World of Warcraft (but then I escaped that death-trap); plus dabbling in too many others to list here
The last game I was addicted to was Heroes of Might and Magic 5. I have played it from start to finish 3 times (taking 4-6 weeks each time) repeating some sections multiple times because I enjoyed the character combat.
I was a big fan of the Civilization series, SimCity, and if you go way back Alpha Centuri and Doom.