Irvine Housing Blog

The Heloc abuse is mind altering because it makes the subprime abuse a joke. People took out insane amounts of money and could just walk away.

This homeowner knew he could take his money out of this house and either rent it out while still owning it getting the homes full dollar amount which is more than a reverse mortgage would give him minus the fees. And more money then selling it and paying a agent.

This was a smart move on his part. He got it’s full value at the height.

Many did this and bought other properties with their cash thus becoming landlords.

“Hopefully, the owner wasn’t taken advantage of by someone who preys on senior citizens.”

Do you mean someone like the owners kids?  That was my first thought?

“If it bleeds, we can kill it.”

This certainly doesn’t meet the profile of a chronic home-debtor.  The typical home-debtor was full of kool aid by the time they came to the sugar bucket the second time, and would have completely taxed the loan to value in Feb of 2007.  This borrower didn’t ... he borrowed $385,000 ... he very likely could have borrowed more.

I highly suspect this was a life altering event that created this mess.

That’s what I thought, after 30 years that house would have been solidly in the stable. There must have been a huge bill of some kind that needed paying rather quickly.

If it was a reverse mortgage, I don’t think it would have to be labeled as a short sale.  First of all, it would be empty at the time of sale (because the owner would have died or gone to a retirement home), which this property clearly isn’t.  Second, I believe the lender assumes risk in a reverse mortgage-if there is less equity left in the property at the time of sale than the sale proceeds, the bank eats it, period-I don’t think it would be labeled a short sale even if there was a loss, and most likely such a sale would be a probate sale anyways.

I have a guess as to what happened here, but it’s just a guess.  DarthFerret pointed out below that there are baby items (a crib, a safety gate over the fireplace) in the photos.  I’m guessing the 2004 mortgage was, in fact, a reverse mortgage-but the 2007 refi was to undo that, because the owner’s child and grandchild needed a place to stay (and moved in at that time), and they wanted to keep the property after the current owner dies.  But they couldn’t keep up with the payments, yatta yatta.

IR, does this theory make sense?  Or am I missing something?

Let’s just ask…

Sue, because if the bank takes a hit and loses money on his abuse, and we as taxpayers bail out banks, then we pay for this guy’s “lottery” or whatever.  If he steps up and covers the loss and pays back the bank for the loan, as he should, then fine.

If you’re retired 30 years would keep your monthly payments lower. Plus if your mortgage is paid off you miss the tax advantages.

It depends on the valuation of the property and the retirees income.  A 30 year fixed mortgage locks a portion of the costs of home ownership (there still are maintenance and taxes which will increase) which can make sense for someone with a steady stream of income.  At 55, they may be looking at reducing the inflation sensitivity of their housing costs for the next 15 years before moving to an apartment or assisted living.  If the property is near rental parity, this may make a lot of sense for the borrower and lender rather than selling and renting. 

  The typical 30 year mortgage has a life of about 7 years before repayment (refi or sale of property).  Ironically, the lender may expect the mortgage to the 55 year old to have a longer effective term than the mortgage to the 35 year old.

Why is a 30 year payoff period chosen when so few mortgages ever reach full payment through the 30 years?

All these home-buyers step right up to take out these 30 year payback loans and practically none of them intend to pay the thing off.  It’s a huge circle jerk scheme of perpetually revolving credit.  Just look at terms like “Starter house”, “Property ladder”, etc that imply that the way things work is to jump around every 5 to 10 years while making payments on loans that span 30 years.

Who are the winners in this?  Banks - the entities who just happen to own the United States government.  They gorge themselves on the money printed by the government while the rest of us borrow it and pay a King’s ransom in interest.

When you boil it all down, it amounts to a combination of fleecing the public and controlling the crowd.  You turn housing into a big game for all the participants; make them believe that they are investing, get them up and running around, frothing at the mouth for housing and Kentucky Fried Chicken, slaving away to pay for their house so that they do not have time to march and protest government policies and disrupt the status quo of their elite masters.

The answer to your question is that there is nothing magical about 30 years.  It’s nothing more than a calculation made by the banks allowing them to maximize interest payment revenue as much as possible for the average chump to feel like it is “affordable” on a monthly basis scale so that they can gorge themselves as he slaves to make interest payments during the finest years of his life.

Have you noticed how the builders are magically able to keep matching the falling housing prices?  Goes to show you that house values have nothing to do with building costs.  We have been completely ripped off.

What is the magic about **mortgage** anyway? Just pay for the house full and we won’t have this mess, right?

Oh I forgot….this is AMERICA….land of the borrowings

Dropping home prices and rising sales suggest a slow recovery could be on the way though.

I see…

So when a great many of these participants in the “rising sales” go under water and walk away from their debt to let the tax payers mop up - what point of the recovery is it that are we in?

Does anyone bother to ask what happens when these buyers turn in to knife-catching bag-holders?

Does anyone think beyond today?

I agree BuyIn, that information is consistent with my overall impression and information. The biggest weakness of the Irvine/OC area is that its economy has been RE driven for quite a few years now, and prices have gotten out of hand versus the income available in the local economy.  Other pricy areas (the Bay Area, NYC, even LA) seem to have have a solid base of highly-paid professional jobs to mute the combination of the recession and the credit crunch.  Irvine is more exposed than most areas of the country.  I suppose that I should add—just be glad we aren’t San Diego.  Irvine has already been hammered pretty hard…but the question is, how low can it go?

“The attorney fees were expensive”

Public defender is free (thanks to taxpayers).

Hey, where’s the outcry on this one (free public defender)???

The prices in new homes with future increases planned had everything to do with buy now before the prices go up. Which fueled the frenzie and the lines trying to get into the new homes.

Because “prices only go up in housing” is how they manipulated the public was fueled with cheap money/sleazly loans and the public believed the manta that RE always goes up.

They can say construction costs were increasing along with demand so the ability to raise pricing was there.

The public believed buy now or be outpriced in the future.

Should we have sympathy for those who bought way over their incomes? Or for those who heloc’d their way into more debt but can walk away now?

I say a loan is a loan people—-you knew when signed on the dotted line what your costs would be.

For those that took out a second and paid back their loan Great going!!!

The rest of you that are leaving me with higher taxes and less interest on my hard earned money—well no words can express my anger.

As I have friends who have lost their businesses from this downturn, many who have lost their jobs.

The consquences from the domino effect run into everyone’s lives.

So while you are out with your cash or lived off your heloc you can be so proud of yourself just look what you did to the rest of the economy.

“My impression from this bog is that most comments are blaming the people to refinance their own house any spend their own money.”

It wasn’t their own money. It was the bank’s money, and now it’s our (the taxpayers) money. IAC hasn’t taken a dime from me, since I live 2000 miles from Irvine.

Reverse mortgages really are the way to go, especially if one doesn’t have children or the children are well enough off financially and won’t need the inheritance income that selling the house at a probate sale will bring.  They get a steady, predictable stream of income, and they get to stay in their house.  This is one way where using your house as an “investment” can pay off, IMHO, without being an irresponsible jackass.

I saw that one and actually posted a thread in the forums about it.  It was not only a short sale, but also listed as a fixer.  They bought the house brand new in 2006, and it’s already a fixer!  That takes skill.  There were also no photos in the listing.  Hard to tell what is really going on, but that was not a normal listing, to say the least.

That pretty much matters only if you are black.

I wish I was kidding.

Well that settles it.  Nobody move to Texas - there is a fringe little Redneck town with some crooked cops.  Best to avoid the entire state or stay in places like California where the police have a much better reputation.

That’s some good gravy! OINK OINK!

I just checked the current rate on my savings account:

As of right this moment it stands at:

Interest Rate 0.995%

LOL Not even 1%.

Down from 4%-5% when I originally opened it. 

All I have to do now is work hard and save up 10,050,251.26 and I’ll be raking in 100K per year on interest just like these guys on pension. 

I need to get in on some of this government cheese.

its just sad there are more greed than tragedy.