Irvine Housing Blog

“They took a risk to their credit and passed the financial risk onto the bank. The bank is going to lose their entire second mortgage.”

Well, normally you would expect banks and mortgage lenders to be smarter than their customers, and to deliberately ensure that their credit is secured against all possibilities, right? I know you have moral objections against buyers simply walking away, but, come on, who forced the lenders to give away hundreds of thousands of dollars to couples like this one (and others, who really didn’t understand that they engaged in a huge gamble)? This was total negligence,imho, and I still can’t see why the banks shouldn’t be the ones to pay for it. They are supposed to be the professionals, and such a long streak of bad professional judgment comes at a price. That’s business.
——-

And let’s not forget that your hypothetical converstion is really only hypothetical. We don’t know if this buyer didn’t buy the property in good faith, relying on the spin that brokers and agents folled him with. How high is the share among houseowners of flippers who deliberately and consciously gambled at rising prices, using negative ammortization plans because they knew perfectly well they couldn’t really afford to their ‘property’ otherwise? This would be interesting to know.

The bank will not be losing anything.  Your pension plan will be paying for this and you will be paying with inflated dollars.

This means 20% down payments, 28% DTI ratios, and good credit.

O-No!  “But, but, but ... you mean to tell me that I’m not entitled to buy a home” ... (stomp-stopm) “I don’t have $150,000.”

These new rules will kill real estate prices in the The O.C.

We’re just getting started, and this decent back to earth is looking like it’s going to be quicker than I originally thought.

Well, the banks will be losing something, in some cases; surely there was some paper which wasn’t sold; in some cases there were assurances that the banks gave the bag holders, there is a reason for all those write offs we are seeing.

Citi said it might be cutting its dividend.

The rest of awgee’s comment is totally warranted.

I heard that Florida’s foreclosure rate has doubled to 1 in 95.  What does that mean.  Foreclosures for the year?  For the quarter?  That are going on right now with Lis Pendens notices and court filings?  That have been referred to foreclosure attys and maybe they haven’t gotten around to filing yet?  This was Reality Track.  (Trac?) 

We are third, behind you and Nevada.

I’d like to know that figure as a total for the year?

Citibank is pulling the entire Dow down this morning, after it was downgraded, and fears of cutting the dividend.

The Banks = BAGHOLDERS!

Jesus Christ! I’m sick of Frank Sinatra! Somehow I don’t like to listen to the Mafia singing. It’s all his fault that this RE bubble reached such a height.

I’m very familiar with the West Irvine property.  It’s around the corner from me…  Been in to see it a few times. 

They were at $630K list for a while, and had multiple offers at $600K, but the bank was too slow to provide final approval on the short sale.  At least one of those buyers walked and bought another property - 3/2.5 1800sf SFR in same area for $685K.  The bank was taking so long because the most recent comp on a similarly thrashed REO/short (closed in August) was at $629K.  Guess they couldn’t fathom the fact that prices could fall 5% in a couple of months.

There is an REO, same plan, three streets up that just came on at $594K to compete with this would-be short.  REOs have caused a 10% price drop in these houses since the summer…  My equity is getting killed by exactly the problem(s) that IR has been blogging about. :(

The Fed will bailout Citi, GS, BSC, JPM, and Lehman in the name of financial market stability.

Sorry, absolution for borrowerrs doesn’t fly.  If the banks pull the plugs on people everybody cries foul about being denied credit and opportunity.

You bought it, you need to know what you are doing.  The professionals you “hired”.  You need to treat them like they are, contract employees.

“The bank was taking so long because the most recent comp on a similarly thrashed REO/short”

Thrashed?  $600K+ and it’s thrashed?

Yup.  These are REOs/shorts.  As-is, super lived in condition.  Stuff needs to be replaced.  Floors are messed up.  Some have big holes in the wall.  The one that sold for $629K has light fixtures hanging off the wall, needed all new flooring, backyard landscaping was dead likely beyond saving.

Help someone has hijacked my name!!

Identity theft.

I have only one z.

Don’t forget if the banks actually sell at realistic prices, then they have to mark the rest of their holdings to market.

That’d suck, because their earning/profits/bonuses would tank.  Shareholders might actually give them some pain over it, and start questioning things like claiming all the unpaid interest as earnings on option ARMs they are pushing for reFi’s.

Worse yet, the whole RE market might fall faster, and people in denial might stop paying their mortgages earlier ... and then stick them with even more foreclosures and less income paid before the foreclosures.

It’s not just about the 1 short sale today ...

This isn’t me.

My ID is being stolen!!

Yeah, I saw the extra z straight off.

Did you guys see the fourth picture of the Sorenson property on Redfin?  Completely blurred out.  And what about that last picture of some random corner of the carpet and base boards?  If I were a realtor, I’d be absolutely embarrassed to have my name associated with these photos.

Citi didn’t say it may cut its dividend; some analyst from some small firm suggested it could happen, and everyone started selling this morning.

I can’t believe nobody’s knocked the all-beige kitchen, from cabinets, to flooring, to counters, to stools.  I’m just surprised the exterior’s not painted the same shade of beige.

the whole RE market might fall faster, and people in denial might stop paying their mortgages earlier

Exactly ... and here’s why Orange County is at a higher risk than most other bubble communities.  OC home prices, (Irvine in particular), are so far ahead of incomes, and so much higher than the conforming loan limit, the decline can only intensify on the way down.

The psychological impact of making large mortgage payments on a depreciating home, when you can rent a nicer home for much less money is huge.  The idea that you can live a much more comfortable lifestyle by mailing the keys to the bank is going to become much more enticing.

Remember, the median price is still well below the conforming loan limit of $417,000 in most bubble cities outside of California.  Orange County, you are number one ... and you are indeed the poster child of the housing bubble!

“The psychological impact of making large mortgage payments on a depreciating home”
You hear people talking about the vast majority of recent buyers who can afford their mortgages and can qualify for refi, but I can’t help but wonder how many will make the lowest payment of their option ARM or will not bother to get refi’d because of the emotional impact of throwing away huge amounts of money at a depreciating asset.  How many folks who can afford to make their payment will just say, “To heck with this.”?  I dunno.

Tell it, brother.

two of my friends purchased houses this month for 815k and 845k with 10-15% down and mentioned that they had a tough time negotiating the prices. I am sure one of us is drinking the wrong kool-ade. I will keep renting

Not the same floor plan, but close in size and just around the corner literally less than 100 yards away. 

Nicely $100,000 less at $499,900.  http://www.redfin.com/stingray/do/printable-listing?listing-id=1082605

Oh, and 145 Topaz #15 must have the wrong historical sales price right?  http://www.redfin.com/stingray/do/printable-listing?listing-id=1243524 It didn’t previously sell at $900K+ and now be on sale at $590K?

I should have looked more north.  Looks to be two other REOs of the same floor plan, still only 150 yards away. 

Is Sorenson detached?  53 Avondale is detached and cheaper.  http://www.redfin.com/stingray/do/printable-listing?listing-id=1240662

89 Avondale #45 is also detached and cheaper.  http://www.redfin.com/stingray/do/printable-listing?listing-id=1240662

Heck, looks like 89 and 53 Avondale are about to debark on a cheapest detached home in Irvine fight. They both claim it in their MLS listing and they’re maybe 50 yards part.

89 Avondale is looking at $200K below peak.  53 is $150K plus and closing in on $200K.

I wonder if the borrowers will really get away Scott-free.  If I were a lawyer, or a law firm, I might take some of these worthless second mortgages on a 50% contingency and sue.  I’m sure I could find mortgage fraud rampant throughout the application and documents.  Doesn’t fraud negate the “one cause of action” rule in California?  And if I were one of these borrowers who “accidently” overstated my income by 60%, might I not be willing to offer up something to avoid a massive judgement or, perhaps, the biggie—criminal prosecution?

Those walking away aren’t going to be sleeping very well unless they were squeaky clean on their loan documents.  See, lawyers are good for something after all.

Ipoplaya, I live in the same area and having been watching the same two houses you mentioned. Zovall wrote about the house on Sorenson in March: The Plot Thickens in Fraud Park. I noticed when the Sorenson house went on the market, it started at $600K, went to $630K, and then back to $600K. I wondered if someone was getting greedy for a moment or ??? Maybe a momentary brain fade?

On the other hand, there’s a home at 68 Glen Arbor ( MLS #:P591828) for $625K-a true WTF price since the 2/2.5’s haven’t ever been listed for more than $615K, and that was in April or May of 2006! Not a surprise that it’s been sitting on the market since July and collecting dust.

It’s scary times for us homeowners in West Irvine.

Are those really baseboards?  They look like large quarter rounds.

Excellent question.

I bet a law firm might get involved if they know there are hidden assets.

How about a collection agency buying the debt for a penny on the dollar and settling for ten cents on the dollar? They can be relentless.

The only way out will be bankruptcy or going underground.

Fraud is an exception to the rule (it always is), so you’re absolutely right.  And as long as the economy keeps chuggin’ along (i.e. unemployment stays low) there’s definite value in exploring these loan docs for fraud.  If something odd is found, then you see if the borrowers are solvent (i.e. still have jobs). 

It’s not something you would take on contingency, but it would seem to be worth the effort to spend a few dollars reviewing loans in order to earn a few more dollars.

Sapphire is a bad comparison.  Those are attached townhomes…  Have always sold much cheaper.  Very dense development.

Sorenson and Avondale are all detached.  The 53 Avondale property was on the market for a long time (Frank Agahi - probably #1 in West Irvine) at WTF prices and then got foreclosed on.  53 Avondale is a better location, more nicely upgraded, and cheaper vs. Sorenson.

89 Avondale is 200 sf smaller.  Still a 3/2.5, but the downstairs is tiny.  89 will be dropping I suspect…  Their offers have been in the $550-560K range I think.  Too bad too, it’s pretty nice inside.  Last sale of this size (1425 sf) closed in Sept. for $610K.  Last two market sales of the same unit as Sorenson were 81 Sorenson (8/27/07), which was an REO for $630K, and 92 Avondale (8/17/07) for $655K.

In my estimation, prices are down 6-8% in this area over the past four months alone…

I find it hard to believe that some paid 715k for 78 sorenson.. even at its peak. Could that price be an incorrect entry?

Why pay those prices in Tustin when it’s cheaper for detatched in Quail Hill?

http://www.redfin.com/stingray/do/printable-listing?listing-id=11763

You are Wisteria person tm?  The realtor brought the Soreson short on at $600K, but got rebuffed by the bank with the first couple of offers at $600K, moved it up to the bank’s firm price, $630K, and then took it back down for I don’t know why. 

Maybe the bank is more willing now to take $600K since the first few tries, but I know that they had a well-qualified offer at $600K from a buyer with a good chunk of cash just 3-4 weeks ago and didn’t move on it.

54 Congress is another good WTF, listed now at $715K, same plan as Sorenson.  It was the model for that plan, but a built-in entertainment unit and some wainscoating don’t add $115K in value!

I think 53 Avondale will get into escrow pretty quickly.  Good location, decent upgrades, and priced to move as compared to very recent comps.  Heck, someone paid $588K for 71 Avondale (same plan) in September at one of those big auction deals.  With the 5% auction premium, that one was $617K and it had few upgrades and was trashed inside.

No, that is accurate. 

There are people that paid more than $715K for that same plan…  Peak price for that 1622 sf detached condo was around $740Kish.  One on my street sold for $735K right around a year ago.

Two inch base, was builder standard at the time.  The 3.5 to 4” 7-11 MDF base that you see more often nowadays as a builder standard was an upgrade at the time. 

When you put down laminate flooring next to 2” base, you’ve only got 1-1.25” left of baseboard above the level of the flooring.  Not much taller than putting a quarter round down on top of the flooring…

Fraud is very difficult to prove. Seems like it would be easy, but you rarely win a fraud claim.

We’ve hashed this out before on IHB. Short answer is that the owner walks without owing anything.

And even if you sue, and win. So what? Do you think the former owner has six figures stuffed in his mattress? Blood from a turnip.

Final thought. Anyone with six figures in cash and the foresight to stash it has done so in a way that you can’t touch it.

Ipoplaya, I am a Wisteria resident. I live near the 89 Avondale listing and have been inside that one. Teeny tiny living room, huh? And I can’t stand the agent, but that’s another story

You would think with this stinkin’ market that the bank would move a bit faster on offers on the Sorenson property. Are they thinking if they wait long enough prices will go back up? I think 53 Avondale will go quickly, too, but ouch…that price!

I haven’t seen the listing for the place on Congress. I usually set my Zip Realty results to 700,000 and below. I figure if they are above that, it’s a waste of my time to look at it. It sounds like they are being a bit unrealistic, to say the least.

So 71 Avondale went for $617K? Whoa. We saw the inside of that one, interesting paint job on the bedrooms…very colorful. And I noticed the outside gate was “air-conditioned” as there was a huge hole in it from a dog or something. I’m sure the neighbors and the HOA were not pleased.

“While I am on a rant, I would like to point out the most widespread delusion about financing workouts the suddenly generous lenders are promising: borrowers will not be able to keep their house and their lifestyle. The reality is that the bank will demand a dramatic reduction in personal spending and a change in lifestyle to keep a home.

A great many borrowers who are facing a reset believe they can go to the bank, and the bank will work with them to reduce the payment. True to a point, but the bank will analyze your financial situation, determine your bare minimum financial needs, and take everything else — just like a bankruptcy. They will also ding your credit for your efforts. Borrowers can keep their houses in exchange for a decade or more of financial servitude to a lender. Enjoy the Ramen noodles.

Perhaps someday, the mainstream media and our academicians will fully comprehend the nature and scope of the problem. Until then, we will continue with our message and continue to document the results.

I guess that’s life…”

AMEN BROTHER!!!

Are you sure you have no multiple personalities and you’re also Dr. Ruth?

I think Iblis is right here.  Getting a judgement against someone is one thing…actually getting money out of it is quite another thing.  It’s tedious work chasing down deadbeats, and when you figure out what an attorney would make (in $$ per hour) I’ll bet it wouldn’t be that much.

Most lawyers want to go after “deep pockets” (i.e., big companies, Catholic church, hospitals, etc.).

Thanks for the info IPO.  It’s good to have feet on the ground in the neighborhood.

The prices are still impressive.  IHB will need to keep an eye on that little corner as it appears we have three similar homes with motivated bag-holders fighting for a so far absent buyer.

Here’s an example:

John Q from laguna Niguel owes 645k on a neg am 1st mortgage and has an 80k HELOC. His value has gone from 925K to 799k in 18 months.  H’s loan will recast in about 11-12 months.  His prepay is expired, but because he is @ 91% LTV he cannot refi into a loan with an affordable payment.

The only way a bank will help John Q is if he files for a financial hardship with the loss mitigation department.  Since he has never made a late payment and is still employed they will just tell him to pound sand.

Be careful tm, Mr. Gunther reads the blog!  He got a good price on 92 Avondale considering he was going up against the REO at 81 Sorenson at the time…  Good job of pre-marketing the property too IMO.

Saw Frank Agahi recently at an open house in Sheridan.  His tollroad plan 4 that was on the market forever went into escrow at $662K I believe.  Hope it closes.  It’ll be nice to have a comp to compete with the REOs.

Maybe I know you?  I was the HOA board prez for the last few years.  Association parties are normally outside mine and my neighbors place on Knollwood…  The guy who owned 71 Avondale owned another (not sure which) and was very delinquent on his HOA dues for both.  I think he lived in one and rented out the other.  The renters at 71 did do some interesting things in that property.  They had to be evicted and removed by PD or Sheriffs as I understand it.

IR’s post isn’t talking about deadbeats (subprime borrowers).  The theory is that a lot of non-subprime borrowers will experience negative equity over the next few years, and many of them are going to choose to walk away from an adjusting loan. 

Fraud on a loan app is not hard to prove.  If the borrowers state their income is $150K, plaintiff can prove their paystub income was less (not sure if there’d be a burden shift to defendant at that point).  If these borrowers still have jobs, then a judgment is very valuable regardless of whether the borrowers have any savings ‘cause their wages can be garnished.

Now, complicating the fraud claim is the fact that the lender (& broker if applicable) were probably complicit in the fraud.  Weren’t lenders asking for fraudulent loans when they sold stated-income loans?

Bite your tongue, no bubble.

okay.. its detached.. i didn’t know that. that makes sense then..

In the most recent UCLA Forecast for housing, this little gem appeared:

<i>Some people still don’t get it. It is not subprime mortgages that are creating the problem. It is 100% financing and exotic loan terms — two items which are common in OC. We have documented case after case of 100% financing deals going bad. This is the primary driver of lower prices in Irvine right now. As the multitude of exotic loans reset over the next few years, this will cause the next major wave of foreclosures and short sales.

Well, maybe less severe than Stockton, right? I have to wonder whether UCLA has an Angelo Muzilo lecture hall somewhere. It would explain a lot.

p.s.: And yes, that would be Life.

Ahemm,  ahemm.

Note:  getting a judgment is one thing.

Collecting on it is something else entirely.

Threatening criminal prosecution if you don’t pay is a crime in and of itself:  extortion.  However, I think that if I were a second mtgee and I knew I couldn’t collect, I’d want to see the evildoer in jail.

Sometimes you can get restitution.  Usually prosecutors don’t want to bother with that, but the hub got quite a lot of resitituion when he was an assistant state atty under Reno, before he went back to being a scientist.

I have found that 2nd mtgees up to now would simply refuse to negotiate and refuse to acknowledge that some money is better than no money.  Also, these are employees you are dealing with.  Underpaid employees, who have no money in the 2nd mtges and don’t give a $___t.  Maybe if they got a juicy commission on collections. . .

I guess these will eventually be sold to collection agencies at pennies on the dollar.

I think you are wrong.  I got this e-mail from a realtor today.

“This is an excellent time to buy real estate, perhaps the best “Buyer’s
Market” in 15 years! Please give our “Welcome Home Team” a call if you are ready to move ahead on your plans of homeownership.”

Yep, according to Homeseekers.com, Frank’s property on Deermont is “accepting backup offers” so it looks a bit more promising for him to close that sale. That one took forever to sell!

Why am I not surprised that 71 Avondale was behind in dues?

I know exactly where the parties are! Haven’t been to any of them and haven’t been to any of the HOA meetings (bad, bad owner!) I try to stay under the radar and behave

Get yourself an IHB shirt and where it to the Xmas party!

Your HOA dues are going toward paying for the festivities so you might as well get some free grub and booze out of it…

I’m off the board now, so I’m going to raise some hell while I still live there.  By the time I get fined for anything, I’ll probably be living in Northpark.

Giggle, ssnnortt.

“Get yourself an IHB shirt and where it to the Xmas party!”

That would be funny to see the reaction of the other owners if you guys did show up wearing the IHB shirts. Can other IHBer’s show up too? That would make it even better.

No, no, no and no.

At least, I don’t think so. We shall see.

show some manners jerk

my comment was directed at ‘no bubble in la’, not lawyerliz, the comment was removed

With any luck, it will be the same management company in Northpark

hit the send button too fast!

With any luck, it will be the same management company in Northpark and you can be on the Board again Won’t that be fun?

One more time

It would be even funnier if you could invite the local RE agents and have THEM wear the IHB shirts!

““This is an excellent time to buy real estate, “”

I’ve heard this from agents for the past two years.  As soon as they say those words I cross them off my agent list for when I am ready to buy.  As soon as I have an agent be honest with me they will get my business when I am ready.

Lending,

My experience is that money has a hard edge, and banks hold the money. Anyone that thinks that bankers are going to break out in a chorus of “kum by yah” and start forgiving dept is not very wise.

Exactly awgee.  The banks won’t lose in the long run and in the short run, at the very worst, they’ll be very meek for awhile.

Lots of people played fast and loose with the rules and with common sense.  Who gets burned in the end?  Who usually does?

What’s that dollar worth again?

Correct me if I’m wrong Liz, but on the face of it there is no debt. Someone would have to go to court and win a judgment based on fraud first, then collect on the judgment.

So until you’ve had your day in court and won, there is nothing for a collection agency to collect on. This is more along the lines of contingency fee litigation, not debt collection.

Capocorso - I am going to go way out on a limb here and theorize that you may never hear a real estate agent say that is not a good time to buy or a good time to sell.  They make their living by someone buying or selling, so for them it is always a good time to buy or sell.  Is there anybody out there who really thinks that a real estate agent has their best interest at heart?  Especially those real estate agents who are “friends”?

Your legal basis of things is different in California, tho in practice it ends up being the same thing.  You are a “title theory” state, in which, hypothetically title stays in the lender until the loan is paid off.  Therefore, you post.  We are a “lien theory” state, in which hypothecially, the lender only has a lien, not ownership.  Hence, judicial foreclosure.  As part of that, you can ask for a deficiency.

But they seldom to never do.

I deduce from reading this blog that 1st mtgees can’t get deficiency judgts there—but please don’t take that as accurate.
I assume even if you can get a deficiency on a first, you have to go to court, and thus spend extra time and money.  We are already in court.  Many 2nd mtgees don’t even bother to answer the complaint.  If they do, it’s pro forma.  In Fla, they would be smart to answer the first’s complaint and their own piggyback foreclosure, with a difficiency judgt at the end.  I assume that would work; since nobody asks for dificiencies, I don’t know if it would work.

Second mtges seem to be different from firsts there.  But to get a judgt, you’d almost certainly have to go to court.

On the other hand if a 2nd mtgee is suing someone for fraud, that might be a whole different story.  The system is not set up to do things en masse.  I can’t see a second filing oodles of different suits against lots of different plaintiffs for fraud.  Each case would be different, and recovery difficult to impossible.

Oops, defendants.

I guess if you were one financial unit (ie. spouse), they might be trustworthy .

Oh, and 145 Topaz #15 must have the wrong historical sales price right?

That property sold for $590,000 in 4/04 and has not transferred since. Borrowers put 30,000 down and have an ADJ rate mtg. Ouch.

I LOVE that song.

My way.

A true song with cojones.

Ipoplaya, 53 Avondale is now “Inactive” according to Zip Realty. It went fast!

Here’s the Craigslist posting for one of the houses on this post….

http://orangecounty.craigslist.org/rfs/466141289.html

The title of it is “$600000 Time is Running Out - Going to Foreclosure” !

Lawyerliz, how are things in Miami?

Are they marking all those condos to market yet?

By, ah…, 2010, I should be ready to come to dear old Miami with cash for my winter home.

What kind of deal will i be able to get, do ya think?

Surprisingly, I have come across many agents in the past few months who have actually admitted that they think the prices will be coming down much more, and told me that they have had a hard time trying to get their sellers to reduce the prices on their listings. 

It is interesting how many agents will tell you at first that it is a great time to buy, but as soon as you say ‘I don’t think so,’ their true colors come out and they agree with you and tell you all about how their own house has gone down in value and how the sellers they just told you are ‘relocating’ are actually underwater.

But it seems to me that bankers not making a workout deal with someone that has a good credit history and good payment history who will otherwise not be able to afford the house are the ones being unwise.  They’re going to end up with a house to maintain and sell, and nobody paying *any* principal or interest.  If I were the banker, I’d rather take a cut in the interest than a total loss. 

I realize, that taking a house back isn’t a *total* loss, but the bank only gets back a portion of the principal, minus fees and upkeep, whereas if John Q keeps the home, they get principal & interest…

But I’m not sure what they’d do when he decides he needs to sell.