New blood joins this earth

And quickly he’s subdued

Through constant pained disgrace

The young boy learns their rules

With time the child draws in

This whipping boy done wrong

Deprived of all his thoughts

The young man strugggles on and on he’s known

A vow unto his own

That never from this day

His will they’ll take away-eay

What I’ve felt

What I’ve known

Never shined through in what I’ve shown

Never be

Never see

Won’t see what might have been

What I’ve felt

What I’ve known

Never shined through in what I’ve shown

Never free

Never me

So I dub thee UNFORGIVEN

Unforgiven — Metallica



Forgiveness is never an easy thing. There are some things that seem so wrong you don’t want to let people “off the hook” or you know you will see the behavior again. In the end, holding on to anger is far more destructive to the angry person than it is to the person to whom the anger is directed. Forgiveness is something one should do for their own sake.

The almost unbelievable irresponsibility with debt displayed by homeowners like today’s is so amazing, so far beyond any form of excusable behavior, that you have to wonder if it is right to forgive it. If someone borrows hundreds of thousands of dollars against their home and ends up with a short sale requiring the forgiveness of this debt, how do you feel about it? Remember America’s Debtor Prisons or Are Short Sales Moral? These questions do not go away. Does a really extreme case change your opinion about the subject? Let’s see…

9 Soaring Hawk Front9 Soaring Hawk Kitchen

Asking Price: $1,195,000IrvineRenter

Income Requirement: $298,750

Downpayment Needed: $239,000

Purchase Price: $397,000

Purchase Date: 7/20/2001

Address: 9 Soaring Hawk, Irvine, CA 92614

Short Sale

Beds: 4
Baths: 2.5
Sq. Ft.: 2,960
$/Sq. Ft.: $404
Lot Size: 4,462 sq. ft.
Type: Single Family Residence
Style: Traditional
Year Built: 1984
Stories: Two Levels
Area: Woodbridge
County: Orange
MLS#: S517428
Status: Active
On Redfin: 12 days


Beautiful Woodbridge home has been expanded over 1000 sq ft to create an extra Large Kitchen, Great Room, Huge Master Bedroom complete with a Walk In Closet & a full size Customized Master Bath. Updated Kitchen includes Newer Appliances, Stainless Steel Refrigerator, Recessed Lights & Granite tile counters. This home is situated on a Private Lot with Gated Access to the Front Door. Walking distance to Parks, Pools and award winning Irvine Schools.



So lets walk through the mortgage history of this property and see just how bad HELOC abuse can get…

  • 7-20-2001 The house was purchased for $397,000 with a first mortgage of $317,600 and a downpayment of $79,400.
  • 11-07-2001 HELOC for $48,000 taking out over half of downpayment.
  • 8-26-2002 Refinance for $360,000.
  • 11-26-2002 HELOC for $29,000
  • 11-26-2002 HELOC for $71,000
  • 6-18-2003 HELOC for $56,000
  • 6-18-2003 HELOC for $100,000
  • 6-1-2004 Refinance for 517,500 –probably paid off HELOCs at this point.
  • 10-22-1004 HELOC for 89,900.
  • 4-21-2005 Refinance first mortgage of $624,000
  • 4-21-2005 Refinance second mortgage of $156,000. Total debt of $780,000 at this point.
  • 9-12-2006 Refinance first mortgage of $948,750.
  • 9-12-2006 Refinance second mortgage of $189,750. Total debt of $1,138,500. No HELOCs

So there you have it. This homeowner went to the housing ATM 8 times over a 5 year period and pulled out $820,900. Now they have a property priced at a WTF asking price hoping they can find some knife catcher to come pay off their bills. Even if you wanted to buy this house, would you do it knowing that you were about to pay for $820,900 worth of consumer spending (They may have spent $200,000 on the renovation, but please spare me the BS about investment or illness or any of that crap. Look at the pattern of withdrawals. They spent it, and you know it.) I suppose the lender can always hope these people stashed some of this money away somewhere to cover the shortfall at the closing table. Doesn’t seem very likely, does it?


Consumed by greed, the homedebtors will be seeking forgiveness for their debts and sins. Our major religions believe forgiveness is a good idea, or should this behavior remain unforgiven?


Lord’s PrayerOur Father

which art in heaven,

Hallowed be thy name.

Thy kingdom come.

Thy will be done

in earth, as it is in heaven.

Give us this day our daily bread.

And forgive us our debts,

as we forgive

our debtors.

And lead us not into temptation,

but deliver us from evil:

[For thine is the kingdom, and the power,

and the glory, for ever. Amen.]

The Lord’s Prayer — Matthew 6:9-13


I bet you didn’t think I could get Metallica and the Lord’s Prayer in the same post and have it make sense.


That concludes another week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.


150 thoughts on “Unforgiven

  1. franke

    This is like the older woman trying to pass herself as something much more desirable than reality…..it’s embarrassing to watch! At that price who’d be interested? Is this for soccer moms, young professionals , empty nesters or what?

  2. former_irvine_resident

    Wow. Someone who could satisfy the $300k income requirement sure wouldn’t want to live in a Woodbridge tract home, that’s for sure. Especially one that backed up to Culver!

  3. quesnay

    I don’t put all the blame on the home debtors. They made mistakes and lived way beyond their means. But, as long as there was not blatant attempts at fraud (stated income?), I can forgive them. Who among us has not fallen prey to greed at some time in our lives?

    Who the heck was lending them this kind of money? The final refinancing of $1.1M would require a substantial income to support on any reasonable standard ($350k per annum?) If they lied about this income, then I blame the borrowers and they should be charged with fraud and punished appropriately under criminal and civil law. If they didn’t lie and were still given the money, then the lenders will get what they deserve. They were professionals, right?

    The crazy thing to me is that if they had lived within their means, they would have made an excellent return on this property. Assuming the place is really worth $800k, 10x on your money in 7 years while providing a place to live is not too shabby. Is it really that hard to do?

  4. AZDavidPhx

    It doesn’t even bother me at this point.

    Yes, these people are pigs who will be slaughtered in the pricing decline.

    The banks were the ones that enabled their HELOC OINK OINK. Porkers like this were the bread and butter for the banks during the party.

    So let the bank go ahead and take the house back with all of its upgraded gaudiness and hold the turd.

    What is with the television in the bedroom? Did they rip that thing out of room 327 at St. Joseph’s Hospital?

  5. George8

    quesnay, I’m with you on this forgiveness thing. However, odds are they had lied big time on the progressive bigger mortgage. I believed the lenders knew they were lying as well.

    So, do you still forgive them?

    By the way, this is a ugly, outdated $1 million property.

  6. OCB

    All of this borrowing/lending was done between greedy and willing parties in a free market. Now they will rightfully suffer the consequences of the free market. There are no victims. As long as there is no taxpayer subsidized bail-out of any kind, there is no problem…just a life’s lesson.

  7. KO

    The mortgage people took their cut, bundled the property with a bunch of other mortgages, sold it and moved on. The institution that bought it is the one left holding the bag. And the monoline that insured the mortgage. The mortgage company is at least partially to blame and they are getting off scott-free.

  8. ice weasel

    This doesn’t change the actual issue of guilt, just tempers it with the reality in which we all live, what is the difference between this and any number of businesses who sucked venture capital or stock money out of company and left it to rot? I see no difference at all. These people played the system and possibly won, big time. They should laugh all the way to their next real estate abomination.

    The other side is, sure, these people are likely parasites who did little to actually enhance the value of the home and took money from it as much as they could with the willing help of compliant lenders (who doubtlessly made their commissions). It’s immoral. It’s slimy. It’s not even all that bright.

    Now, compare those two views and you tell me which one applies. In the end, these people will either take a big bag of cash with them or they’ve just had a great for the last seven years. Either way, they won. They beat the system I don’t respect them for their methods but I also don’t see how they are any different from the lenders standing on capitol hill with their hands out claiming, they “just didn’t know what was going to happen” or the thousands of lenders who made huge commissions from acts such as the ones illustrated here. It’s not right because other people participated in it but let’s face, this is the result of your unregulated, no oversight but still government backed financial industry.

    The only people who will really lose are us because in the end, each of us is going to pay for a little piece of that seven years of heaven these people may have enjoyed.

    Lucky us.

  9. shhhhh

    “… if they had lived within their means, they would have made an excellent return on this property.”


    They already DID make an excellent return on their money. C’mon, how much are they actually going to have to pay back?

  10. Hmmmmm

    Honestly, I think this looks like a case of credit card dept getting out of control more than anything else. Look at how small the loans were. Run up the cards, take out some cash to pay thme off at lower payments and then start again. The fact that the house price could get so bloated doing this is scary. I am betting by the end they didn’t even have to qualify for anything.

    If they bought in 2001, is that the epected roll back price, or close too it, these days? That will be a mighty big haircut.

  11. tbone

    Well, judging from the pics, An $800,000 spending orgy sure can’t buy you taste, that’s for sure. I’ve stayed at classier looking Travel Lodges.

  12. jhill

    This house still has popcorn ceilings! And they are LOW popcorn ceilings! 750K max, even in Irvine.

  13. Kelly

    It does not look like they put close to $200,000 in unless it was a real dump before and they got ripped off from the contractor. All the lighting looks low end Home depot floor stuff – in one bathroom picture they even have burnt out lightbulbs. 2 of the bathrooms look decent but 2 look low end outdated. The kitchen does looks cute but Home depot type of custom. I see nothing high end or high quality in any of the pictures.

  14. Joe S.

    In a more just world, these homeowners would have been punished enough by a tarnished credit record. In this world, it makes no difference. They’ll file and instantly receive more credit.

  15. Barbara

    We do have a winner. The tax man cometh. They would have taxable income to the extent that any of the loan is forgiven.

    Oops, in 2007, federal law was changed. Debt forgiveness on a principal residence is tax free for up to $2 million ($1 million for a married person filing a separate return).

  16. tonye

    (1) If they built those 1000 sq feet during the ’02 to ’05 time frame then they paid a significant price. Construction costs were overpriced.

    (2) However, looking at the house pictures, it’s obvious that they did not pay to put in high quality fixtures/appliances anywhere. Just take a look as the light in the living room. You’re looking at at least 100K to make this house presentable. I’m just talking Mariott here, not Hilton. This place is strictly Motel 6.

    (3) I think most of the money they took out was not put into the house. Judging from the finishes they used, I would be concern that there was little quality put into the “bones” of the rebuild. How cheap are those wall, romex, pipes? Are the power and HVAC sufficient? If they went for maximum size, then the whole construction is a disaster and this house may need as much as 200K to fix up properly.

    (4) These people have absolutely NO TASTE. Just looking at the picture I see three bathrooms that will need to be redone, a kitchen that needs serious help (appliances) and is badly laid out (too small) and a SUPREME LACK OF TASTE…. I don’t want to get ethnic, OK, but truth is that the standard home decorating taste by a certain ethnicity common to Irvine is simply beyond my understanding. I understand Western European, East Asian and even Middle Eastern design, but this particular ethnicity simply blows me away with its lack of restraint and coordination.

  17. Susan

    How can you guys criticize great patriots like these homeowners? Clearly, they only began borrowing after 9/11, when we all knew we needed to spend money to protect our way of life. Why, their borrowing must have financed a good 15 or 20 seconds of the war by now. A much better system than those clunky old war bonds.

  18. IrvineRenter

    Exactly. They already made their money. The bank bought the place a year and a half ago, they just didn’t realize it.

  19. AZDavidPhx

    I thought the same thing.

    The house itself looks nice.

    But all the cheesy; over-the-top decor and the hospital bed-side television in the bathroom and bedroom.. Eek!

    The bathrooms trying to be all fancy shmancy, but leaving you with more of an “Eww” than and “Aww” first impression.

    It’s like somebody took lipstick and smeared it all over the pig.

    Maybe the photos are just bad.

    I also like the cat-tree behind the couch in the living room. Nice staging.

  20. RC

    It’s easy to think the worst of these people, but it does say in the listing “home has been expanded over 1000 sq ft” so perhaps the owners did put some money back in to the place. Not much, mind you, of the total, but a good chunk.

    You can’t just blame the homeowners. The realtors made money, the mortgage guys, the original lenders, etc. Contracts freely entered into with no guns held to any heads.

    And, everyone loses. I was a corporate banker for 10 years and used to finance flooring lines for finance companies and small banks, among other things. If no one was looking critically at the underwriting standards, then shame on them, even it was market madness. I can tell you, there were banks and lenders who did in fact dial back their lending standards when things got crazy the last couple of years (why does no one speak of them?).

    As a former lender, I tend to blame the lenders first in this market. And then the mortgage brokers.


  21. Mr Vincent

    “expanded over 1000 sq ft to create an extra Large Kitchen”

    Did they get permits for this?

    As someone said earlier – it looks like a pig with lipstick smeared all over it. Some parts still look like 1984.

    Lot size 4400 sq ft. Almost NO yard. If you look some of the pics, you will see that the house next door is used as the property border.

    I would not touch this place. If I had to buy it, I would pay 500k.

  22. arm

    The house backs onto Culver, the busiest street in Irvine, with a small lot. The price in 2001 is 100K lower than most Woodbrige houses of similar size were going for for this very reason. This is a WTF price and will be on the market a long time because it backs onto Culver (a non-starter for many buyers).

  23. Dave

    I actually feel bad for the owners. You can almost see the desperation in the refi history. It is credit card, credit card, and then in April 05, they realize that they are getting in over their heads. I bet they pulled out the rehab money thinking “we’ll never get enough in a sale to pay off the money we took out to pay off our CC debt unless we make some major improvements.” The claw tub, and other touches scream “we’re trying to make this house look high end so we can get out from under this albatross.” Not quite done by the time of the 2006 refi, and then boom!

    The only market left are knife catchers.

    I bet the last seven years have been anxiety-ridden as they try to figure a way of their financial hell. As is common with the dim, they just ended up making the situation worse.

    They should get 7 years of no access to credit to rehab their self discipline, a total of 14 bad years. Seems fair to me.

  24. No_Such_Reality

    From 2002 on, everybody got ripped off by the contractors. They wouldn’t even return a call unless they thought it was going to be a $20,000+ gig.

    IMHO, any remodeling from 2002 on cost 2-3X it’s real price.

    If they added 1000sf, they likely spent $200-$300K doing it. If that bathroom with the TV isn’t new, the remodel there probably cost them $15,000 alone. It shouldn’t, but I suspect it did.

    Tonye, I recall you redid an old house like this, thoughts? How much to add the 1000sf and do the rest?

    The house looks like a classic example of easy money, easy spending. A primary problem one remodel spending over the last few years.

    Even given the massive amount they’ve spent on the remodel, they’ve still likely spent $100,000K per year of equity.

    What’s really scary, this really shows how precarious our economy is. Sure this may be a one off. It’s really bad, it alone is going to blast $150K a year out of the OC economy.

  25. AZDavidPhx


    It’s obvious that these people like to spend and carry a balance on their credit card.

    I would be chasing these people down trying to give them a credit card once the bankruptcy was over and their slate clean.

    Granted, I wouldn’t give them a 750,000 credit line!

    Probably between 5K and 10K just so they could run up to Best Buy and get themselves a new television. Then stick it to em with 40% APR.

    Gravy. $$$$

  26. dc blogger

    Hard cases make bad law. I don’t mind if an undeserving debtor gets away with irresponsible behavior if it is part of a policy that stabilizes the economy in a way that benefits the country as a whole.

    What concerns me is golden parachutes for the executives involved in creating the present disaster. They need to be prosecuted.

  27. AZDavidPhx


    They get to go flossin the H2 with chrome spinners around town to show the Jones’s WHO DA MAN!

  28. ochomehunter

    Stuff like this tells us that there are several properties like this out there that are yet to hit the banks and their balance sheets or some hedge fund who is holding the bag. This financial system is far from bottoming out. I think we will crash real hard sooner or later. I predit we will crash after elections.

    The time leading up to elections, Fed and Govt. will continue to eat shit and pass BS laws and do things that will keep the markets volatile.

  29. AZDavidPhx

    Where are the photos of the backyard?

    Oh wait – that land was used for the EXTENSION.

    That totally ups the value of the house when you get rid of those pesky back yards.

    I guess little Timmy can just go play ball on the Wii in the guest house instead.

  30. IrvineRenter

    “It’s really bad, it alone is going to blast $150K a year out of the OC economy.”

    That is what I see as well. I have already profiled a number of these properties, so it isn’t uncommon. There is one thing I like about blogging these individual properties: you can’t deny the facts. These are real examples of real people spending huge amounts of borrowed money in our local economy. This money is now gone, and it isn’t coming back any time soon — if ever.

  31. ipoplaya

    You don’t see spinners in Irvine AZ. I suspect any H2 arriving in city limits with spinners would immediately be surrounded by 5 very bored Irvine PD officers and circled by a helicopter.

  32. ipoplaya

    I just check the property taxes on this one. They had a 2007 supplemental that took their roll value from $429K to $519K. WTF? Doesn’t a permitted remodel require a full reassessment?

  33. Alan

    I propose a petition to the IRS to assign tax investigators into all HELOCs over a threshold (say $250k) to verify that the monies were spent on home improvement. The (wink-wink) secret of HELOCs is that in order to quailfy the money is supposed to be spent on home improvements. If the IRS were to start auditing these people, you can be sure that the interest deduction would be disallowed. Fear of IRS audits might affect future behavior.

  34. Smurf

    I understand people get their taxes forgiven on mortgages even some refis, but does that also apply to HELOCs?!?!! Wow…

    The issue of forgiveness :
    do we forgive greedy wasteful home-debtors who played the system to their advantage or the banks who gave them the $800k plus to throw away?
    They did something maybe not ethical but not illegal,

    How about banks? How ethical is it to give OTHER PEOPLE’S MONEY (like municipalities) to people who cannot and will not pay it back and then ask Congress for a bailout? How legal is it to use the money of investors this way? I guess we’ll find out when the shareholder lawsuits start going in earnest.

    So, although I have no warm feelings for folks like these HELOC debtors, the ones I do have a real issue with are the banks and financial insitutions who created this mess with their appalling underwriting standards.

    And now we pay for it ALL OF US by having a devaluating dollar, high inflation, Helicopter Benny & the inkjets.

  35. AZDavidPhx

    That’s a shame.

    There is nothing more impressive than a set of shiny chrome RIMS that spin around when the car moves.

    It’s just one of those things that makes everyone around take notice and think “wow, that guy is COOL. I wish that I were as COOL as that guy.”

    The police are obviously just jealous.

  36. AZDavidPhx

    There may be desperation right now; I’m sure back when they were doing the refi’s – life was good. Values would go up forever. No worries.

    There was around the clock “Flip This House” and “Who Wants To Be A Millionaire” playing on the hospital-stolen TV’s in the bathroom and bedroom with cheese and Kool-Aid parties on the weekends.

    The cheese deliveries have stopped. The TV’s have been turned off.

    Reality sets in.. “We have to actually pay back all of this money? Whoops! Gotta go! Here are the keys! Thanks for the ride!”

  37. NanoWest

    I bet these home owners are chomping at the bits to get the $600.00 from the governments stimulus package.


    Todays example is sick and pathetic, not to mention the house is absolutely fugly.
    These people and and folks like them should be chased to the ends of the earth to repay the money they’ve borrowed, even if it takes them the rest of their lives to make restitution. No one should be allowed to sit in a penalty box for a mere seven years and then start over clean. Whatever happened to responsibility and paying one’s debt? How does a person sleep at night knowing they’ve screwed someone somewhere out of money? People like these, the banks, realtards, etc. have screwed over the entire US and it’s economy. Now we have to sell ourselves to the communists and terrorists abroad just to stay solvent. I just want to puke, and no my heart is not one bit happy.
    End of rant.

  39. IE_Priced_Out

    repost from last article:

    Hey IR, I hate checking out properties for rent on Craigslist because they tend to be managed by agents and thus the owners need to increase the price. I found these properties on the Vietnamese paper today. They are in vietnamese and I will translate, not word for word but these are in HB. What do you think ??

    HUNTINGTON BEACH Nhà riêng, cách bi?n 1 mile, 3PN + 2PT, m?i tân trang r?t ??p, cho thuê t?ng phòng, ho?c c? nhà ($1,750/ tháng ). D?n vào 2/15/08. L/L 714-XXXXXXX

    (Huntingtun Beach, 1 miles from the beach, 3/2, $1750 monthly)

    Nhà house 2 t?ng, Huntington Beach, 3PN, 2.5PT, nhà m?i, khu yên t?nh, 2 car garage attached, family room, living room, built-in BBQ backyard, nh?n housing, $2,500/M. L/L ?? l?i message. Leslie: 714-XXXXX

    (2STORY, HUNTINGTON BEACH, 3/2.5, …. 2,500 MONTHLY)

    Huntington Beach, nhà 4 phòng ng?, 2 phòng t?m – khu sang tr?ng, yên t?nh, ?i b? ra bi?n (góc Brookhurst and Banning) – $1,900/M. L/L 714-XXXXXXX.

    So, what you guys think…. hehehe.. I know.. I know Irvine is MUCH better than Huntington Beach

  40. AV Paperboy

    “I bet the last seven years have been anxiety-ridden as they try to figure a way of their financial hell.”

    The one argument I would make is that they started off with a downpayment of $80k!! That’s a lot of money to have sitting in the bank, especially in 2001 when the bubble was just getting started. I know it’s not impossible that they already had credit card debt when the bought the house, it’s just utterly amazing that they ended up pulling $800k out of the house!

  41. Eskwaya

    I have no problem with the homeowner consuming the equity in the home. Those are the rules of the game.

    In my own example, a woman owns a house built in 1960 that cost $17,000.00. She never made any improvements to the house. Its condition has only depreciated over time. She rejected my offer to purchase of $450,000.00. She wanted $675,000.00. In the end, she sole it for $585,000.00; over half a million dollars from $17,000.00. Never kept it up, never improved it. Just let it rot. And yet, it yielded a 3400% return after 45 years. Call it “equity” if you like. She did not spend the equity while she owned the house. But is it any less shocking to the conscience than the example given in the post?

    Here, in the post, this Irvine, CA family bought a house for under $400,000 that rose in market value to over a million in a short period. The banks lent the money secure in the value of the collateral.

    If this particular situation is describing a bailout scenario where taxpayers have to clean up this mess (either by propping up the bank or the homeowner, I would lack sympathy and feel outrage). But otherwise, I don’t see why the public should be concerned about this family’s poor spending habits. Maybe this dude has a gambling problem. There are thousands like him. Is that what this story’s about? No, it’s about the cost of housing.

    So, we should definitely look at a system that makes possible this kind of windfall (i.e. nearly 200% profit realized within 6 years). What is this value that they call “equity” and where did it come from? As you pointed out, it could not be the home improvement project alone. In fact, what this whole housing market mess makes clear is that “the house” has almost nothing to do with it. It is nothing that the homeowner did that increased the value of the home, as my example makes clear, since the howeowner in my example did absolutely nothing.

    We must look to that special something upon which the house sits. Then we must ask, is it just that this value, which was not created by the homeowner, become the property of the homeowner? IF you, like me, answer that it is not just, then we ought to come up with an alternative. Would you join me in organizing around this … http://en.wikipedia.org/wiki/Georgism?

  42. AZDavidPhx

    You are assuming that these people view the situation the same way that those of us on the outside do.

    We had a nice discussion a day or two ago about how all of the unsavory characters in the housing meltdown get to finger-point at each other (buyers, realtors, lenders, etc) and everyone walks away Orewellian convinced that THEY are a victim who was screwed by the other guy.

    People like us blame all of them. The people involved blame all of the co-conspirators.

    You just rationalize that “Im a good person. The other guy took advantage of me” and voila! Chicken-soup for the heavy conscience!

    You sleep fine.

    I would not hold my breath for the day when all of these people come out to repent.

  43. Diane

    I am sorry, but these people need to go to debtor’s prison for this.

    forgiveness, my arse.

    It is sickening what has happened to this country. In fact, it no longer is a country. It has become a game.

    And, tag, we are all losing…due to all these fraudsters.

  44. AZDavidPhx

    I suspect they were not first time buyers. Most likely this was originally a trade up. Used the equity from prior sale plus some savings to “get in”. Then once the house party started – went spending crazy.


    Ok, forgive complete stupidity. But LET US NOT FORGET, and just because forgiveness is extended there should still be consequences. Let the debt follow the debtor all the days of their lives, through wage garnishment etc. Let the idiotic banks suffer, starting with the CEO’s who should suffer unemployment and ostracism for their lack of foresight and poor decision making, same with the loan officers and realtards.
    Let them live in one bedroom apts. and work two jobs while they repay their debt!

  46. hb

    What is also very sad is that if they had spent just a few thousand on a decent architect, they would have had something much better for less money. All the stuff looks like they picked it out impulsively, at random, without any planning.

  47. tonye

    From ’97 through ’00 we rode the NASDAQ into ten inches of change orders, four work permits and a complete rework of our house.

    As a rule of thumb, when you build up, you have to rebuilt what’s below.

    We touched every thing and ended up with 2700 sq feet (950 new, 1750 rebuilt) With foundation, framing, wiring, HVAC and piping to easily add another 800 sq feet. Also added 1000 sq feet of outside living space ( upstairs deck was built to hold a large hot tub/jacuzzi!!!).

    Brand new kitchen on new slab, travetine tile, top of the line rugs, 1600 feet of Cat5e, 300A panel, dual water heaters, dual HVAC with four zones, six inch studs, 30A romex, built in lights, etc, etc, etc….. Our final cost ( this is approximate ) was about 300K… which worked out to about 110bucks per square feet when it was all done and said.

    But, and I but…. our house shows it. The 200 sq foot kitchen alone consumed $80K of money: slab, framing, plumbing, wiring, windows, custom cabinets, appliances, counter tops. It is the single most expensive kitchen in the house and you better not scrimp on its design and execution. We got full extension drawers that can support 300 lbs each, for example. And we got three work stations. Again, you can not be cheap or stupid with your money when you remodel.

    And, yes, the last few years the contrators were nuts. We ran into some issues towards Y2K as construction was heating up and the cost of labor and materials went up. But it was nothing compared to what it was a couple of years ago. 400 per sq. foot was the quoted price in TR… which was idiotic.

    Anyone who bought or built RE in the last four years overpaid through the nose.

    But, soon it will be time to rebuild again. I figure I’ll add 400 sq feet upstairs ( new den ) for $20K ( no need for slab work and rough electrical and HVAC already done ).

  48. IrvineRenter

    A 3/2 a mile from the beach for $1,750, and a 4/2 for $1,900? Unless these places are run down to the point of being uninhabitable, those are good deals.

  49. hb

    Thank you IHB for this amazing story of HELOCs and REFIs and folly. A jaw-dropper. It would be a great episode for a series on BRAVO–“My Orange County Bankruptcy”

  50. tonye

    No. You only get assessed fully on NEW construction.

    On a “remodel” you get only assessed on the NEW square footage and then they won’t necessarily take into account the cost of better quality finishes or additional features.

    Depending on how you’re building you may only get upped a small fraction of your cost.

    Now you know why on big remodels they will leave a few stud walls nicely held up and reuse as much of the slab….. That’s a remodel.

  51. tonye

    How tacky.

    In my part of town we only burn hard woods and those nice “cracking” wax logs.

    Fireplace logs are so passe. So double wide. Yuck.

    What next? A fake electric fireplace in the bedroom?

  52. MMG

    I have a question for the board.

    we some times blame borrowers, and other times we blame lenders.

    both were idiots and deserve to go broke


    banks and lending institutions got that money from somewhere. in this case some idiot bank or lender just gave away a million bucks of SOMEONE’s money that will likely or has evaporated. the borrower got to spend the money, so the lender/bank is $hit out of luck.. I wonder if we will see banks go under , I also wonder if the fed can cover all these losses (FDIC).

    It sure is getting ugly out there 🙁

  53. Jeff

    IR – I have been following this blog since August 2007. Thank you for the informative posts. After graduating college in 2004, I began to think seriously about purchasing a home. I quickly found myself trapped by my desire to adhere to conventional affordability metrics.

    Now I am thankful that I didn’t listen to the “fuzzy” mathematicians when conventional mathematics failed me. However, I did blame myself for not being able to afford a home. Interestingly, I did not see the overheated So Cal housing market as the problem. The problem to me, at that time, was my lack of preparedness to enter the market (e.g., low salary, indifferent FICO and no cash).

    So, by chasing the So Cal market and strictly believing in the wisdom of conventional metrics, I decided the only option was to “better” myself. In May, I will complete my MBA, I am now making twice what I was making in 2004, I have no debt, money in the bank and an excellent FICO.

    After finding this blog, I realized that I wasn’t crazy after all and I am certainly “no worse for wear” for my conclusions. Today, I represent the “pent up demand” and “buyer on the sidelines”, but for all the right reasons. I intend to rent for a time longer – not worrying about whether I have found any sort of market bottom – and leverage my stronger position into a nice, first home.

    Thanks for the insights,


  54. MMG


    see my post above, same thoughts, I know everyone will have to pay somehow. I just wonder how much? 😯

  55. Bob

    I don’t see what there is to forgive. The guy sold already sold his house to the lender (that’s why the lender owns all the property’s equity). He paid rent (in the form of interest) while living in the lender’s property. Now he wants to leave and the lender is trying to sell it for the stupid price he paid for it. It’s not a question of forgiveness, it’s what it means for a loan to be secured by property. The lender overpaid for the property and is going to lose a lot of money.

    If the borrower never intended to pay the money back, you might have an argument, but he probably did, when the house’s value rose some more. In the meantime, he’d made an investment, it was paying well, and he decided to spend his investment earnings. Lots of people do that with stocks every day. The only difference is that brokerage firms don’t make 100% margin loans, because it’s stupid and probably against the law, and when they do make margin loans, they make sure the loans aren’t secured solely by the stock.

  56. Zardeenah

    Here’s my thought — people like this who obviously took advantage of the system need to just lose the house, lose their credit (down to zero, or whatever the absolute lowest rating is), and be on the hook for as much of the debt as possible.

    But…I was thinking if a buyer could reasonably prove that there was lender or realtor fraud involved in their purchase or re-fi (and we *know* there are those stories out there), then they should get forclosed on, but still get to preserve their credit rating and be eligible for bankruptcy on more generous terms. The logistics and bureaucracy of this would be tricky, though, but at least it’s not a free money for everybody type bailout.

    Oh, and maybe these fraudulent loan agents, mortgage brokerages, and RE Agents need to pay big fines to pay for some of this stuff (although they’re probably broke too).

    That way, everybody has consequences, but real victims of the sharks in the RE market have a little softer fall.

    What do you guys think?

  57. Kelly

    I also just noticed that the recessed lighting in the kitchen is just placed in the middle – not efficient lighting of the work areas and counter tops. Why bother with lighting like this – probably heard that recessed lighting is fancy so they just did it.

  58. lendingmaestro

    This scenario seems pretty drastic, but you’d be surprised. This is not the exception in OC, it is the rule. Serial refinancing is everywhere, even more in south OC than in Irvine.

  59. Woodbury Renter

    I am throwing this out there since I have come to respect the opinions of the folks on this blog.

    Hypothetical situation: single income professional raising family in Irvine has $50k in credit card debt. Said individual receives $100k bonus payment, say $60k after taxes. Said individual has been on the sideline renting due to irrational prices. Would you recomend declaring bk and putting the money in the bank or paying off all the revolving debt and leaving a few k in the bank?

  60. Mandy

    We are ALL victims. They drove up the price and forced us to rent because we didn’t want to play their game!. We are making six figure income and have been renting for over 7 years!

  61. PurpleHaze

    In hindsight I would think that you should pay off your credit card debt since the interest you are paying on that debt exceeds what you might earn in a savings/checking account. It is always better to be debt free my friend.

  62. Woodbury Renter

    Hypothetically – say the bonus hasn’t been paid yet – it is in the future – what if you declare bk and then when the money comes put in the bank?

    btw, said person is going to use the money to pay off all the debt – however when looking at all the examples of people profiled on this blog that have walked away from their debt said person feels a little naive.

  63. ipoplaya

    Oof, BK’s are bad. If I was in that situation, I might try to move my $50K from card to card going for 0% interest deals every 6-12 months, and bank the $60K in hopes of having enough to throw a down payment on a place at market bottom or when interest rates got so crazy low it made good sense to buy. Can’t buy squat for $300K though so I might only do this if I thought I could save up another $20K or to add to the $60K. If that’s wasn’t possible, pay down the debt.

    And for sure, if I had $50K in cc debt, I sure as hell wouldn’t be paying the premium to rent in Woodbury!

  64. zaleriana

    Here’s the problem–if the bonus is earned but not paid, it’s likely to end up in the BK estate anyway, i.e., it will be used to pay off the debt.

    Also, given the level of CC debt and the implied income, it would be difficult, under the new-ish law, to file 7 instead of 13. If filing 13, it wouldn’t matter when the bonus was earned, if it’s paid in the next 3-5 years (depneding on the plan), it would go to pay down the debt.

    Bad, bad idea. This is one more reason that any mortgage “bailout” sucks–if you didn’t have the opportunity to roll your excessive CC debt into home equity, you’re out of luck.

  65. ipoplaya

    Mandy – by your own admission you are not a victim – “forced us to rent because we didn’t want to play their game”. You have freewill, made the choice not to buy, etc. etc. The free money train was making lots of stops in OC and you didn’t want to get on it. How can you be a victim if you made the choice not to ride?

    Seven years ago I bought for $300K or so and we made very low six figures then. Prices were already climbing, but mortgages were very affordable…

  66. Major Schadenfreude

    How in the world would allowing people to NOT pay back their debts “benefit the country as a whole”?

    What concerns me is Uncle Sam asking me to pay THEIR debts while they continue to live in a house that should be MINE!

    Down with Dodd!!!

  67. Major Schadenfreude

    I bet not.

    When you spend THOUSANDS of dollars a year on yourself. $600 is nuffin.

    GIMME MORE!!!!!!!!

  68. tonye

    (1) But you have to live in Dallas.
    (2) For all we know, that’s a WTF price too.

    Bottom line? Post like that are trolls.

  69. Stupid

    Someone had to buy all that debt – it’s possible you have already bailed them out, you just haven’t had to mark to market your 401K, pension, taxes already collected & now invested, etc. yet.

  70. skek

    Good point. I wonder if someone from the industry could explain the limits of FDIC insurance ($100k cash per institution, I believe). My specific question is whether securities are safe when a bank goes under. I know they are not FDIC insured, but my understanding is that the financial institution holds stocks, bonds, treasuries, mutual funds in trust for their customers and as such, those assets are beyond the reach of the bank’s creditors. My understanding is that this isn’t true of a money market. True? False? Any input is appreciated.

  71. AZDavidPhx

    I don’t know – call me crazy, but if I had to pick moving to the Dallas House or today’s Irvine House; I’d become a Cowboys fan real quick.

  72. Glenn

    Yeah, it really sucks here. It may be a WTF price but I’d sure as hell rather live in the Dallas house than the Irvine POS.

    I still talk to some old friends who are still in Cali and here that same crap all the time… “man, it must suck to live in Texas” type stuff. Trust me, things aren’t so bad here. Keep living in your little fantasy world paying outrageous taxes, having criminals let out of prison because your state gov can’t manage within the limits of reality and enjoy the nice weather and traffic. I’ll continue to come out and visit every summer and live in this hell we call Texas.

  73. IrvineRenter

    “If the borrower never intended to pay the money back, you might have an argument, but he probably did, when the house’s value rose some more.”

    Have you heard the saying “The road to hell is paved with good intentions?”

    Do you think their intention to repay extends beyond the ability of their house to make the payment for them?

  74. Mr Vincent

    “Keep living in your little fantasy world paying outrageous taxes”

    The property taxes in Texas are MURDER. Nothing against TX, I like the place esp Austin and the lakes leading into it.

  75. skek

    Perhaps the person in question should show some class and pay his debts, since he has the money to do so. Why is this even a question? It is disappointing that the American Dream seems to increasingly revolve around gaming the system and leaving others to pay your debts.

  76. Glenn

    Prop taxes are kind of high – I pay about $2.10 per $1k but we do have reassessment every year so it is based on “market value”. However, no income tax so that helps.

    I love California but there is no way I could move back after experiencing the cost of living here. I’ll just keep visiting for a couple of weeks a year.

  77. StunnedinSD

    I’m kinda fuzzy on the recourse/nonrecourse thing, but — this being a refi — can’t the lender go after the couple’s other assets, such a boats and such?

  78. Stupid

    Cool. That’s what $1.2M ought to look like.
    Is there some law in Texas that restricts the crazy lending in some way? I seem to recall there was some lending laws passed after the last oil boom/real estate crash that prevented bubbles or something (bigger % down? no HELOC?) but I forget what it was.

  79. kevin.

    We bought the exact same little island-thingy for $89 at Ikea a year ago. It sure looks nice in that kitchen that costs more than our house.

  80. Bob

    If th owner had sold the house outright rather than a piece at a time, there wouldn’t even be anything to talk about. There would be an unremarkable story about someone who bought property at the top of an inflationary spiral and lost a lot of money. Moral outrage at them because the most insistent and convenient potential buyers for their properties were lenders strikes me as a bit ridiculous. They were just playing by the rules. Next you’ll be saying that people shouldn’t be able to spend money from the sale of appreciated stock.

    If anyone is to blame, it’s the geniuses who dreamed up the SIVs, tranches, etc. that masked the risk and funneled billions of dollars of “safe” investment capital into the loans that inflated this bubble, and the genius analysts who evaluated the results and called them investment grade, and the genius actuaries and accountants who insured them, even though the companies doing the insuring didn’t have the capital to actually–you know–insure (that would have been expensive, after all).

    I’m not claiming the housing market has been sane, but I don’t see why this property owner is more culpable than someone who sold near the top of the market, pocketed a large gain, and moved into a rental to ride out the fall.

  81. houseonlegs

    There is fraud in probably 95% of all reduced doc loans, and in most cases the borrower knew about it or initiated it. On the final loan todays borrowers took out, I’ll bet they went stated or no doc knowing that they could not reasonably qualify for the loan. Your idea is rational but not realistic because it would be way to hard to prove who is the victim and who is the criminal. Of course the borrowers would say that they never made the income that was on the application if they could be forgiven.

  82. Laura Louzader

    These people should have to dwell in a Virtual Debtors Prison for at least 15 years.

    By that, I mean that they should get no credit for at least that long, and should have to be on the hook for a considerable portion of this debt.

    If they make, say, $100K a year, they should be given a living allowance of about $2800 a month of their income at the most. They will just have to find something out there that rents for $700 or $800 a month and if that meens Chula Vista or Santa Ana, well, TOUGH. Same goes for cars..somebody will have to take the bus, maybe.

    They should have enough personal luxury items left over from their spending spree, like snazzy electronics and expensive clothes and jewelry, to solace them while they live in a 700 sq ft rathole and drive around in a 15-year-old rustbucket.

  83. slacker kate

    tx property taxes are high and the overall system pretty regressive – but we hardly have a monopoly on that (prop 13).
    I have been wondering why tx didn’t seen the big run-up in prices like other parts of the country. There were a few gentrifying neighborhoods, and some condo mania, but overall, not so bad. The cultrual pathologies described by IR are at least as bad here. My thoughts so far:

    1) the third coast is not as appealing as the east or west ones
    2) there is a lot of room to build new stuff, and weak regulation to contain it
    3) economies stung badly by the tech bubble and Enron
    4) still smarting from the S&L meltdown

    I’m not kidding about the last one – it was even worse than in CA – banks in Houston asked people to stay in their foreclosed houses just so they wouldn’t deteriorate.

    of course, the lack of a run-up doesn’t mean it can’t deteriorate – that will depend on foreclosures. equity lending was only legalized less than a decade ago, so may not have become so common (that and the lack of runup makes it harder to use), but there are already zip codes with nationally high foreclosure rates.

    when I go home to visit my folks in CA I sometimes see ads from houston companies for investment in “underpriced” tx real estate… but really – not so much. Rents in houston are apparently going down, and not from people buying up.

  84. Laura Louzader

    Last I heard,in 2001, Texas, and Florida as well, had the most liberal, corrupt bankruptcy laws in the country. You don’t want to buy bundles of debt from these 2 states.

    In the 30s Dustbowl era, foreclosed Oklahoma homesteaders would carve “GTT”, or Gone To Texas, on the doorsill as they departed, for Texas has always had a Homestead law that protects your residence from creditors in the event of your insolvency. I forget exacty what the value is capped at.

  85. houseonlegs

    Yes, cash out refinances are restricted, I’m not sure in what ways but I know most lenders will not do cash out in TX.

  86. Kate


    It isn’t true that you were supposed to only use HELOC money on improvements! In fact, the loan sales sharks made a big deal about how you could spend it on a car, as did all their ads on TV. Take a vacation, buy diamonds, etc etc was their hue and cry. Apparently lots of folks took them up on it.

  87. tonye

    The restriction is on the interest deduction only. If you borrow the money on your house and then spend it on a car you can not deduct that interest.

    You can spend the money off your HELOC anyway you wish.

    However, if you had spent your own money earlier on the house ( say doing 20K of work, which is not that hard to do ) then you could borrow the money to cover what you had paid and then go buy the car.

    In essence the interest on the amount you borrow to cover your home maintenances and upgrades ( cost basis ) is deductible.

    I believe there is also a 1MIL limit on the total loan amounts.

  88. quesnay

    As a refinance, this is a recourse loan, right? So aren’t they on the hook?

    If the lender won’t go after them for the balance, maybe there should be a secondary market for deficiency judgements (if there isn’t already). Anyway, an idea for all of you enterprising folks out there.

    Forgiveness does not mean you get a free ride.

  89. tonye

    And this is for tomorrow night.

    Ten minutes from my house. Our usual mid orchestra seats.


    Weber: Overture to Oberon
    Beethoven: Symphony No. 7 in A Major, Op. 92
    Beethoven: Violin Concerto in D Major, Op. 61

    Royal Phiharmonic
    Pinchas Zukerman, conductor and violin

    DUDE….. I’m in HEAVEN. This is THE VIOLIN concerto for all time. And this is the second time in 20 years that we’ve had top notch talent do it.

    Then the 7th. Holy Shit Batman. .. Time to take Smetana off the iPod and navigate towards the 7th.. aargh…I only von Karajan’s version of that one, his third round .

    Webber, well that’s often paired with Beethoven anyhow.

    Good luck getting that type of talent anywhere in the US but NY, SoCal (LA, Costa Mesa) and perhaps, perhaps Chicago. We’re talking REAL talent here.

  90. zaleriana

    Texas and Florida have unlimited homestead exemptions. But that doesn’t affect mortgages, as liens pass through bankruptcy. The dodge is to run up huge, unsecured debts and use that money (and whatever other money you have) to purchase as big a house as you can in TX or FL. For a not-quite-on-point example, see OJ.

  91. slacker kate

    mortgage brokers are licensed/regulated… houses are not as protected in bankruptcy as people think. In the major MSAs median incomes are about half irvines, but that doesn’t mean anything for appreciation, expecially with the freaky mortgages. Although with the foreclosures, that may indicate some degree of freakishness – I’m just wondering why it didn’t translate into (much of) a bubble. there were bubbles in a lot of places other than CA-FL-NV (Minneapolis, e.g.). And why are prices in Seattle still like CA in 2006?

  92. tonye

    Oh, I can not overemphasize the importance and beauty of Beethoven Violin Concerto.

    Not a fiddle, and Karajan with the 7th was unstoppable. A true panzer. But jesus man…. Karajan and the Berlin knew how to scale Beethoven.

    Oh.. did I tell you that we once saw the Berlin Philharmonic do Beethoven on back to back nights… and four months later it was the Vienna do the same back to back trick with Mozart, Beethoven, et. al…..

    Courtesy of the ORANGE COUNTY Philharmonic Society.

    What do you get in Dallas? Joey “Happy” Benson III and his bunch of gypsy fiddles?

    My mortgage is worth because I can experience things near my house that will cost you a far trip. I see top notch global orchestras ten times a year -more sometimes. If you wanted to experience that you would have to pay for ten trips to OC or NYC -or worse yet, Europe. That would run you a lot more than my mortgage.

    When we all die, I can say that I have seen and heard some astonishing artists play some of the most sublime music ever written. And experienced the sun setting over the ocean many times.

    You keep Texas. Obviously your values are different. But don’t go passing judgment. Passing judgment is something that many people outside of California like to do.

    That’s karma they’ll have to sweat out.

  93. Mallen

    Gee Laura, you sure are sanctimonious. What did these people do? They put their house up for sale. Big friggen deal!

    This isn’t a short sale, this isn’t a REO. So what if they spent the equity in their house. Who cares?

    You want to put them in a Virtual Debtors Prison for 15 years and have them live in rathole when, at least at this point, there isn’t any evidence that they aren’t paying their bills. Jeesh!

  94. slacker kate

    um… the major cities in tx (and everywhere else) all have at least one major symphony/orch/opera/ dance co – yes we have high culture out here and lots of oil money to throw at it (especially now). Van Cliburn is from here, e.g. But what I think I have come to appreciate more about the place is the high level of amateur achievement/involvement – people play music, not just go to concerts. I noticed this about the midwest too – lots of general musical skill.

    I’m not passing any kind of judgement, and not trying to be a troll – I’m trying to figure out what the precipitating factors are here. TX has a huge history of booms and busts, I’m just trying to figure out who not so much this time. I seriously doubt it’s some bit of legislation – under this gov we’re working with W’s B-team – they make Brownie look sharp.

    And if you’ll notice, I didn’t say anything about relative prices, just relative appreciation.

    And I think the Frisco house is a tacky McMansion – but probably no tackier than McMansions anywhere else.

  95. ipoplaya

    Not quite true tonye. There is not a restriction on the interest deduction per se, there is a restriction on what you can characterize as home equity debt which in turn limits the interest available to be taken as a deduction.

    For most people in CA, who didn’t buy over the last couple of years, they may have up to $100K in home equity debt and fully deduct the interest paid on that debt. It matters not what they did with the money… Pay off credit cards, buy a car, take some vacations. IRS does not care.

    There is a home equity debt limitation related to FMV of the home and the acquisition debt. Many recent buyers, who may have an original acquisiton mortgage which could be equal to or even below the FMV of their home, would likely not be able to deduct interest on HELOCs or 2nd mortgages per IRS rules.

    See the following if interested:


  96. IrvineRenter

    It is refreshing to read stories about people who saw this foolishness for what it was when everyone around them failed to do so. You will be rewarded for your patience.

  97. IrvineRenter

    These are recourse loans, and the lender could go after any assets from the seller in the event of a short sale or foreclosure. However, you can’t get blood from a turnip.

  98. tonye

    Here you go. Houston


    However, if you think that you can compare a regional symphony orchestra with the LA, NYC, LSO, BSO, VSO, et. al… (even Cleveland and Chicago are good) you are simply confused.

    It’s not the same.

    Even in a high end stereo ( I got one ) you do not capture the experience and the dynamics and power of a top notch orchestra ( you will capture their expression though).

    Van Cliburn… I got his recordings. But none with a Texan Orchestra. This is with Chicago


    At some point, the Chicago and Cleveland were really fantastic too. And Minnesota is rather good today.

  99. tonye

    I wonder how my Acura TL and Honda Odyssey would look like with spinners. Surely it would drive nuts the control freaks across the street.

    Are spinners heavy? Would they be heavier than the lightweight alloy wheels in my cars?

    Would I have to to 22″ wheels and rubber protectors?

    I think I need to apply for a HELOC to buy us a couple of sets.. heck make that three sets and we’ll have the only Civic Hybrid with spinners.

  100. ipoplaya

    Most spinners are simply wheel covers that go over existing wheels. They probably wouldn’t clip to your alloy wheels.

    Real spinners, i.e. custom rims with the portion that spins are essentially defined by rim manufacturer Dub. The smallest size you’ll find Dub Spins in is probably 18″.

    If you really want to snaz up your Civic Hybrid, forget Spinners. They are so 2005… You need some Pimp Stars instead. Set of 22’s will set you back $12K.


  101. tonye

    Yeah. I was thinking about those. But cost a bundle.

    I’d have to sell my house and get a 110LTV on a McMansion in TRidge. Hopefully next year I’ll double my money and I can get some 22 Pimp Stars in my Benz AMG G-Wagon.

  102. tonye

    Hmmm… what a dropping Full Market Value means now is that the IRS could come back and haunt the homeowners.

    I can see where homeowners will want to ask the County to lower their assessed values to drop their RE taxes. However, they will have to be careful that the IRS doesn’t come back and starts auditing their tax returns.

    Oh boy. The joys of those 100%LTV HELOCs.

  103. slacker kate

    I kind of like it when you can ride horses, see an opera, dance/drink to Joe Ely and catch a Horns game in the same weekend. More specifically – when you can afford to.

  104. slacker kate

    Did a class paper on Henry George a few years ago… definitely something to it. The lady with the 17k house didn’t contribute anything to make the land under the house worth more – it became more valuable because of improvement of neighboring properties – if all the properties in the neighborhood were neglected to the same degree it would be blighted. it’s sponging off your neighbors’ investment.

  105. doug r

    As a professional driver, I HATE spinners.
    One of the clues you use when driving defensively is-“Is that vehicle stopped moving? And if it’s moving, how fast and is it speeding up or slowing down?”
    One of your best clues at slow speeds, especially when you yourself are moving at traffic speeds and your angles are changing constantly, is watching the wheels of cars that may enter your path. Spinners completely screw this up. I think they are as bad as “obs view” or tinted windows and should be ILLEGAL.

  106. tonye

    Err… we’re on a joking trip.

    An Acura or Honda with spinners turns my stomach.

    Actually, spinners in general turn my stomach, around, and around, and around, and around….

  107. ipoplaya

    Wow, the spread on 30-year fixed loan program between conventional and jumbo at the lender I watch is 1.375%. Yikes… That is the worst I have seen it.

  108. lawyerliz

    The free pass doesn’t go up to infinity any more in Florida for homestead. There are all these extremely complicated rules about timing and prices, that frankly, I don’t understand.

    In Texas, it used to be that you couldn’t get a home equity loan, could just get a 2nd mtg for home improvements, but this info is 20 years old, so I don’t know if it’s still true. At that time, if you lied and it was just to take out money, you could avoid being foreclosed on, but go to jail for lying. I was told that this happened to some pro football player.

    Anyway, if this law is still on the books in Tx, it probably saved a bunch of Texan tushies. And made a lot of lenders reluctant to make 2nds.

  109. lawyerliz

    I should clarify. Mtges are secured loans. So you might be able to get rid of or minimize credit card debt and other non-secured debt, and still keep your house. . .but you have to make your payments. If you never fell behind and just have credit card debt, this is possible, practically. If you’re also trying to catch up, you have to pay your old payment, a catch-up payment and a hefty trustee’s fee. In practice this is a snare and a delusion. People who can’t keep their loan current, can’t keep it current with all those add-ons.

  110. cmhappyrenter

    I believe the tax forgiveness is only on cost basis of home purchase, not MEW. Also CA is not in the forgiveness mode. I hope these folks have to write checks the rest of their lives to the gov.

  111. ice weasel

    And to be perfectly clear, I’m not arguing for what I am going to put forth below, only putting into it the conversation for the sake of discussion.

    Assuming the people in the hypothetical could hide the bonus away legally and issues of perceived morality aside, why should they pay back the debt?

    I’ll say it again, it is a regular business practice to negotiate, partial pay or not pay at all debts when a business is in trouble. To take a step further, we have energy companies that sell to each other, one shows a loss the other rakes windfall profits. It’s not illegal per se, so why not?

    My point comes down to this, why is it immoral, unethical or just bad form for an individual to do something that is considered “sharp business” for a corporate entity?

  112. tonye

    You can ride horses in SoCal.
    You can see Opera in SoCal.
    Mr. Joe Ely and the ilk travel to the Crazy Horse in Irvine ( they’re moving ). In fact there’s a lot of music diversity and lotsa redneck music here too.
    You can watch a real college football team play. USC. Some years too if UCLA is up to it.
    If you must go NFL, you can drive to SD. It’s not far from Irvine.
    And I’ve owned my house for 21 years.

    So there.

    Of course, it did rain today. 😛

  113. Formerbanker


    A depositor’s deposit accounts (CD, money market, checking account) are insured up to $100,000 per institution. There are combination rules for different account types that can raise that limit higher. For example, if you have a joint account with a spouse, you are each insured $100,000 so the account would be insured up to $200,000 if neither one of you had other accounts at that bank. Or, a husband and wife could have a deposit account in trust for their three children, and you’d actually have $600,000 of deposit insurance. You can calculate insurance coverage using the FDIC’s online Electronic Deposit Insurance Estimator at: www2.fdic.gov/edie

    If you buy securities through the brokerage services offered by your bank, you are correct – they are not FDIC insured (i.e. your principal is always at risk to the market forces) but they are separate and apart from deposit liabilities. Typically, if you buy investments through a ‘bank’, you are dealing with a bank affiliate company, and not the insured deposit institution bank subsidiary. Say you buy $1,000 of company ABC through the affiliate’s brokerage service. The affiliate acts as a fiduciary for the account (buys the security on your behalf, puts in in ‘safekeeping’ electronically, maintains investment account records, etc.) The cash you paid for the security went to the seller of that security. That security doesn’t show as an asset on the bank’s balance sheet (banks do have investments/securities on their balance sheet, but those are securities that the bank buys for its own behalf to earn interest income, not securities it is holding in fiduciary capacity for its customers). Hope that makes sense…

  114. Stupid

    Interesting comment over at http://lansner.freedomblogging.com/2008/01/25/tell-us-will-stimulus-save-oc-housing/

    clemente Says:
    January 25th, 2008 at 7:46 pm

    Cross posted from Calculated Risk comments section:

    For the time being, the GSEs are living by OFHEO’s rules on capital (haven’t heard that we’re throwing those out yet) and the reality is that they are having trouble just holding on to what they have on the portfolio now. Given how they account for their derivatives, it is almost certain that they will have to raise more capital after they print their Q4 numbers. Ceteris paribus this crowds something else out of the GSE portfolio or draws capital away from some other mortgage portfolio.

    The GSE have dramatically scaled back the amount of IO/high LTV/Low FICO/etc higher risk loans they are doing as a result of the capital constaints (to say nothing of the way they have performed). The GSEs are not in a position to wave a magic wand and save the housing/mortgage market.

    I was at a mortgage credit conference today and there was a very strong consensus that these jumbo lite loans would not be pooled with conforming loans. The best guess was that this move might cut the current jumbo/conforming spread in half.

    Of course, the Paulson/Pelosi/Bonehead troika didn’t stop to think about any of this, nor did they think about how they would sieze up the jumbo market while this plan works its way through Congress. When the market got wind of this, prices on jumbos hit the floor because no one wants to hold them knowing that jumbo holders will have a much stronger propensity to refi when this gets put into place. So if you want to know why jumbo rates jumped 50 BP yesterday, you can think our august leadership in Washington.

    Brian | 01.25.08 – 9:34 pm

  115. Boston2TheBay

    tonye – I am no classical music expert but I would imagine SF and the Bay area get a much richer offering of “culture” than OC/LA. For that matter Boston when I lived there beat them both. And both areas bleed high paying jobs. The weather in Boston sucks however. No argument there. And the evening news always leads off with the Sox or Pats. Seriously. They would pre-empt a Middle East Peace announcement for an emergency update on Manny’s whereabouts.

    OC is a paradise, but that is derived from one element: phenomenal beaches with nice weather and all the accoutrements. Mid-market economy otherwise with very pedestrian avg wages, and lacking a world class university. Plenty up the road in L.A., but OC is really its own market. And for non-beach people, I find that OC strangely holds no allure. Many prefer the Westlake Village area. More open space, less crime, still close to Malibu if you need the beach. I’d personally love to have my Bay area job and salary and transplant it to Irvine. That ain’t gonna happen.

    When it’s all said and done, I feel TX will look bubblicious compared to OC RE values. The only thing that will rescue the OC market is a big ramp in the local economy, as such a huge percentage is in the REIC. I did read that OC is becoming known as a center of mobile application development. Building the software, biotech and biomedical industries is needed to boost local wages and thus put a floor on the crash, because as our friends in TX have noted, the premium due to it being different in OC shot up rather precipitously from 2000 – 2007.

  116. GrewUpInIrvine

    I hate to say it, but I hope that they get soaked. Both the owners and the bank. People & banks like this have caused much of our housing situation.

  117. tonye

    Actually, the Los Angeles Metropolitan Area is so much larger than the Bay Area that we have much better availability of “culture”.

    San Francisco is more snotty but it has nowhere the market clout of LA/OC. So, when a touring act ( classical, redneck, punk, etc…) makes a decision where to go, LA and OC are far better choices financially.

    Also, in LA/OC an act can put together two sold out nights without the added havoc and expense of moving, so this makes our market much more desireable.

    What it comes down to is that SF may have a greater “density” of “culture” but when it comes to sheer numbers it’s miniscule compared to LA/OC.

    Same with Boston, really. Boston, SF, for example, have excellent local orchestras which are well funded, but it is a smaller market that NYC and LA/OC.

    And really, you can not compare LA/OC with Texas. The premium for SoCal has always been the weather. And, yes, we do have still a reasonably strong economy. Just because the Mortage Industry shed jobs in Irvine and Calabasas (San Fernando Valley) it doesn’t mean that jobs in other industries went away. Besides, not everyone who lives in Irvine works in Irvine.


  118. seattlegameboy

    As a third party observer from up here in NW, I would rather buy this S%$hole in Irvine for $1.2 million than the same price house in Dallas.

    There are things much important than how much you are paying for your housing.

    Bush was a popular governor in Texas which propelled him to be the worst president in US history. You can’t pay me enough money to live in a state where they thing W is the greatest thing since the slice bread.

  119. iwk27

    There are lots of people in Texas who hate Bush. He only won in Dallas County voting by two percent. But there are so damned many more who don’t see anything wrong with the guy…

  120. ex-tangelo

    I don’t think anyone but a bankruptcy lawyer has any right to chime in here, but this is the internet! So here’s my “I’m not a bankruptcy lawyer but I play one on the internet” take:

    If you choose Option A (put $ in bank, declare bankruptcy): The bankruptcy court orders your assets liquidated and/or your wages garnished to service your debt. Welcome to the next ten years of Hell.

    If you choose Option B: You’re out of debt and up $10,000.

    I know people who’ve gone through bankruptcy, it’s survivable but not recommended if you have another option. If you have had some disaster like a major health emergency, unemployment or divorce, my heart goes out to you. If you just got happy with the Visa card, talk to the hand.

    I’m not of the mindset like some others that bankruptcy is too lenient or that people who declare bankruptcy are selfish and lazy.

    I think the punishments are exactly what they should be. If we make bankruptcy more draconian, we’ll just chill the credit markets so that even the most creditworthy people will shun credit out of fear they may one day lose their jobs or other crisis. Our economy, like it or not, requires some risk-taking, and that risk is reflected in the interest rate on loans. If we insist on zero lending risk by having draconian bankruptcy penalties, no one will take the risk of borrowing. People will stop buying until they can pay cash, and our plastic-driven economy will Grind. To. A. Halt.

    No more people buying new cars.

    No more major appliances.

    No more real estate.

    No more using credit cards for everyday things like groceries.

    Sorry. You don’t have to like it, but that’s the truth.

  121. Laura Louzader

    They didn’t “force” us to rent, exactly, they merely drove the prices past the point anyone would or could pay without a moonshine mortgage.

    The affordability gap is most obvious in the moderate-to-middle income brackets. Since 2002, a moderate-income person would pay twice as much to buy as to rent- a sure sign the property is overpriced.

    Mandy is essentially correct- those of us who were unwilling to assume the risk entailed in buying an overpriced property with high-risk financing were left on the curb.

  122. Laura Louzader

    I can tell you that most brokerage firms DO make margin loans secured only by the stock, as I work in that industry.

    But firms are liquidating very quickly when calls go unmet.

  123. ipoplaya

    Bah. In 2003, in Irvine, it was often cheaper or at least equivalent to buy vs. rent if you were willing to use an adjustable rate mortgage… I got a mortgage in the summer of 2003 at under 4% for god’s sake. 30-year fixed conventionals were in the high 4% to low 5% range. There is no way that buying could have doubled up the cost of renting at those mortgage rates.

  124. zaleriana

    Assuming the people in the hypothetical could hide the bonus away legally

    1. They can’t. It’s called bankruptcy fraud and it’s a federal felony. You’ll do time in a federal-pound-me-in-the-@ss prison. It happens all the time.

    it is a regular business practice to negotiate, partial pay or not pay at all debts when a business is in trouble

    2. As has been mentioned elsewhere, when you owe the bank $10,000, it’s your problem; when you owe the bank $100,000,000, it’s the bank’s problem.

    is it immoral, unethical or just bad form for an individual to do something that is considered “sharp business” for a corporate entity

    3. It’s not, but (a) large corps don’t lie on their bankruptcy petitions, because that’s an easy way for the CEO to go to jail with no upside–unlike an individual who would directly keep any money they “hid” and risk #1, above, so it’s not really applicable in bankruptcy; and (b) for all non-bankruptcy-related situations, see #2, above.

  125. zaleriana

    You are fundamentally correct on all the points.

    I would like to re-iterate, again, that attempting to hide assets or income when filing bankruptcy often leads to a federal felony conviction. Sure, they don’t catch everybody, but is it worth risking up to 5 years in a federal prison?

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