Crack Music — Kanye West
What were the guys over at IndyMac smokin’? I recently spoke with two developers who have looked at the IndyMac portfolio of large loans. They both said it was nearly impossible to value because it was such an eclectic mix of properties with appraisals of dubious quality. There is a great post at Appraisers Forum on the nonsense over at IndyMac. In residential home lending, IndyMac had positioned itself as the leader in Alt-A loans.
Tanta at Calculated Risk has a great discussion in her post Reflections on Alt-A. Her basic premise is that Alt-A was never a good business plan. Alt-A loans were generally stated-income and low-doc loans given to people with high FICO scores. The theory was that people who could be responsible with normal debts could do just as well with enormous debts. It isn’t working out too well, particularly for IndyMac.
One of the intriguing ideas from her post is that Subprime will return, albeit in a different form. There has been much discussion about how people who have gone through foreclosure will get back into the housing market. Subprime was originally intended to take people with poor FICO scores that had good income and savings and give them bridge financing until they could repair their FICO scores and refinance into conventional loans. This business model will probably return in a few years as there will be many people in this category. However, Alt-A is likely dead, and it will not be resurrected. Stated-Income, High CLTV, and low or no-doc loans will probably not resurface no matter how good a persons FICO score is simply because people will default on these loans not matter how responsible their past history.
So where does that leave Irvine’s housing market? Without Alt-A, people will not be able to get the loans necessary to support today’s still-inflated prices. Buyers will actually need to qualify for loans based on their real income, and they don’t make that much money. And since many previously Alt-A borrowers have defaulted and are now Subprime, and since Subprime is currently defunct, the buyer pool in Irvine has gotten much, much smaller.
Today’s featured property is a simple story of speculative greed, Alt-A financing and the aftermath of years of irresponsible lending. The buyer used 100% financing and defaulted when prices didn’t go up. IndyMac foreclosed on its first mortgage and wiped out the second. They are now trying to sell the house to recover the value of their first mortgage, and they are over market. The only mystery remaining is how much of their first mortgage they stand to lose.
Income Requirement: $140,562
Downpayment Needed: $112,250
Monthly Equity Burn: $4,685
Purchase Price: $690,000
Purchase Date: 9/26/2006
Address: 2 Shelby, Irvine, CA 92620
|Property Type:||Single Family Residence|
|On Redfin:||2 days|
lighting. Scraped ceilings. Tile floor throughout. Fireplace with
mantel in living room. Tile roof. Corner lot in quiet family
neighborhood. Close to schools, parks, shopping, freeway. Low HOA. No
Isn’t the front yard beautiful? What a value!
I think the kitchen is the 1986 original, too.
The previous owner bought this property on 9/26/2006 which was the approximate peak of Irvine’s market. He used a $552,000 first mortgage a $138,000 second and a $0 downpayment. It looks like he made payments for about a year and gave up. It went back to IndyMac on 6/25/2008. If this property sells for its asking price, and if a 6% commission is paid, IndyMac stands to lose $161,485.
IndyMac may be on crack, but at least they didn’t get Merril-Lynched…
How we stop the black panthers?
Ronald Reagan cooked up an answer
You hear that?
What Gil Scott was hearin
When our heroes and heroines got hooked on heroin.
Crack raised the murder rate in DC and Maryland
We invested in that it’s like we got Merril-Lynched
And we been hangin from the same tree ever since
Sometimes I feel the music is the only medicine
So we cook it, cut it, measure it, bag it,sell it
The fiends cop it
Nowadays they cant tell if that’s that good shit
We ain’t sure man
Put the CD on your toungue yeah, thats pure man.
From the place where the fathers gone,
The mothers is hardly home
Gonna lock us up in a…home
How the Mexicans say we just tryin to party homes
They wanna pack us all in a box like styrofoam
Crack Music — Kanye West