Indy Crack

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.

2 Shelby Kitchen

Asking Price: $562,250IrvineRenter

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

Beds: 3
Baths: 2
Sq. Ft.: 1,538
$/Sq. Ft.: $366
Lot Size: 5,030

Sq. Ft.

Property Type: Single Family Residence
Style: Contemporary
Year Built: 1986
Stories: 1 Level
Area: Northwood
County: Orange
MLS#: S543642
Source: SoCalMLS
Status: Active
On Redfin: 2 days

lite-brite Tremendous value! Clean, light and bright. Vaulted ceilings. Recessed
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
Mello Roos!

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
And the…
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

70 thoughts on “Indy Crack

  1. Agent#777

    Is that a tile counter too? I thought those went out in the 70’s – maybe they got the “retro” package? Maybe that is why there is only the one poor picture of the kitchen. That, and the missing appliances.

  2. Sid

    I also love the trap door on the bar. Was this to store booze, to offer access to the dishwasher plumbing, or to give a good home for the resident Internet troll?

      1. AZDavidPhx

        Good question.

        I believe that in the classical context it refers to an individual who would log on to a message board and post a bunch of ridiculous assertions and mumbo jumbo in an attempt to inflame and insult the members of the board rather than engage in an honest debate.

        In the more modern context, it appears to be used much more liberally. I have even seen individuals refer to others as “trolls” because the offenders had a different opinion on the subject.

          1. skubiszm

            Awesome reply. I wonder how many people on this blog will get it. Did you hear it on TWiT or that terrible article on the New York Times?

        1. Rumplestilzken

          THIS HOUSE IS A+ VALUE! You renters are just bitter that this type of value is present in the market today, yet you have not saved up enough to take advantage of what is the perfect buyers’ market.

          Only a fool would sit this market out.

  3. George8

    This house was built in 1986 which was about the peak of the late 80s’ bubble. It was then resold in 1991 which is similarly to the current decline in terms of relative timing. The 1991 price of $288k therefore provides a good reference point.

    3% compounded from 1991 it is worth $476K. 4% will make it $560k, and 2% $403k.

  4. lawyerliz

    You say the average irvinite makes about $86k.

    An average Irvinite ought to be able to afford this very average house. So it should come down by about a third. Somewhere in the $380ks seems reasonable for you guys, tho I still can’t get over the prices there.

      1. AZDavidPhx

        Nice try. That’s pretty funny.

        If you go to this website (, the “latest” figure is “124,151”.

        If you go to this website (, the “latest” figure is “71,513”.

        We are in the middle of a recession and you want to believe that half the people of Irvine got a 20K pay raise in the last 3 years?

        I would urge you to be a little more skeptical when the source of the information is not disclosed and cannot be verified.

        They could have looked at incomes by zip code and cherry picked the highest one for the purpose of sensationalism. They could have “adjusted” the value for various reasons. Just go to this website ( so see how easy that would be.

        According to the Irvine, CA government website, the median family income is 85,624.,_California,+CA

    1. No_Such_Reality

      I don’t know Liz. At $380,000 with 15% down, they just barely scrap by the 28% front end DTI and that’s using the $108K Family income data.

      So for the average Irvinite Family to buy this property, they need $57,000 down + closing costs. Enough leftover money to do the minor fixing a light outstanding debt load. Not to mention the light debt load with credit cards, cars and student loans.

      For a more modest household to buy this place, the $86K median, with a FHA 97% loan, drops in at a solid 3.1X income. Or $266K before they tap the front end DTI. That also assumes they have a light debt load with cars, student loans, credit cards.

      If the family uses the FHA loan, the price capability drops to $340,000. Assuming not extra PMI charges. If PMI runs $100/month, the purchase price falls to 3X income…

      So folks, should an average Irvinite family be able to aspire to this place?

      1. Patience

        Excellent question. I don’t make as much as the income requirement stated above and I wouldn’t touch this sh*th*l* with a 10 foot pole.

  5. cara

    The kitchen picture is the worst of them. It’s not that bad of a place, architecturally. And I can even find things to like about the kitchen, the sink on the bar area, means you can talk to people while doing dishes not face a wall, the wall shelf covering the cabinets means that wierd space above the cabinets can be used for display without the walls between the cabinets leaving uneven surfaces to work around.

    This would be a decent house, small in sq feet but large in feeling, if it were at a decent price. Take comfort that at least the housing stock itself isn’t inherently depressing out there. (as opposed to the 1940’s post-war brick boxes we have in suburbs of D.C.)

    1. Kris

      I used to work in Irvine. I now live in Phoenix, and I have to say I like Phoenix’s prices much more than Irvine’s. A house like this would be priced around $185K, especially as most 1500 sq.ft. houses here are on at least a 7,000 to 10,000 sq. ft. lot. A 5,000 sq. ft. lot is a postage stamp.

      And the house doesn’t look that great either. The garage takes up the bulk of the curb appeal, the yard is a turn-off, and the siding looks like it’s ready to fall off. It could just be the photo quality, but it’s something that, if a realtor showed it to me, would have me standing on the gas and driving off to the next prospect.

      1. AZDavidPhx

        The prices are a lot better. But then again, we have to deal with tripping over tumble weeds and cow skulls.

        People pay premiums to not have to deal with that kind of sub-standard living.

    1. AZDavidPhx

      How about that nice oil splotch on the driveway?

      They went and smeared lipstick all over the pig’s inside, but didn’t bother to do anything about the exterior.

      I suppose they figure the tile on the floor and a fresh coat of paint is enough to trick the average knife catch fool.

      1. MalibuRenter

        For people outside of CA, not many know the difference between Mello Roos and Malomars. No need to call him a “doofus”. Call him “google challenged”.

          1. MalibuRenter

            Not sure how I missed that. I guess I just didn’t expect someone to refere to himself that way.

  6. LC

    $366 for a 1538 sq ft house? This has all the markings of a flip…gussied up, spit polish. They might as well put the words “greater fool” in flashing letters. I’ll pass.

  7. Perspective

    Moving closer toward 20% downpayments for all:

    “…Large mortgage insurers insist that they are adequately capitalized, although their losses have grown to $2.6 billion so far this year and they have paid more than $6 billion to cover claims on foreclosed homes. The industry is tightening its standards to stem its losses, meaning that buyers might need to have a larger down payment–up to 10 percent–and higher credit score as well as pay a steeper mortgage premium. The Federal Housing Administration could benefit if private mortgage insurers collapse, as the government entity requires only as little as 3 percent down, or the market could return to a 20-percent down payment standard. There are also concerns whether Fannie Mae and Freddie Mac will continue to buy their loans, as several insurers have been downgraded by credit-ratings agencies and have fallen out of compliance with the mortgage finance giants’ requirements for doing business with them…”

    1. No_Such_Reality

      Well cool, the average Irvine Family can afford this then up to $400,000 in price. Provided, they have the $80,000 + closing costs + reserves to buy it. That’s about $100,000 liquid, or move up…

      It this the kind of place that’s a move up needing $100,000 in built up equity?

      1. rkp

        No, this place is a good starter house that a young couple should be able to buy. Saving $100K after 5 years of working isn’t hard if both are making around the median income.

        1. AZDavidPhx

          That’s quite an assumption, RKP.

          I suppose those family units where both do not earn the median or better ought to go find a cardboard box to settle down in and quit their complaining.

  8. tenmagnet

    There are quite a few IndyMac REOs that have hit the LA market recently.
    Much more to come now that they’ve thrown in the towel on trying to workout short sales.

  9. Robert Green

    i find it depressing that none of these houses have any “green” components at all, nor do the realtors emphasize such upgrades. energy efficiencies, solar panels (oh wait sorry irvine only has 350 days a year of sun), solar thermal or geothermal and so on. none of them. not a one.

    and worse are the fancy houses, 5000 plus sq ft houses with “exotic hardwoods” (wonder which rainforest we chopped down so your bedroom could have a ‘warm feel’ or whatever) and everywhere GREEN F-ING LAWNS, as if water is just easy to come by and eternal.

    i do appreciate that OC is drinking its own poo and pee–seriously it is really amazing. but it is also because there simply is no other choice. poking around on this board it would be nice to see people caring about anything other than short term property values, as opposed to long term human values, but it is still OC–i ask too much.

    1. camsavem

      Im sure when your not preaching for mother earth you are taking care of orphans and widows while handing out meals at the local soup line.

      You have no idea what other people do with their money or their free time. If you want to hear people talk about “green” issues then go to a “green” blog.

    2. Matt

      This is a blog concerned with housing values in Irvine. It doesn’t mean that those of us posting on it have no other interests in houses other than their market value. We just mostly contain our discussions to issues relating to the housing bubble. I, for example, will be installing solar panels and putting up shade trees to the west when I buy a house.

      Also, if it is, indeed, the OC of which you ask too much, then might I inquire why you ask it? Is it simply to annoy? Quite honestly, the internet has enough people yelling at each other over conflicting values.

      As for a meaty part of your post, I think that realtors don’t emphasize green components because the houses don’t have them, their skills leave a lot to be desired, and it’s the kind of message in the posting that might annoy some (and hence, deter a potential sale). However, individual realtors do, in fact, highlight such things when showing a place to people who care about such issues. A good salesman doesn’t sell the same product to different people in the same way.

    3. MalibuRenter

      I think it’s reasonable to ask questions about why the houses lack green attributes. It’s just as reasonable as asking why they are ugly, have small lots, or have not been redone since 1977.

      Realtors in general aren’t technical people. They also seem to believe that saying something precise will turn people off, or might somehow invite liability if they don’t describe it right. I’ve noticed how rare it is to even see “has 8 palm trees”, “comes with 25 cu ft built in fridge” etc.

      If you are a green advocate, you might try to get the MLS services to include information on energy efficient appliances, solar, or low water lawns. If prompted, more realtors might include the info.

  10. Robert Green

    i’m in LA, and the criticism is just as apt here. the truth is that this blog is amazing but it mostly a combo of schadenfreude and i-didn’t-do-it stuff while (reasonably) bashing realtors. i have no issue with any of that. i do have an issue with a system whose emphasis is on short term mememe with no connection to whatever else is happening in the world. any drive through mission viejo with its acres of un-solared roofs in the midst of the greatest sun weather in the world drives this home.

    i’m redoing a house right now all green (solar, grey water, certified wood, native succulents and food growing) in LA and of course i get no help from the city to do so. so thus the frustration. the interesting question is will this give my house, should i flip it, a competitive advantage? and if so, how much per sq ft?

    we shall see.

    1. No_Such_Reality

      “i’m redoing a house right now all green (solar, grey water, certified wood, native succulents and food growing) in LA and of course i get no help from the city to do so. so thus the frustration. the interesting question is will this give my house, should i flip it, a competitive advantage? and if so, how much per sq ft? ”

      Um, why should anybody help you? If it’s good, it should pay for itself.

    2. Joe Schmoe

      Get lost, Boomer.

      Most of the people who post here, me among them, want to buy a house to live in. We aren’t interested in making a political statement, participating in the latest trend (a “green” house) or saving the planet.

      I want housing prices to come down because I have two young children and until recently was raising them in a 1 bedroom apartment. I don’t have the luxury of worrying about things like solar power and “native succulents” (whatever those are). Instead, I am trying to provide a decent home for my children. I would like to raise them in a safe community with good schools. That’s far more important to me than using “certified wood” in my latest flip.

      But thanks to this housing bubble, houses in safe communities with decent schools are beyond my reach. I can’t afford to pay $1mm for a 1,200 sq ft tract house in a neighborhood with good schools. For this reason, I could not possibly care less about the percentage of Mission Viejo residents who use solar power. I am too busy trying to keep my kids out of the ghetto.

      And yet, you have the audacity to complain that “course i get no help from the city” with your latest speculative real estate investment? In other words, you complain that none of my tax dollars (I live in LA) are being used to defray your costs? Someone please give me a handkerchief! I can barely contain my tears!

      Get lost, Boomer. Go back to your second wife (you ARE divorced, aren’t you?) and ask her for consolation. Take your smug, self-righteous blather somewhere else.

      1. east coast wonderman

        I think this is a little over-the-top, and wonder about the relative (to irvine, to such an older/unrenovated place, and to future RE trends) values that “Green Technologies” would add into listig prices.

        I know a friend who bought at the near-top of the peak and has a fifty grand pool out back. In this east coast market, I think his pool is a wash, literally, and needs to come right off the listing price.

        If fuel (and out here, heating oil) prices continue to climb, will green houses be worth more, and how much?

        BTW: the original green rant was a bit out of character for this blog, but I don;t think it deserves the animus from the above comments.

      2. Buck Thrust

        Boo motherfucking hoo. I’m just a put-open little boy with 2 kids who can’t afford to live in “Everyman’s Dream: Orange County.”

        I’m old enough to remember when Irvine was bean fields. At the time, it was a much more fascinating and culturally alive place than it is now, full of Asian computer programmers and their equivalent in white wankers (that would be 1:1.3 wanker ratio). For that reason, I’m happy that I will be quite fucking dead when this shitpile finally comes home to roost and abusive whiners realize they ain’t even gonna have any water to drink much less “gasoline” for their “SUVs” or “food” for their “families.”

        Irvine: La Habra with less Mexicans. That’s all it is and all it ever will be. Thank Donald Bren for that.

        1. LC

          Yeah, Irvine is much better for Mr. Bren than it is for the working slobs that occupy his profit center. If it was shit on a shingle, Irvinites would remark about the lovely aroma and warm texture. They could have affordable, low operating cost green structures — but what they have instead are toxic materials and debt prisons. And they overpaid for them. I guess it takes an Irvine education to do that.

      3. Jeff

        Joe Schmoe:
        You are concerned about the environment- the immediate environment in which your kids grow up.
        Great post.

      4. LC

        Yeah, I would put my family in a toxic plywood radon trap in Irvine over a cheaper-to-build, green, sustainable house anyday. As long as Mr. Bren gets his profit, I am doing my job — says Joe.

        What a pathetic life. “Too busy keeping my kids out of the ghetto.” Well, you live in a ghetto — but you just don’t even know it. I know plenty of people, myself included, who were raised in the rough part of the city, and we do just fine. The first thing that street-smarts tell you is how to spot a phoney.

        It would scare me to death if my kids could not hail a cab in New York, or take the bus in Chicago. What kind of life do you want for your kids?

      5. LC

        “I am too busy trying to keep my kids out of the ghetto.”

        Translation — I am a racist, and I will pay any money, because racists are stupid — it is true.

        1. CK

          Nice commentary, LC and Buckthrust. Appreciate the language. If the sterile, wanker, racist society you percieve Irvine to be keeps people like you two away, then clearly Irvine is the right place for me to buy a home.

          Buckthrust, you should talk to LC — he knows of an often speaks glowingly about a secret place not far from here that is “not that much different than Irvine” but much cheaper. This mystical, promised land is called ‘Corona’. A couple of sophisticates like yourselves would be very happy there.

    1. AZDavidPhx

      Jedi Mind Trick.

      Attempting to create a perception that the market is turning and prices are going back up to pull another victim off of the fence who fears becoming priced out.

    2. IrvineRenter

      They are trying to recover the lost payments during the foreclosure period and cover various fees and costs. It is all part of their loss mitigation procedures.

  11. minou270

    Lipstick on a pig. And not even a full application. The yard = horrible. The kitchen = horrible. Who in their right mind would pay more than 1/2 a million dollars for this P.O.S.?? It will NEVER sell for that price. To the chump how paid $700k, WTF?

    1. AV Paperboy

      “To the chump how paid $700k, WTF? ”

      Well, technically the chump rented it from the bank for a year as they didn’t use a cent of their own money to buy it, saw that prices were dropping and headed for the hills.

  12. momopi

    I like this house, it needs some work but is elderly & handicap friendly. Bedrooms and bathrooms downstairs, though I haven’t seen pictures of the bathrooms yet. If necessary you could always build an additional bathroom into the yard I guess. 2 car garage with full drive way and no weird steps/stairs going up to the front door.

    The price is a bit high though. At around low 400k’s I’d consider buying, probably have to sink another 20k-30k into fixing it up.

  13. Ochomehunter

    We on this board are concerned over “Green”, the kind that means $$$$. We want cheaper housing, and when so called “Green” Technology bubble bursts, we will get that incorporated in our homes as well. My electricity bill on a 1400 SF home is $50/month at annual average. Solar costs in excess of $20,000. Go do the math, it will take 30 years to pay off the cost of solar, if price of electricity doubles in next dacade which it will, still it will take 15 years to pay off. By that time the solar system would be broken and require replacement. Talk about Green

    1. MalibuRenter

      You could put in a low water requirement yard, make sure your pipes are insulated, have better A/C air filters, or have a programmable thermostat. All of those are considered green, and don’t take long to pay for their cost.

      If you have to replace appliances, get energystar rated ones.

      If you are keeping your house airconditioned during the day just for your pet, consider a cool bed, or a kuranda bed. Either one will help them stay cooler with a higher thermostat setting.

  14. furious sugar

    Re: Solar panels… most of the Irvine villages are under atleast 1 HOA. Some of the HOAs are pretty stringent about what is permissible on the outside of the house. Though they can’t outright ban solar– they can make it more challenging. My neighbor recently installed panels and the HOA found that they were laid in a different pattern than was shown on his HOA application. It was the identical sq footage he had listed — just a different pattern. He had to redo it to match the orig. diagram.

  15. idrnkurmlkshk

    It’s amazing how many HOA’s exhist today. you’d think we lived in a Communist country.

    I wonder how many more homes are being foreclosed on, due to Fascist HOA rules?

    I think your mortgage should rank higher in priority than a stupid HOA fee…tax.

    I HATE HOA’s as you can tell. If I wanted to live in a controlled community I’d move to China.

    1. Like HOAs

      Thats the great thing about America. You aren’t forced to live in an HOA if you don’t want to. Most people like HOAs because without them you almost always end up with at least 1 as$clown on every block who never cuts their lawn, has a rusted-out RV parked in their front yard and destroys everyone else’s home value.

  16. idrnkurmlkshk

    That’s the scam. It goes both ways. There are plenty of people who hate overpowered HOA’s as well. It’s usually the details in the CC&R;’s that are the make or break-it in a deal.

    I’d rather live next to a great neighbor who paints their house pink before I lived next to an ass-hole who nit picks every single CC&R;.

  17. it comes in waves

    That Tanta post really got me riled.

    I am self-employed with an 800+ Fico and I didn’t drink the kool-aid. At 40 years I’m looking forward to finally getting a house for my family. Now I won’t have any borrowing options because of all the other fools?

    I admit I don’t know much about lending. Can you use your tax filings to document your income?

    1. cara

      Yes, tax returns count. They like copies of the past 2 tax returns. It’s the prefered method even. Basically if you’re only going to buying your house (paying off your mortgage) with the portion of your income you’re willing to report to Uncle Sam and pay taxes on, they’ll be shit-tickled to death. That’s not Alt-A.

    2. IrvineRenter

      No and low doc programs were started for someone in your circumstances. Unfortunately, they were turned in to the “liar loan” system that inflated house prices in Irvine for a while. There may be a period of time where it is more difficult to find a loan for the self employed, but as was pointed out above, if you can provide real documentation of real income, someone will give you a loan.

      1. it comes in waves

        Thank you both!

        IR- I was never happy about the house scalpers (like ticket scalpers,) and your straight-forward honest posts and analyses are one the best things that ever happened to me!

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