Our popular tour to surrounding communities in search of HELOC abuse continues in Huntington Beach. So far we have seen $3,367,500 HELOC Abuse from Hollywood, $5,000,000 HELOC abuse from Laguna Beach, $7,000,000 HELOC abuse in Newport Coast and 18 different properties in Huntington Beach. Today we will examine the sleepy beach community of San Clemente.
Asking Price: $798,000
Don't Worry Baby — The Beach Boys
Well its been building up inside of me
For oh I dont know how long
I dont know why
But I keep thinking
Somethings bound to go wrong
When you see all these people who took out so much money that they lost their homes, you have to wonder if there was a little voice inside quietly warning them things might turn out badly. It did.
I like San Clemente. In fact, if I do not end up buying in Irvine, I will buy in San Clemente. It is a beach town with a laid-back atmosphere. It is more relaxing than Irvine, although not as convenient. After the crash, you will get more for you money there. There is a great deal of toxic financing in San Clemente because there were many homes built there during the bubble in Forster Ranch, Marblehead, and Talega. Based on the toxic loans and the HELOC abuse I found there among long-term homeowners, I can safely say that San Clemente's housing market is going to get flattened.
When I look at the market in San Clemente, I am struck by the number of short sales. As a percentage of listings, it is much higher than the other cities I have looked at. When I last looked at the San Clemente market a few months ago, there were not this many short sales.
There are three types of listings in San Clemente: (1) short sales where the buyers bought in 2004 or later and paid too much, (2) short sales where the buyers bought before 2004 and abused their HELOCs and now they are underwater, and (3) the high-end WTF listing prices from people who do not yet realize they are underwater. My observation is that HELOC abusers are as common as late buyers in San Clemente. That is a much larger percentage than I have found in other communities.
There is HELOC abuse in the group of late buyers, but these people did not own long enough to do any real damage. There is HELOC abuse in the high-end WTF listings, but since they are not short sales, they are a bit harder to find. The HELOC abusers who bought before 2004 are the list below:
Assembling this partial list of HELOC abusers is not difficult. You could do it looking at Redfin. Look in your own city, and find properties purchased earlier than 2004 where the asking price is over the purchase price, but the property is listed as a short sale. There is only one way an owner can make a profit on the sale and owe more to the bank than the sales proceeds–HELOC abuse.
Although high-end HELOC abuse is a bit harder to find because they are not listed as short sales, it is still quite common. Here is a sampling of high end HELOC abusers:
|Recording Date:||09/01/1993||Sales Price:||$640,000|
|Recording Date:||08/29/1997||Loan Amount:||$547,000|
|Recording Date:||12/27/2001||Loan Amount:||$400,050 Paid down the mortgage|
|Recording Date:||12/30/2002||Loan Amount:||$600,000|
|Recording Date:||12/11/2007||Loan Amount:||$1,900,000 Option ARM|
|Recording Date:||11/07/1996||Sales Price:||$317,000|
|Recording Date:||12/08/1999||Loan Amount:||$100,000 This was a HELOC|
|Recording Date:||01/06/2004||Loan Amount:||$300,000 This was a HELOC|
|Recording Date:||03/13/2006||Loan Amount:||$850,000 Refinance of first. Notice it was the sum of the previous two loans|
|Recording Date:||05/11/2006||Loan Amount:||$350,000 New HELOC|
|Recording Date:||01/30/2008||Loan Amount:||$1,400,000|
Recording Date:05/17/1994 Sales Price: $353,000 Loan Amount: $372,000 — I think the sales price is incorrect on Redfin
|Recording Date:||11/04/2003||Loan Amount:||$786,800|
|Recording Date:||02/17/2005||Loan Amount:||$150,000 This is a HELOC|
This is more typical of what I see; the owner doubled their mortgage while they owned the property, but they will probably still sell for a profit. This total debt on this property is between $786,800 and $936,800 depending on how much HELOC money they extracted. Either way they took out over half a million dollars in mortgage equity withdrawal.
|Recording Date:||00/00/1989||Sales Price:||$605,000|
|Recording Date:||10/31/1997||Loan Amount:||$480,000|
|Recording Date:||10/31/1997||Loan Amount:||$30,000|
|Recording Date:||07/30/2001||Loan Amount:||$535,000|
|Recording Date:||04/02/2003||Loan Amount:||$650,000|
|Recording Date:||11/25/2003||Loan Amount:||$43,000 HELOC|
|Recording Date:||08/16/2006||Loan Amount:||$875,000 Option ARM|
|Recording Date:||05/07/2007||Loan Amount:||$100,000 HELOC|
|Recording Date:||12/28/2007||Loan Amount:||$10,000 Stand-alone second|
Today's featured property is a long-term HELOC abuser. Starting in 1998 this guy extracted almost a million dollars over a 9 year period.
Asking Price: $798,000
Income Requirement: $199,500
Downpayment Needed: $159,600
Monthly Equity Burn: $6,650
Purchase Price: $310,000
Purchase Date: 5/1/1996
|Lot Size:||5,200 Sq. Ft.|
|Property Type:||Single Family Residence|
|Community:||San Clemente Southwest|
|On Redfin:||585 days|
The realtor is not kidding about the Beach side of the 5 freeway…
You can see the stages of grief in this listing price; denial, fear and capitulation.
|Oct 01, 2008||Relisted||—|
|Sep 23, 2008||Delisted||—|
|Jun 04, 2008||Price Changed||$798,000|
|May 07, 2008||Price Changed||$799,000|
|Apr 02, 2008||Price Changed||$995,000|
|Feb 01, 2008||Price Changed||$1,099,000|
|Nov 22, 2007||Price Changed||$1,199,000|
|Oct 13, 2007||Listed||$1,299,000|
As you might have surmised, I picked this property to profile because the HELOC abuse was large, consistent and obvious. Any lender who cared would have noticed the Ponzi Scheme borrowing and cut this guy off years ago.
- This property was purchased on 5/1/1996 for $310,000. The owner used a $279,000 first mortgage and a $31,000 downpayment.
- On 12/3/1998 he refinanced with a $341,000 first mortgage taking out his downpayment plus $31,000. First taste of kool aid.
- On 9/29/1999 he refinanced with a $368,000 first mortgage.
- On 10/17/2000 he opened a HELOC for $30,000.
- On 8/2/2001 he opened a HELOC for $50,000.
- On 6/18/2002 he refinanced with a $495,000 first mortgage.
- On 3/25/2003 he opened a HELOC for $242,000.
- On 6/7/2005 he refinanced with a $750,000 Option ARM.
- On 11/29/2005 he opened a HELOC for $150,000.
- On 2/9/2007 he opened a HELOC for $250,000.
- On 6/26/2007 he refinanced with a $980,000 first mortgage.
- On 6/26/2007 he also opened a HELOC for $140,000.
- Total property debt is $1,120,000
- Total mortgage equity withdrawal is $841,000 including is tiny downpayment.