HELOC Abuse San Clemente Style

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

Address: 121 W Avenida San Antonio San Clemente, CA 92672

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:

224 Via Alegre San Clemente, CA 92672 Price: $635,000, Paid $620,000, Debt $750,000

16 VIA PAQUETE San Clemente, CA 92673 Price: $790,000, Paid $717,000, Debt $845,000

505 Via El Risco San Clemente, CA 92673 Price: $949,000, Paid $693,000, Debt $1,230,350

201 Camino San Clemente San Clemente, CA 92672 Price: $365,000, Paid $235,000, Debt $350,000

2806 Bello Panorama San Clemente, CA 92673 Price: $495,000, Paid $370,000, Debt $654,300

9 Calle Merecida San Clemente, CA 92673 Price: $549,000, Paid $478,000, Debt 780,901

94 Via Onda San Clemente, CA 92673 Price: $674,900, Paid $485,000, Debt $920,000

1617 Vista Luna San Clemente, CA 92673 Price: $700,000, Paid $636,000, Debt $875,000

120 Avenida Algodon San Clemente, CA 92672 Price: $485,000, Paid $189,000, Debt $730,000

1002 Avenida De La Estrella San Clemente, CA 92672 Price: $633,650, Paid $575,500, Debt $1,035,000

239 Calle Neblina San Clemente, CA 92672 Price: $675,000, Paid $237,000, Debt $1,078,250

307 Calle Sonora San Clemente, CA 92672 Price: $749,999, Paid $290,000, Debt $894,000

525 Calle Del Rito San Clemente, CA 92672 Price: $799,000, Paid $725,000, Debt $1,155,000

764 Calle Vallarta San Clemente, CA 92673 Price: $624,900, Paid $187,000, Debt $662,200

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:

4027 Calle Lisa San Clemente, CA 92672 Price: $2,695,000

Recording Date: 09/01/1993 Sales Price: $640,000

Loan Amount:


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

That one has $1,260,000 in mortgage equity withdrawal. It isn't a pattern of small refinances you see on most, but it is a huge amount of MEW.

314 S La Esperanza San Clemente, CA 92672: Price: $1,650,000

Recording Date: 11/07/1996 Sales Price: $317,000

Loan Amount: $370,000

Recording Date:11/04/1999 Loan Amount $375,000

Recording Date: 12/08/1999 Loan Amount: $100,000 This was a HELOC

Recording Date:08/28/2002 Loan Amount $550,000 Refinance of first

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

The original sales price is probably not correct. Even the records say the price is unconfirmed. Since there was a $370,000 first mortgage issued on the date of purchase, it is likely that the actual purchase price was greater than $370,000. There was no 100% financing back in 1996. You can see a steady increase in borrowing in increments from $100,000 to $350,000 up through January of 2008 when the borrower refinanced all the previous loans with a $1,400,000 first mortgage. This property had about $1,000,000 in mortgage equity withdrawal.

4015 Calle Isabella San Clemente, CA 92672: Price: $1,595,000

Recording Date:05/17/1994 Sales Price: $353,000 Loan Amount: $372,000 — I think the sales price is incorrect on Redfin

Recording Date:08/25/2000 Loan Amount: $565,500

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.

600 Calle Tibidabo San Clemente, CA 92672: Price: $1,295,000

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

This is the typical pattern of a HELOC abuser. Notice the numerous refinances and the steady increase in the mortgage balance. These people were making tens of thousands of dollars each year from owning their house. It was like having another breadwinner. The total debt on this property is now $985,000 which is just over double the mortgage debt they had in 1997.

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

Address: 121 W Avenida San Antonio San Clemente, CA 92672

Beds: 3
Baths: 2
Sq. Ft.: 2,546
$/Sq. Ft.: $313
Lot Size: 5,200 Sq. Ft.
Property Type: Single Family Residence
Style: Other
Stories: 2
View: Ocean, Peek-A-Boo
Year Built: 1979
Community: San Clemente Southwest
County: Orange
MLS#: S509071
Source: SoCalMLS
Status: Active
On Redfin: 585 days

Price reduced – need buyer now! Make all offers now subject to lender approval. Entertainers delight! Large Home in in the highly desirable Southwest San Clemente . Large deck and patio with a peak ocean view. Located on the Beach side of 5 freeway on a culdesac. Interior features include large master and living room with high ceilings.

The realtor is not kidding about the Beach side of the 5 freeway…

121 W Avenida San Antonio map

You can see the stages of grief in this listing price; denial, fear and capitulation.

Date Event Price
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.

This is one of the worst cases I have seen, not for its amount, but for the obviousness of the abuse. Spare me the chronic illness or business investment excuses. We all know where this money went.

Imagine yourself living this lifestyle. Over the course of 9 years you had a piggy bank producing its own money. This house was throwing off about $90,000 a year in tax-free income. Whenever you needed a new car or wanted to take a vacation or throw a wild party on your rooftop deck with the ocean view, the house was there to provide for you.

Do you see why the lenders are losing so much money? It is easy to see how real estate became so desirable during the bubble. It is also easy to see why people cling to kool aid intoxication so strongly. Who wouldn't want to live that lifestyle? Too bad it is a Ponzi Scheme….

24 thoughts on “HELOC Abuse San Clemente Style

  1. thrifty

    Hard to believe it’s after 8 a.m. on Sat and not a single post about San Clemente. Suspect it’s the 3 day holiday.
    We bought in S.C. in 1978, sold to our son in 1999 and have been following the market for several years assuming that prices will eventually resume normalcy at which time we’ll probably buy again. An example: 102 Vial Zapata: bought in 2002 for $730,000, now asking $995,000 a short sale with backup offers accepted (for about a month or more so far – suspect it will be back on the market like 90% of s.s.). Perfect fit for IR S.C. category 2 HELOC abusers. However, the $249 per sq.ft. price is substantially lower than most of the s.s. examples and approaching normalcy. My guess is that prices will eventually be under $200 p.s.ft. on a reasonable selection of homes not located within walking distance of the beach. We’ll probably pounce on something about then. The realtors we’ve talked to don’t think prices will go that low – anybody care to hazard a guess?
    An aside: I understand that banks don’t rent out REOs. The realtors comment on one of today’s s.s. examples shows why:
    “Great tenants would like to buy, and very private, so showing a tad difficult.”
    One caveat on S.C. If you can see the freeway from any of the hillside views, you can hear it. Might be bothersome to some, particularly at night if you sleep with windows or sliders open.
    Talega residents won’t have to be concerned about noise from the currently defunct attempted extension of the 241 tollroad (Foothill South Fwy) – at least for now. And the traffic congestion is significant through all of S.C. If you’re thinking about going to Irvine, particularly on weekends, pack a lunch!

    1. george8

      This property is very close to I5, is’nt it? How much would you buy back this one since your are familiar with SC?

      1. thrifty

        Not over $200 p.s.ft. and only if it was in excellent condition. That offer would very likely be rejected out of hand. Wouldn’t buy, however, because of fwy noise.
        For comparison, I paid $105K in 1978 for a 3br/2.5ba condo with ocean view just over a mile inland on hillside and sold in 1999 for $200k to our son (a fair price at the time). It would probably bring about $525-$625 now depending on how badly someone wanted the floorplan (biggest and few of them) and view (about the same as this current 2br listing on redfin:
        S.C. prices have been just as slow to decline as Irvine and often as unrealistic but, like Irvine, they’re dropping.
        I neglected to mention that fwy noise is also audible anywhere on the hillside even if you don’t have a view. (It diminishes rapidly on the ocean side of the fwy because of the onshore breezes). It only disturbed me in the evenings – could not sleep comfortably with sliders or windows open facing ocean (for breeze in summer) due to it. It’s 24/7 and worse now.
        And there were at least 6 weeks a year when a/c was needed, particularly during Santa Ana conditions which lasted about 5 days each time. Now I think it’s more. I wouldn’t be without a/c if I lived there year-round (perhaps a portable unit for the bedroom at night and l/r daytime).
        Unfortunately, all the LA and O.C. traffic going to San Diego and vice versa has only one road – I5. It is very busy on weekends. Weekdays are no fun either. There will have to be some construction of new (toll?) roads to accomodate it. I think the recently nixed 241 extension will be revived in some fashion when the traffic becomes unbearable in a few more years.

      2. LC

        I once looked at a house in San Clemente on a street called Via Quieto. It backed to the 5 freeway!

  2. MalibuRenter

    I have a good friend in San Clemente who insisted until a couple of months ago that prices in the good neighborhoods would not go down. I had been warning him for over 3 years.

    He owns a lot of rental real estate. He also took out HELOCs on a couple of them in early 2008 to maintain liquidity, i.e., he wanted to make sure he got the equity out before the offers disappeared. He is likely to remain current on his loans.

    1. thrifty

      Do you remember a 1965 surfing movie by Bruce Brown called “The Endless Summer”? I have a friend who built a home decades ago off Ortega highway. He said that Mr. Brown had purchased substantial amounts of land along Ortega around that time and subsequently slowly sold them off in smaller parcels. Timing is everything!

  3. Craig

    What I don’t understand is why all of these people who took out hundreds of thousands of dollars worth of HELOC money didn’t just set some of it aside to help pay the mortgage for a few years. I guess if they were responsible enough to plan ahead for such a thing, they wouldn’t have ended up defaulting as soon as their teaser rate payments ended.

    1. IrvineRenter

      Many people did that. Unfortunately, that is still an unsustainable Ponzi Scheme, and prices will not rise to bail them out.

      1. MalibuRenter

        Depends on what they did with the money. If they bought overpriced real estate, they doubled down on a bubble.

        If they bought stocks, they lost about the same amount.

        If they bought high grade bonds that weren’t MBS or CDS, they didn’t make a ton of money, but they didn’t lose much either.

        If they started a profitable business, they may have done pretty well.

        If they sent kids to college, the results are uncertain.

  4. E

    Note to self….

    Buy more gold bullion on Monday.

    Seriously…is this making anybody else uncomfortable?

    IR…if you get a chance…I’ll bet you dinner that the Ahmanson mansion in Hancock Park might be an interesting one.

    401 S. Hudson 90020

    I heard (from a reliable source) that the owner turned down an offer from Madonna a few years ago.

  5. newbie2008

    Lots of them are making money in my book. Simple math:
    original purchase price < current sale price Loan abuse is another matter. What happened to the cash? Will the bank's go after them or just bill the Feds, who will pass the bill to taxpayer? Options: (trustee sale with quick foreclosure without recourse vs. judicial foreclosure-with possible lien against other assess), I think the banks will go with the former and stick the bill to the taxpayers. The latter takes too much time and collecting requires work. Why work when you can get money without working or risk? Who needs the Ponzi scheme when the govt will make up the difference?

  6. San Diego Homes Blog

    Is it still considered HELOC abuse if the property is sold for a profit? Taking those loans is definitely a risky maneuver. A the short sales are really unforgivable. But if they manage to get out from under the property without stiffing the lender I’m not sure it should be called abuse.

    1. IrvineRenter

      It does depend on how you define abuse. I suppose you could call adding to a mortgage balance and risking a home “incredibly stupid use” if that sounds better.

      Your query is somewhat revealing. The idea that there is a legitimate “use” of a HELOC other than perhaps property improvement shows just how deeply embedded personal Ponzi scheme financing is in our culture.

      It is like credit cards. The only sane use of credit cards is to pay the balance off each month. Carrying a revolving balance–financing consumption–is extremely foolish, but some would just call that “use.”

      1. covered


        Even that’s about to change. Prudent savers with good credit are once again being tapped to pay for the foolish credit card revolvers. “Deadbeats” are what collection agents call us who pay our balances off monthly and get airline miles or cash back for card purchases. For that privilege under the new law that the bank lobby wrote, we get to pay fees to use those cards starting next year after having our credit lines cut because the trillions we bailed out the “too big to fail” outfits with wasn’t enough for the poor things to feel comfortable lending us back our own tax dollars. Oh, slightly OT, but our bond buddy Bill Gross says the US and the UK are about to lose their AAA credit rating for the first time ever. But “the bottom is in.” Wasn’t it Seinfeld, or George, that said “it’s not a lie if you believe it.”

    2. newbie2008

      The abuse is when the is a walking away with money in the pocket.
      Purchase price: 400,000
      Purchase loan: 399,000
      HELOC loan: 200,000
      short at: 450,000

      Or the “Owner” walks away with $150,000 loan forgiving or possible cash in pocket. That $150,000 might even be tax-free (depends on date of forgiven). Taxpayer is billed ~$200,000 ($150,000 for loan default and $50,000 for RE and Bank late fees). The HELOC abuser / “owner” is now a victim.

      I know of two that gave back the keys (on with no money for 6 M) and other other had to bring some money to the short closing. They can’t get a home loan for 2 years, but credit is good enough for cars on credit.

  7. Lee in Irvine

    These people make me want to vomit.

    There, I said it … I feel better now.

  8. Peter

    Very interesting post on SC. I never understood why everyone here is so obsessed with Irvine. If you add Aliso, Laguna Niguel, San Juan and SC to your roster you get 5-10 times the inventory of only looking in Irvine and a better chance for a good deal. You can also be closer to the beach. If you work in Irvine you can take the 73 and get there in 15-20 minutes for $200 a month.

    Here is a great article on knife catchers in Phoenix.


    This quote summarizes the attitude of most buyers: “You need to buy when there’s blood in the streets,” he said with a shrug. “Even if it’s your own blood.”

  9. darms

    Apologies as this is OT, it’s continued from the previous thread but IMHO it’s important so here goes – (IR, please feel free to delete this as it’s your (marvelous) blog. (about some ugly $hit that affects us all))

    I wrote – “It wasn’t just the home “owners” who stole the money from us, the banks & mortgage brokers got hefty fees for their ‘services’ and the realtors got their their 6% as well…”

    AZDavidPhx responded – “I am calling out fauxowners who are squatting after defaulting on their mortgages.

    It is (and should be to you) just as offensive as AIG throwing parties after getting bailout cash.

    These pigs on the other side of the spectrum don’t get a free pass. These mother-fers were part of a two-person tango.

    If this pig mailed back the keys after defaulting then I would chalk it up to another gambler biting the dust. But no, she sat in the place stuffing herself and taking a dump at everyone else’s expense for two years.

    This is B.S. You should be outraged. But hey, if you want to go the “all’s fair ho ho ho hah hah hah” and take to morals down a notch then who am I to stand in the way. What do I care? Let’s all get naked and go streaking through the local elementary school everyone – who are THEY to JUDGE US!”

    & here’s why I posted this:

    Yes, I blame all parties in this mess, those that ‘bought’ & those that ‘sold’, but my major beef is with those that ‘sold’. Why? Because it’s those that ‘sold’ these bogus mortgages & loans who knew what they were doing was fraudulent at the time they were doing it yet did it anyway because they knew they would get their cut in any case, knowing full well it was their client/(prey) and some lending institution somewhere that would get left holding the bag (& ultimately, responsible taxpayers aka chumps like many of the readers of this blog & myself).
    John Q. Public sees his neighbors make off like bandits w/their HELOC $. His mailbox is full of similar offers. Why should his neighbors’ houses ‘earn their keep’ & not his? Yeah, right, he should have known better, BUT, it’s the bank officers, the mortgage brokers, the realtors, they’re the ones who get paid the big bucks TO KNOW THIS STUFF yet they pimped these fraudulent products right down the line. Hate the homeloser all you want to, sir, but if you don’t first & foremost target those few with the power to have made it all happen in the first place, you’re both blaming the victims and setting the stage for the next bankster ripoff of “We, the people”. Priorities, man, priorities!

  10. Robert

    How many people in Irvine don’t own the land their homes are built on?…and don’t even know they don’t own the land?

    1. thrifty

      If they don’t own the land, then they would most likely be paying a lease on a regular basis (monthly, quarterly, yearly) by separate check. Can’t imagine an owner not having been advised at the time of purchase that the land (or their share of commonly owned property in a condo complex) is not being sold with the structure.

    2. San Diego Homes Blog

      Uh… All of them? I’m not an Irvine expert, but the Irvine Company owns all the land there, right?

      1. thrifty

        I had no idea that the Irvine Co still owned the residential land. I assumed it owned and leased the commercial land (apts, business locations, etc). And that it had sold the land with the master planned communities such as Irvine. In any event, I think the residential sales docs must stipulate that the company still owns the land.
        Interestingly, Palm Springs is laid out like a checkerboard with Indian ownership of every other square mile except the acreage sold off piecemeal. This has resulted in some homes being owned (fee simple) and others being built on leased land. Like homes on leased land are usually cheaper since the land is leased and not part of the purchase. After 50 yrs the land and all structures on it reverts back to the Indian owners. Wonder if all the homes in Irvine revert back to the Irvine Co after a given period?

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