Once an owner has extracted every penny of equity and “put” the property to the bank, they don’t care anymore because they think, “I Got Mine.”

Asking Price: $450,000

Address: 51 Lakeshore #20, Irvine, CA 92604

{book6}

I Got Mine — Motorhead

Right now, this time,
You got yours and I Got Mine

It is human nature to be more concerned with your own problems than the problems of others. Many HELOC abusing homedebtors already extracted all their money out of the house, so the losses really aren’t their problem any more. Some stupid lender or crazy CDO investor somewhere is eating a huge loss, but the borrower is walking away with what is left of the cash. What reason would they have to care–other than perhaps for their credit score.

The whole situation reminds me of a brief scene from “King of Queens” I saw a few nights ago. Doug goes into an ice cream parlor and orders an ice cream cone. The attendant gives him the ice cream cone, and Doug hands him a $20 bill. The guy tells him he can’t break a $20, and Doug responds that it is all he has. After going back a forth a few times, it becomes apparent they are at an impasse. Doug looks at his ice cream cone and licks it a few times as if to tell the guy “I got mine, the money is your problem.” So it is with our housing market.

Asking Price: $450,000

Income Requirement: $112,500

Downpayment Needed: $90,000

Monthly Equity Burn: $3,750

Purchase Price: $551,000

Purchase Date: 4/12/2004

Address: 51 Lakeshore #20, Irvine, CA 92604

The word nestled must come out of the realtor vocabulary.

Doesn’t the single picture of a glass door make you wonder what is inside? Perhaps this is a genius realtor ploy to pique our interest and schedule a showing… or not.

• This property was purchased on 4/12/2004 for $551,000. The owner used a $440,800 first mortgage, a $27,550 second mortgage, and a $82,650 downpayment.
• On 6/1/2004 he opened a HELOC for $55,100.
• On 1/6/2006 he refinanced with a $600,000 Option ARM with a 1.75% teaser rate.
• Total debt is $600,000 plus negative amortization.
• Total mortgage equity withdrawal is $49,000.

If this property sells for its current asking price, the lender will lose $177,000 plus negative amortization after a 6% commission.

{book2}

Here’s the story, there’s only me,
No other place for you to be,
I’ts only you babe, it’s only you,
I can’t believe the things you do,
Right now, right here,
Ain’t gonna let you disappear,
Right now, this time,
You got yours and I Got Mine

I Got Mine — Motorhead

The sun is shining, the bluebells are blooming, and prices are crashing back to 2003 levels.

Asking Price: $450,000

Address: 14 Bluebell, Irvine, CA 92618

{book7}

Irvine Homes has my profile on Deerwood in Irvine.

Bluebell Polka

Growing up, I used to listen to polka music at my grandparent’s house. There were lifelong fans of polka, and I have fond memories of them whenever I hear it. Days gone by…

Today, I want to show you just how long the foreclosure process takes in the real world. I have charted the theoretical foreclosure process for you before:

The time between filing an Notice of Default and the actual trustee sale can happen in as little as 111 days. However, with all the foreclosure moratoria and processing delays, the process actually takes much, much longer. Look at the records on today’s featured property; it took almost two years to move from Notice of Default to Notice of Trustee Sale, and apparently, the foreclosure has not happened yet.

If this is how long foreclosures are taking, think about how long the foreclosure debacle is going to stretch out. Moratoria and other delaying mechanisms do just that; they delay the process. Very few are “saved” during these delays, mostly people just get free rent for a few extra months. What a great system we have… not.

Foreclosure Record
Recording Date: 12/03/2008
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Document #: 2008000557064

Foreclosure Record
Recording Date: 08/28/2008
Document Type: Notice of Default
Document #: 2008000408844

Foreclosure Record
Recording Date: 08/08/2007
Document Type: Notice of Rescission
Document #: 2007000493224

Foreclosure Record
Recording Date: 05/25/2007
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Document #: 2007000338375

Foreclosure Record
Recording Date: 01/24/2007
Document Type: Notice of Default
Document #: 2007000048591

The owner of this property stopped making payments sometime in late 2006. It has been over two and one-half years since this owner stopped paying, and she is still listed as the property owner, so one can assume she still occupies the property. That is two and one-half years without a housing payment–a bill we will all pick up as taxpayers at some point. How does that make you feel? Did you pay for your housing since 2006? I did.

{book4}

Asking Price: $450,000

Income Requirement: $112,500

Downpayment Needed: $90,000

Monthly Equity Burn: $3,750

Purchase Price: $465,000

Purchase Date: 10/10/2003

Address: 14 Bluebell, Irvine, CA 92618

I can’t criticize that description, although I could point out that there isn’t one.

This property was purchased on 10/10/2003 for $465,000. The owner used a $372,000 first mortgage, a $93,000 second mortgage, and a $0 downpayment. On 12/30/2004 she refinanced with a $486,500 Option ARM, and on 2/3/2005 she got a HELOC for $67,000.

Within 16 months of taking ownership–something that required no money from her–she managed to withdrawal $88,500 from the housing ATM.

She made payments for about three years–tiny payments because she used an Option ARM–and then she defaulted. If you count her mortgage equity withdrawal toward her payments, and if you add up the time she spent living free in the house, she is approaching 6 years of living with no net housing payment. Sometimes I really feel like a fool paying rent for all these years…

I hope you have enjoyed this week at the Irvine Housing Blog. Be sure
to come back tomorrow as I explore HELOC Abuse San Clemente Style, and
come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

The long awaited implosion of the North Korean towers at the Marquee is happening as envisioned. There is a race to the ground, and no floor in prices is in sight.

Today’s featured property is being offered for 53% off its purchase price.

Asking Price: $349,900

Address: 3131 Michelson #307, Irvine, CA 92612

One more community profile at the Irvine Homes Blog: Quail Hill.

I first wrote about these towers in Equity Inferno and most recently in $16,805 Monthly Equity Burn. In the Equity Inferno post, I ran a rent versus own calculation and estimated rental parity at about $325,000 with a $2,800 rent. With changes in interest rates and rental rates, this number is now about $350,000 which is today’s asking price.

Does that mean I recommend this place? No. Values will likely decline further because the fate of these units is not to be owner occupied–these will mostly be rentals. Cashflow investment levels, even at these very low interest rates are about 25% further down. If you buy these units at rental parity, you need to be prepared to be trapped there for many years as prices drop to cashflow investor levels and stay there indefinitely.

Today’s featured property is being offered for 53% off its purchase price. So what makes me think values will decline even further? Perhaps it is an inventory issue. There are 7 properties for sale under $500,000:

3131 Michelson #306 Irvine, CA 92612, Price: $399,000

3131 Michelson #606 Irvine, CA 92612, Price: $399,000

3131 Michelson Dr #802 Irvine, CA 92612, Price: $430,000

3131 Michelson Dr #1102 Irvine, CA 92612, Price: $449,000

3141 Michelson #804 Irvine, CA 92612, Price: $475,000

3131 MICHELSON #1302 Irvine, CA 92612, Price: $499,000

3141 MICHELSON Dr #404 Irvine, CA 92612, Price: $499,999

I was going to link to the entire inventory in these two buildings, but there are too many. I would not be surprised to see an 80% turnover of these units in foreclosure with a bottoming price near $250,000, perhaps lower if there is overshoot.

Asking Price: $349,900

Income Requirement: $87,500

Downpayment Needed: $70,000

Monthly Equity Burn: $2,916

Purchase Price: $740,000

Purchase Date: 5/15/2006

Address: 3131 Michelson #307, Irvine, CA 92612

Wonderfull?

The mortgage records on these properties are difficult to sort through (they unit numbers are not given), so I was unable to locate the mortgage records. With an asking price 53% off, someone is eating a big $hit sandwich. If this property sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $411,000.

With all of the defaulting owners and crashing prices, I cannot help but wonder what the fate of this place will be. Will the services be cut back and the $1,150 HOA fees reduced? Will this be converted to low-income housing? Will lenders loan on units in places like this? I don’t see the end game here, but I am pretty confident this place will never be what it was advertised to be.

Some people should never have been given the loans they had; they can’t afford the properties they occupy. Today’s featured property is beyond the means of its owners, so it is going into foreclosure. Is this foreclosure a crisis? or is is the cure to their debt problems?

Asking Price: $1,399,000

Address: 25 Arcade, Irvine, CA 92603

{book1}

I contributed another post at Irvine Homes: Turtle Rock.

Escape — Metallica

I’ll fight until the end,
To escape from the true false world,
Undamaged destiny,
Can’t get caught in the endless circle,
Ring of stupidity

The stupidity of lenders is amazing. It is obvious that some people can only afford their home with Ponzi Scheme borrowing, but during the bubble the lenders did not care. The few that noticed or cared believed they had no risk so it didn’t matter. The collateral would go up in value forever, so they had no foreclosure risk, they could sell the loan to investors and remove the risk from their books, or they could protect themselves with a credit default swap from AIG. In short, they could write whatever loan they wanted to any borrower with a pulse, and they could not lose money–or so they thought.

Today’s featured property was partially financed with a $998,400 Option ARM with a 1% teaser rate. These are the loans that inflated values at the high end, and they are the same loans that will cause its destruction. None of these loans are stable, and the borrowers using these loans are defaulting in large numbers and building the next foreclosure wave. None of these loanowners are going to keep their homes because they cannot afford the payments on a conventional mortgage.

At the conclusion of Mr. Mortgage’s most recent post, he stated, “Bottom Line — after seeing these latest figures I am
more convinced than ever that the next step is wide-spread principal
balance reductions that will reduce the massive negative equity burden
in America and be a first-step to solving the mortgage and housing
crisis once and for all.” Widespread principal balance reductions are occurring in a process known as foreclosure. Once a property goes through foreclosure and is resold, the new buyer has a much lower principal balance than the old one. That is what needs to happen.

Does Mr. Mortgage believe this is going to happen through voluntary “gifts” of principal reductions to existing borrowers from the lenders? That is what his statement implies. I rather doubt it. There is no way to make this “gift” equitable, and the moral hazard would be extreme, and the lenders will resist this to the bitter end. Look at their opposition to allowing bankruptcy judges to reduce principal balances; they would rather take the home back in foreclosure than allow principal reductions even in the case of borrower insolvency and bankruptcy. Further, they have managed to kill that measure in the Senate–a Senate completely controlled by an antagonistic Democratic majority. Don’t expect to see either a voluntary or a politically mandated effort at principal reduction any time soon.

The only rational method of principal reduction is through foreclosure. As a society, we need to stop viewing this as a “foreclosure crisis.” There is no foreclosure crisis; there is a debt disease, and foreclosure is the cure.

Asking Price: $1,399,000

Income Requirement: $349,750

Downpayment Needed: $279,800

Monthly Equity Burn: $11,658

Purchase Price: $1,248,000

Purchase Date: 1/26/2005

Address: 25 Arcade, Irvine, CA 92603

architectual?

Notice the I-don’t-give-a-crap description on a $1.4 million property

So how did this become a short sale? The property was purchased on 1/26/2005 for $1,248,000. The owners used a $998,400 Option ARM with a 1% teaser rate first mortgage, a $62,400 second mortgage, and a $187,200 downpayment. On 2/10/2006 they opened a HELOC for $310,000, and apparently used it. The total property debt is $1,370,800 plus negative amortization.

If this property sells for its current asking price, and if a 6% commission is paid, the lender will not lose much, perhaps $100,000. It is interesting the “rich” people who live here wouldn’t pay off the short sale amount. Perhaps they are not so rich after all.

{book3}

Feel no pain, but my life ain’t easy,
I know I’m my best friend,
No one cares, but I’m so much stronger,
I’ll fight until the end,
To escape from the true false world,
Undamaged destiny,
Can’t get caught in the endless circle,
Ring of stupidity

Escape — Metallica