Will HOA Lawsuits Compel Lenders to Foreclose on Shadow Inventory?

Home Owners Associations are being crushed by delinquencies, and there is little they can do about it. If the first lien holder doesn't foreclose, HOAs can't get paid, and any bills are wiped out when the foreclosure finally does occur. Existing homeowners are the ones who are damaged most.

Irvine Home Address … 77 CANYONCREST Irvine, CA 92603

Resale Home Price …… $650,000


The fields of Eden

Are full of trash

And if we beg and we borrow and steal

We'll never get it back

People are hungry

They crowd around

And the city gets bigger as the country comes begging to town

We're stuck between a rock

And a hard place

Between a rock and a hard place

The Rolling Stones — Rock and a Hard Place

The amend-extend-pretend policies of lenders is fraught with unintended consequences. The obvious costs to lenders is lost revenue from squatters who get to stay in their homes without making any payments, but lenders are not the only parties involved who aren't getting paid.

Local taxing authorities and Home Owners Associations (HOAs) also are not being paid. The taxes will get paid eventually because property tax obligations survive the foreclosure. Whatever bills the old owners left behind are the responsibility of the new owner. Bills due to HOAs are only paid after mortgage holders are paid in full. Since most delinquent homeowners are underwater, there is no equity left over to pay the HOA bills, and any delinquent amounts are not paid by the new owner. The costs of extinguished HOA dues are passed on to existing homeowners who are still paying their bills.

Home owners associations have only one recourse to compel an owner to pay their dues: foreclosure. In a normal real estate market — one where home owners have equity — the threat of foreclosure is an effective threat; however, when owners do not have equity and they are not paying their mortgage, HOAs have no leverage. HOAs are generally unwilling to foreclose because their ownership position after the foreclosure is subordinate to the surviving mortgages — an HOA foreclosure does not wipe out the superior liens. In other words, HOAs can take possession of an underwater property — which provides them no benefit — and in the process wipe out any claims to back HOA dues. Taking ownership of a property they cannot sell to a dues-paying owner does not help them.

The HOA dilemma

HOAs cannot compel payment without foreclosure and their bills do not survive foreclosure if the home owner is underwater. Most HOAs are praying that loan modification programs succeed; unfortunately, cure rates fell off a cliff when prices started falling. The recent uptick is the short-lived boost from the government's loan modification program designed to shift liabilities from lenders to the US taxpayer. With millions of squatting homeowners underwater and unemployed, HOAs are not likely to see delinquent homeowners get current on their HOA dues any time soon.

HOAs want a dues paying homeowner. They would prefer banks to work out a loan with an existing borrower and get paid for the past due amounts. Since this is rare, their next best alternative is for the bank to foreclose, sell the property, and get a new homeowner to start making the HOA payments. However, when lenders refuse to foreclose — which is what creates shadow inventory — then HOA finances do not stabilize, and property owners face huge assessments or even bankruptcy of the HOA.

The current laws create two separate problems for HOAs. First, they must determine if there is any hope the existing homeowner will ever pay their delinquent HOA dues. Vacant properties owned by speculators are never going to pay their HOA dues, so these properties become targets for HOA foreclosures. This leads to the second problem: banks don't like to pay the HOA dues either once they have foreclosed.

New law lets HOA's go after banks

Friday, 11 Jun 2010

NEW PORT RICHEY – There are several houses in the Hunter's Creek neighborhood where the grass is long, the paint is fading, and the houses are vacant.

Neighbors call them eyesores, but they've become more than that. Foreclosed homes have become a financial drain on entire neighborhoods.

People often stop paying their HOA fees long before they stop paying the mortgage. Michael Paulson is a member of the Hunter's Creek homeowners association in New Port Richey.

He says once a house is empty, it's impossible to get even a nickel of the past due fees.

"We try to get with the banks who own the home and they don't do anything about it either, so we're constantly trying, it makes our property value go down," Paulson said.

It also forces those who do pay, to pay more.

"The cost of keeping up the common areas, the upkeep of the association and other bills that may come in is now spread out to those who continue to live there and are paying their maintenance fees," Paulson said.

State Senator Mike Fasano authored a bill that becomes law next month.

It allows homeowners associations to bill banks for delinquent HOA fees for home on which they've foreclosed.

"The mortgage company, the bank, the lender is now going to be responsible for paying up to 12 months of the maintenance fees, the monthly dues," Fasano said.

Condo associations have been especially hard hit by people who walk away from their homes, leaving thousands in unpaid association dues.

"We just had a special assessment. Everybody here has to pay extra. We had to raise $100,000 to cover these delinquencies," said Bill Sanders.

HOA board members say there is a limit to the number of extra fees they can force their members to pay to help make up for the bills their old neighbors left behind.

"They're saying 'hey look, every $50 dollars a month, you know it really hurts us,'" Sanders said.

The payment of HOA dues provides a strong incentive for banks not to foreclose. Even though they may end up paying the bills later, each month that passes with the property in shadow inventory is one more month the bank doesn't have to pay the HOA dues. This new Florida law makes it clear that lenders are responsible for HOA payments while they own the property. What this law will do is increase shadow inventory and decrease the time from foreclosure through disposition. In other words, lenders will not foreclose any faster than they can process and sell the REO in order to minimize their HOA dues.

HOAs need to force first-lien foreclosure

What HOAs really need is the ability to force the first lien to foreclose. Only then will a dues-paying homeowner get into a property. The law Florida gets banks to pay after the foreclosure, but it also provides a huge incentive not to foreclose. The only solution that will serve HOAs is for them to be given the ability to force the first lien holder to foreclose and make lenders pay the HOAs on their REO. Anything short of that will leave HOAs in the circumstances they are in now: bleeding cash with no recourse and no end in sight.

Something has to change or we will see an epidemic of HOA bankruptcies ahead.

She nearly forgot her down payment!

I wonder sometimes if lenders have learned anything about cash-out refinancing during the bust. The previous owner of today's featured bank-owned property would have lost her entire down payment if not for a HELOC.

  • This property was purchased on 5/27/2005 for $759,000. The owner used a $607,200 first mortgage, a $75,900 second mortgage and a $75,900 down payment.
  • On 7/3/2006 she got a HELOC for $135,000. Assuming she rolled the second mortgage into the first, she left $16,800 in the property which she has now lost.
  • Total property debt was $742,200.
  • Total mortgage equity withdrawal was $59,100.
  • Total squatting time at least 13 months.

Foreclosure Record

Recording Date: 03/12/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/01/2009

Document Type: Notice of Default

This is a pattern observable on many bank-owned properties; the first mortgage was held by Wells Fargo, and the HELOC was from American Mortgage Express Corp. Since the same lender did not hold both the first and the second, it is wiser for the first mortgage holder to foreclose, extinguish the second mortgage, and resell the property to recover their capital on the first mortgage.

Going forward expect to see short sales when the same lender owns both the first and the second and foreclosure when these mortgages are owned by different parties.

Irvine Home Address … 77 CANYONCREST Irvine, CA 92603

Resale Home Price … $650,000

Home Purchase Price … $759,000

Home Purchase Date …. 5/27/2005

Net Gain (Loss) ………. $(148,000)

Percent Change ………. -14.4%

Annual Appreciation … -2.9%

Cost of Ownership


$650,000 ………. Asking Price

$130,000 ………. 20% Down Conventional

4.84% …………… Mortgage Interest Rate

$520,000 ………. 30-Year Mortgage

$132,148 ………. Income Requirement

$2,741 ………. Monthly Mortgage Payment

$563 ………. Property Tax

$150 ………. Special Taxes and Levies (Mello Roos)

$54 ………. Homeowners Insurance

$181 ………. Homeowners Association Fees


$3,689 ………. Monthly Cash Outlays

-$466 ………. Tax Savings (% of Interest and Property Tax)

-$644 ………. Equity Hidden in Payment

$241 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves


$2,903 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,500 ………. Furnishing and Move In @1%

$6,500 ………. Closing Costs @1%

$5,200 ………… Interest Points @1% of Loan

$130,000 ………. Down Payment


$148,200 ………. Total Cash Costs

$44,400 ………… Emergency Cash Reserves


$192,600 ………. Total Savings Needed

Property Details for 77 CANYONCREST Irvine, CA 92603


Beds: 3

Baths: 1 full 2 part baths

Home size: 1,275 sq ft

($510 / sq ft)

Lot Size: n/a

Year Built: 2004

Days on Market: 14

Listing Updated: 40336

MLS Number: S619029

Property Type: Condominium, Residential

Community: Turtle Ridge

Tract: Chnt


According to the listing agent, this listing is a bank owned (foreclosed) property.

Charming beach close town home in gated community of Turtle Ridge. Bamboo flooring, high base boards designer light fixtures. Elegant Lami doors throughout. World Class association amenities include a cabana lined pool, spa, bbq and clubhouse facilities. The good life!!!

We have a special visitor tonight. Pat Regnier from Money Magazine is doing a story on Orange County real estate, and he will be in attendance for anyone who wishes to express an opinion on the subject. Of particular interest is anyone who is underwater but isn't going to walk away from the property. Come out and tell your story, and you may make Money Magazine.

I hope to see all of you this evening.

69 thoughts on “Will HOA Lawsuits Compel Lenders to Foreclose on Shadow Inventory?

  1. newbie2008

    She go more than reimbursed for her $16,000 down payment balance in free rent for 13 months ($13*2000 – $16,000 = $10,000 profit). She actually ahead in dollars. Wah Wah Wah. Poor ole me. Uncle Sam help !

    Sad story of a guy killing his family over housing debt. Just easier to leave the millstone behind and walk away (and more morally sound in that case).

    My understanding is CA HOA FC have power only when the borrower has equility or will make good on the real sale. If the borrower/owner is being FC, it makes little economic sense to pay for any lien. The banks upon FC is not obligated to pay for the secondary liens. The HOA only have power over responsible owners and essentially no leaverage over ilresponsible owners who have no equility.

    1. MrSlappy

      Imagine a lender going after these squatters, and defaulters for the NEXT 20 years! Imagine that… HaHa.

      Firms profit off Florida homeowner defaults

      ” ….In Florida, a claim must be filed within five years, but the lender has up to 20 years to collect.

      So even if a borrower has no money today, he or she may rebound within the collection time frame.

      “People are broke right now, but they won’t be broke forever,” Greene said. ”



  2. AZDavidPhx

    House Building Plunges, Apartment Building Surges

    Builders are very depressed over the end of the taxpayer gravy giveaway to house buyers as buyers discover that newly built houses cost more than used houses. Low interest rates and lower prices are running out of steam as fewer suckers are to be found who have not already signed up for 30 years of slavery to an overpriced house.

    Builders are not confident about their ability to compete with shadow inventory.

    At least with all these new apartments being built, the squatters will have someplace to go when they are eventually dragged out by the Sheriff.

  3. newbie2008

    I’ve seen banks drag their feet on a 70% equility home refin. (30% LTV remaining) to lower interest rate from 8% to 4.8%. The bank used every excuse in the book to juice the loan a few more months at the higher interest. Had a angry customer that transfer other accounts out of their banks after the closing. Banks has one last jab in miscalculating the remaining principle upon selling the note. Only a slight non-refundable fee of $100 to “research” the miscalculation.

    How much is the N. Korean towers HOA in debt with all the empty and other non-paying members. Water and power cost must be taking a heavy toll on the paying members or HOA reserves.

  4. newbie2008

    What about mortgages that collect on taxes, HOA and insurance cost?

    If the loan has HOA fee collection and doesn’t pay the HOA, are the banks seeking reimuburse on the uncollected HOA fees?

    Many builders purchased the land while the prices were still high. They will need to take a haircut unless they have friends in high places to get free or subsidized intrastructure (road, sewer, etc.) or other freebies/welfare payments. Those that purchased at very low prices are still making a profit.

    FHA 30 year 3% down loan are not slavery, but a free rent stimulus package. Pay until you’re way under water. Then, free rent for a year or so, if in a non-recourse state. If the prices go up, sell. If the interest rates go up, sell with the assumable loan. Only loser will be the taxpayers.

    1. AZDavidPhx

      You notice how nobody is talking about the defaults that are coming 5 years from now when today’s buyers start walking away. We are hearing all about the 20004-2006 vintage walkaways. There are TONS of 2007 and 2008 knife catchers who are equally as hosed but making very little noise. People who buy in 2009 and 2010 are going to be the next wave in 5 to 7 years from now. They will be the suckers who bought at the bottom of the interest rate cycle and have to take 100K+ haircuts on their houses when they try to sell ( since we know that none of these 30 mortgage debtors ever stay in one place for 30 years or pay off their loan ).

      The only people who should be buying today are people with bubble wealth that they do not mind blowing. First time buyers should RUN as fast as they can and not get trapped. Let the boomers consume each other – do not jump into the water with them as you will only get eaten.

      1. lowrydr310

        Let the boomers consume each other – do not jump into the water with them as you will only get eaten.

        I love that last line! It’s not only boomers having at it right now, but also many wanna-bes who associate homeownership as some sort of achievement or status symbol (unlike the renting class scum of America), regardless of the cost of entry. There’s a sucker born every minute.

        From what I’ve observed, there’s a big group of C-class driving posers with the McMansions who think they’re rich buying giant homes, splurging on cars, spoiling their whiny kids, etc. I’ve also seen a lot of 30-somethings who cave into pressure from their SoCal wives (and parents) to get in on the RE game, since it’s such a wise investment, renting is throwing money away, we’re at a bottom, etc. An old friend of mine just bought a place in SD, prior to the expiration of the tax credit. I’m not so sure he really wanted to buy, but his wife (South OC native) is the type who I could see hassling him to buy a house so she could show off to her friends.

        1. Marc

          You would not believe how many Ferraris, Porsche and Range Rovers you see in the rather average Irvine apartment community I live in. Biggest unit is a 3BR. Driving a Ferrari and living in a 2BR? Or are these the smart guys who are sitting on a million dollars in cash and are waiting until prices drop further. But then again, if you have that money you don’t live in a 2BR. It is all about pretending, that’s why I don’t want my kids to grow up here, not the right values and not sustainable.

      2. Major Schadenfruede

        “Let the boomers consume each other – do not jump into the water with them as you will only get eaten.”

        The vision conjured up in my mind is ten years from now with all the old foogies (boomers) living in their overpriced & over sized homes all getting mad at the snobby youngsters living cramped in their tiny apartments who are refusing to play the game.

        “Nope! I will not buy your overpriced home. Plus, I can’t make any more money than I presently am because your generation outsourced all the jobs. So, no tax base to supported your bloated health care system.”

        1. AZDavidPhx

          I refuse to pay one penny in dividends to acquire some boomer’s cherished house. My attitude: “Screw you, Mr. Boomer” I have no problem whatsoever renting until you kick off and your kids sell off everything for whatever they can get for it.

          The most selfish generation to ever walk the planet and now they want 20 year olds to go off and die in stupid wars and then come back and take out gigantic loans to buy a house in a market that the boomers have effectively cornered and now act like a generational cartel.

          Boycott all houses being sold by boomers. Yes we can. Yes we can!

          1. Shannon

            I teach in Fountain Valley. Unfortunately we have no affordable housing in our school zone. There is not one single apartment complex for our ony K-8 school in the district. We have seen our numbers dwindle over the last 8 years. There is absolutely nothing affordable for families with younger children to buy. This coming year we will only have 1 kindergarten class, 28 kids, that’s it. Think about that for a moment. This is a K-8. The foundation is kindergarten and with only 28 kids we will have so many layoffs every single year unless something changes dramatically. The irony is this area is so desirable because of the K-8 school but it will be impossible to keep open without an enrollment explosion. So Sad.

    1. lowrydr310

      Time to get out of stocks entirely and go all-in on real estate! Historically it’s gains have outpaced the stock market! Home prices never go down!

    2. Alan

      But you’re wrong – now that it is under $1, you can buy hundreds or thousands of shares on some electronic OTC board. When it bounces back to the 2007 price or higher in the next few months or 1 year max., think about the size of house it can fund the downpayment for!

      (Legal disclaimer: this is not investment advice. Please discuss your particular situation with a qualified Realtor before investing.)

  5. ElvisInMiami

    what is the deal with property insurance and foreclosures? I know in the buildings in downtown Miami the HOA dues pays the insurance (for example my landlord pays $1568/month for HOA dues.)

    1. Laura Louzader

      The condo association, or HOA, pays the insurance for the common elements of the building- the exterior, the common areas. The condo owner pays for the insurance of his individual unit.

      The property taxes are paid by each individual owner, for they are assessed on each unit individually. Each unit owns a pro-rated share of the common elements.

      Your HOA insurance will not cover the interior elements of individual units.

      Elvis, $1568 a month for HOA dues is absolutely insane. Even old 20s vintage buildings here in Chicago with horrific maintenance requirements hardly ever charge more than $800. I only see HOA fees of $1500 in extremely fancy old co-operatives. Does your building have a lot of units in default?
      Water, electricity for common elements, trash collection, landscaping, and sometimes heat are the responsibility of the HOA. Those bills have to be paid no matter what and if you have half the units in default, the remaining paying owners have to pick up the slack. So you MUST get the bank to take possession of the units, and then fight like hell to get the institution to pay for the REO units’ HOA fees, because your paying owners will be in big trouble otherwise. They didn’t count on paying the bills for unoccupied units when they bought.

  6. Anonymous

    Canada Housing Resales Fall 9.5%, Realtor Group Says (Update1)

    Finance Minister Jim Flaherty tightened rules in the country’s mortgage market Feb. 16 to ensure buyers can afford their homes if interest rates rise. Under the changes for mortgages eligible for government insurance, which took effect April 19, buyers will have to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing will be stricter and people buying a home that they don’t occupy must make a down payment of 20 percent.

  7. Mark

    This may be a stupid question here, but aren’t HOA dues a “drop in the bucket” compared to the $100K to $200K losses the banks are dealing with?

    I mean, there are homes everywhere that people bought in 2005 and 2006 for $850 to $900K that are foreclosing and being sold off for $700K and sometimes even less.

    So that bankers are reluctantly paying for the expensive meal (foreclosure losses), but want to stiff the wait staff on the tips (HOA dues).

    Property taxes in OC are something else. I can see why banks want to avoid paying 18 or more months of property taxes for a distressed SFH in OC.

    1. AZDavidPhx

      Agreed. I hardly see the motivation here for banks to be penny pinchers and avoid foreclosing just to save giving the HOA dogs some table scraps so that they can hire some illegal labor to mow lawns. It would strike me as in their interest to pay the HOAs in order to keep their property from deteriorating.

      As far as I can tell – there is no sense of urgency on behalf of anyone of these banks to get moving on this because they know damn well that at the end of the day – they are insolvent and they should be closed down and liquidated. Rushing to foreclose only means that these bankers will lose their nice cushy banker jobs even sooner. So why rush? Just pretend all is well and get paid.

      We hear all about how overwhelmed and disorganized the banks are, but come on… Come on now… They have been doing this for a couple of years now and should have an army of foreclosure grunts churning this stuff out by now. The fact that they are now choosing to not even bother filing NODs just shows how screwed they are and that the real problem is the balance sheet – not some HOA lawn mowing fees.

      1. Swiller

        C’mon David…we all know that if all those lazy good for nothing pieces of crap called americans would just keep paying on that life debt of slavery the banksters wouldn’t even have a problem. Let’s go after the people defaulting for causing the banksters to be so inept!

        If everyone would just keep paying, and if everyone just kept buying, we would have no problems…it’s ALL the fault of the deadbeat 10% of americans who refuse to honor that signature! All the banksters did was lend money, how can that be wrong?

        Go get them pricks Dave!

        1. AZDavidPhx

          Swiller –

          You are exaggerating. I am all for fairness and equality in failure. Let the borrowers who default get foreclosed and evicted. Let the banks implode and have the masses round up the CEOs of these banks and burn them at the stake.

          If you want the system to be healthy then both of the evil doers need to face their consequences.

          You are taking one half of what I say and slapping it into a straw man and blowing it apart with a bazooka for everyone to see.

          It makes for great theatre, but it’s a misrepresentation.

          Nice try though.

          1. Swiller

            Oft times I am not so forthcoming with the obvious. Was meant to make you smile and not to try and make a specific debatable point.

            Even old curmudgeons like myself can occasionally lighten the load of life.

    2. Geotpf

      I laugh at your examples. ($900k to $700k). Out in the sticks, 50% off peak or more is typical. I paid 62.5% off peak for my Riverside house ($400k to $150k).

      Here’s the record, as far as I know:


      $450k to $32,375, or 92.8% off. I’ve posted this one before. Enjoy the drug deal in progress a block north of the house caught by the Google Street View camera. It’s been newly relisted at $50k-what a steal for the drug addict with descriminating taste!

      1. BeachRenter

        That Palm Springs house is great. Really evokes the bygone era of LA glamour in the desert, eh! The funniest thing is that if you troll up the street view to catch the drug deal in progress, you also see a neighbor with a full array of gardeners tending to their luxo property. Only in CA do people in $80K houses (in the desert no less) have gardeners.

    3. irvine_home_owner

      “I mean, there are homes everywhere that people bought in 2005 and 2006 for $850 to $900K that are foreclosing and being sold off for $700K and sometimes even less.”

      Would you believe that there are homes in Irvine bought for those same amounts in 2005/06 and are selling for more now?

      Everyone here wants to ignore that but I guess the Kool-Aid is still full-strength in Irvine.

      1. AZDavidPhx

        Nobody is ignoring anything IHO. I think the consensus among the bears at present is that it is not going to last and prices will eventually resume their fall.

        I still stand by my belief that the people who are bidding up these prices are not doing so with money that they saved up the hard way. There is no doubt in my mind that these large down payments are the result of 90’s vintage buyers moving up the ladder while selling to a sucker on the lower rung who will eventually default.

        There is no way that this can continue indefinitely even if house prices flatline because the new generations of buyers will not be able to afford it since their entry level house has depreciated for 10 years since they bought it.

        I have presented you with this argument in the past and you are the one who does all of the ignoring. I have yet to see you explain how the prices will sustain themselves under present conditions.

        1. Swiller

          Good post David. I’m not sure I agree that the price of homes in Irvine will fall, or if they do, they will fall a whole lot less than other areas.
          It’s the TREND. The trend is that the middle ground between the rich and poor is quickly disappearing, and if by some miracle you haven’t really looked around, the rich are taking over Irvine. This is money from China, Korea, the middle east, etc etc.

          Hell Irvine is almost the MODEL of a controlled communist city. I should be selling LOTTO tickets to the Chinese just to have a CHANCE at getting to own in political heaven.

          There is also inflation…..which I believe will be the way our nation frees itself from the yokes of indebtedness. When this happens, home prices will mean nothing, and the savers will get destroyed if they are all in cash. I’m not a big advocate of buying at this present time, but if hyper-inflation kicks in…good luck on that rent!

          Hyper-inflation may actually reward those whom were conservative as well and managed to stay in their house.

          1. AZDavidPhx

            I am reserving my judgement until we start to see some more accurate median income figures.

            I am not convinced that “the rich” are taking over Irvine. When IrvineRealtor was posting sales info, it was showing some very high down payments like 30% to 50% but hardly anything was a 100% cash buy. I do not believe that “the rich” use mortgages. What is more likely is that these down payments are the result of 90’s buyers moving up. With the government goosing the lower end of the food chain and greasing the wheels you’ve got plenty of suckers signing up believing that they too will be in a similar position 10 to 20 years from now (not likely if Japan is any indicator)

          2. Geotpf

            Truly rich people don’t live in a tract house five feet from your neighbor (or an actual condo), no matter how good the public schools are. And that (condos and houses so close together they might as well be condos) is the vast majority of Irvine housing stock.

          3. chipotle

            Amen. The only neighborhood — ONLY neighborhood — in Irvine that the truly wealthy class would live in is Shady Canyon. That’s about 400 homes, most of which are in the process of being flipped by early spec builders. In other words, it has few actual residents.

            Turtle Ridge is for pretenders, except maybe La Cima (another few dozen houses). Turtle Rock is for the upper middle class, except for maybe the Summit which would be attractive to the low-end of the wealthy class because its gated with large view lots. Nothing else in Irvine is anything other than upper-middle class by OC standards, and many residents in Irvine are still stretching too far to obtain that status.

          4. Anonymous

            Source – redfin.com – search for “92603”, click on any listing, then click on the demographics link on the bottom of the listing

        2. irvine_home_owner

          “Nobody is ignoring anything IHO.”

          Whenever I post about how well TIC is doing with their 800-home project which they’ve already sold over half of in less than 5 months (and raising prices every phase), no one responds. Why? Because “the consensus among the bears at present” was that they weren’t going to be that successful.

          Every time someone says “Irvine isn’t different” I post things that are happening NOW in Irvine that say otherwise. And I don’t say that to push any type of agenda… I’m just reporting my observations. I’m not telling anyone to buy anywhere.

          “I have presented you with this argument in the past and you are the one who does all of the ignoring.”

          You are being a bit disingenuous here. Last I recall, the ball was in your court and you did not reply. Here it is from 12/22/09:

          I wrote:
          Do you have proof that these downpayments are coming from move-up buyers?

          Until you can produce that, your theory is just as good as my FCB one.

          And you’re back to sidestepping, regardless of where this down comes from, do you really think that Irvine buyers are more or less responsible for these economic problems than those people who are buying in other cities with FHA 3.5% down loans?
          << How nice it is to take a stance that can't readily be disproven... or proven. Unless you are going to ask each buyer in Irvine where they sourced their down payment from, I can say the down payments came from Nigerian royalty and it can be just as good as your theory. I'll give you some anecdotal information, when we sold our home in 2008, we got 2 all-CASH offers. The one we turned down was because we did not want to deal with the hassles of communicating with their Taiwanse bank. The offer we finally did accept was a 20% cash down with some of the proceeds from their 401k, they kept their current house as a rental so there was no equity move-up for them. Again, how can you comment on what type of buyers are in Irvine, what home ownership means, what kind of premium Irvine has and how important kids are? You're fine when you are speaking generally but you really need to take into account some perspective if you're going to single out Irvine specifically or talk about parenting. You won't see me commenting over at SingleComputerGuyRentingInAZHousingBlog.

          1. AZDavidPhx

            IHO – I am simply taking a guess as to what is going on. I would love to join your circle jerk and pretend that Irvine was some kind of lifestyle of the rich and famous and have the mystery solved. Unfortunately when I consult the income numbers for Irvine – it does not add up.

            The good news is that we are going to find out as time progresses. Many of your neighbors are going to be evicted over the next several years and I believe the large down payments are going to start getting smaller.

            Your problem is looking toward the future. I am not questioning what you observed in 2008, I am challenging you to give me a reason as to why it is going to continue.

          2. irvine_home_owner


            “IHO – I am simply taking a guess as to what is going on.”

            Like you guessed the majority of Irvine buyers were using 0% down loans? Until I showed you that the number was closer to 40%?

            “I would love to join your circle jerk and pretend that Irvine was some kind of lifestyle of the rich and famous and have the mystery solved.”

            See, when you try to use colorful words, hyperbole or MSPaint jpegs, your message gets tainted. I don’t think the rich and famous live in Irvine, I’m just telling you what is happening since I actually live here. And don’t get me wrong, it’s not just Irvine, Tustin Ranch and newer areas north of Ladera Ranch are still running at premium levels despite unemployment, tight credit and looming foreclosures/shadow inventory.

            “Unfortunately when I consult the income numbers for Irvine – it does not add up.”

            I already explained this. Considering Irvine is home to a large number of non-US citizens, how do you think that any type of income census is going to poll? This doesn’t take into account many cash-only business owning residents who probably won’t report everything to the govs. So you may want to take this into account as it probably skews your Wikipedia numbers a bit.

            “Your problem is looking toward the future. I am not questioning what you observed in 2008…”

            You have been. And I have more evidence to back my theory than you have to yours. Don’t start dancing now.

            “I am challenging you to give me a reason as to why it is going to continue.”

            This is where you misunderstand my posts. I have never said that Irvine or any other city will continue on this pace. I have always questioned why. Do you think I’m happy that TIC is charging over $900k for a 4/3 home with only a 2-car garage?

            I do hope we see some big falls but if past historical cycles hold true, Irvine will have to see at least another 25-40% drop in order to keep in line. But I’m not sure that is possible because that would mean the outliers like Riverside and other parts of IE would have to go negative.

            Question for you:

            You’ve said prices should get back to 1999 non-inflation adjusted numbers. In 1999, a brand new 4/3 home in Irvine went for a little more than $300k. Do you honestly think that a brand new 4/3 home in Irvine will go that low in 2010? 2013? 2020? Even if we adjust for inflation over 15 years, in 2014 you’re looking at $450k. That math doesn’t seem right either.

          3. Eat that!

            That’s what it would be if interest were set at 6 or 7% wouldn’t it? That’s the problem. We, you, me, my children, their children are giving away money by supporting programs with our tax money to keep prices artificially high by keeping interest rates artificially low. There’s no two ways about it. Take away the supports, no FHA, no gov’t backing of banks and let’s see how the RE market does even in ‘glorious’ Irvine (makes me retch even to say it).

          4. AZDavidPhx

            I am pretty sure that I have never claimed that most of Irvine was using 0% down payments. If I did state that then I will concede to being wrong on that but I don’t ever recall making such a statement.

            I see no reason why Irvine could not revert back to 1999 prices but it all depends on your local incomes. Your median income is much higher now than in 1999 if we believe Wikipedia. The unknown lies in how much of the wealth destruction is going to impact Irvine. I personally believe that the median income is going to decline. How much so I cannot say.

            Interest rates are also going to rise (I bet 2012) and this will bring prices down just as they let prices rise.

            I am looking at the big picture and I see no reason to believe that the curent environment is sustainable through the next 10 years.

            Inflation adjustment is nonsense linear extrapolation. It uses historical averages to project the future. That is why I pay no attention to those kinds of numbers and focus on the real income numbers which at present do not support these prices.

          5. irvine_home_owner

            @Eat that!:

            The low prices for 4/3 SFRs in Irvine are about $625k, 20% down at 5% loan puts your payments at $2685. Working backwards with 7% loan, the price is about $505k. That’s quite a ways from $300k.

            And even so, that’s quite a ways from $625k… no seller will adjust their listing price in direct proportion to the interest rate… especially in Kool-Aid induced areas like Irvine.

          6. irvine_home_owner


            “I am pretty sure that I have never claimed that most of Irvine was using 0% down payments. If I did state that then I will concede to being wrong on that but I don’t ever recall making such a statement.”

            To clear this up, it was in response to your main complaint that buyers in Irvine were fiscally irresponsible:

            “And my biggest complaint about Irvine are the ridiculous amounts of credit that banks extend to buyers with no reasonable expectation that it will all ultimately be repaid.

            There is some serious ethical lending boundaries being pushed in your community.

            Notice that none of the grievances are with Irvine being a nice place to live. Just with the financial shell games.”

            My contention was that it wasn’t just Irvine and in fact, Irvine probably had more responsible buyers in that they put more money down than other areas. All the ones you see IR profiling are the minority.

            “That is why I pay no attention to those kinds of numbers and focus on the real income numbers which at present do not support these prices.”

            There you go ignoring me again. You can’t get REAL income numbers for Irvine. I’m sure there are quite a few cities where median income does not match median housing prices. Premiums are sometimes built on non-fundamentals… I’ve always said this… that sometimes it’s the things you can’t measure that make the most difference.

          7. chipotle

            Anecdotally, Newport Beach’s median income is another example of the data only telling half the story. It does not include the retired wealthy or those who have substantial wealth in non-income forms. But it does include the burnout surfers on the penninsula who work as bartenders and pizza delivery guys and live 6 to a unit in ganja stained studio apartments. Do you think the real number is higher or lower?

          8. What if

            What if the policy makers continued to print money? The results would be hard to evaluate considering that inflation would raise incomes and prices but possibly restrained by higher interest rates. It will fudge things even more.

  8. Eat that!

    Call me crazy but isn’t it just stupid to think that a condo with tiny bedrooms and no counter space is worth $650K!? Is there an ocean view? Or even any view at all? Flat out dumb.

    1. AZDavidPhx

      Haven’t you ever spoken to a realtor? Every market is different! You are paying for more than just a condo with tiny bedrooms and no counter space, dummy. You are paying for the prestige of apartment style faux ownership in a fashionable community. I suggest that you buy immediately because the price may jump to a million by this time tomorrow.

      1. Swiller

        If you buy that condo you get to enter your kids in the awesome school district! Don’t mind that your 16 year old son has to share a room with his 14 year old sister…it’s worth it!!!

        Just say no….to DOPES!

    2. MrSlappy

      “Or even any view at all? ”

      Of COURSE there is a VIEW! The view is right into
      your next door neighbor’s bedroom… And if your windows are open at night, you can probably hear your neighbors snorning, farting, having sex, arguing…etc


  9. newbie2008

    Banksters are not stupid. They know that the HOA are obligated and will and maintain the property and pay for the utilities. That includes paying for the non-paying units. The HOA will pass along the expenses of non-paying members to the paying members until the paying members can no longer pay and reserves are exausted.

    So each month of not paying the HOA fee is $200 to $1200 in the pocket of the bank. The banks can consider non-payment as less expenses or an increase in profits.
    The paying HOA members are left holding the bag.

    BTW: The non-paying HOA members (being FCed) are many times the biggest users of the water and other utilities. That’s why I avoid ownership in units with shared utilities and look for individually metered units. Reduces liability exposure, but likely a high min. monthly expenses.

  10. Buck

    Did anyone else just recieve the ‘Emergency’ email from (allegedly) IR trapped in the UK asking for money to be wired via Western Union?! It reads just like a Nigerian Scam email… My deepest sympathies if the situation is real, but seriously the email is very suspect, especially considering the grammar and sentence prose when compared to the daily posts here. Crazy!

    In its entirety, recieved 1:36pm:

    “I’m sorry for this odd request because it might get to you too urgent, but due to the situation of things right now, I’m stuck in London United Kingdom right now, i came down here on a short vacation and i was robbed, my bags, cash, cards and my cell phone were stolen off me at GUN POINT, so i only have access to my emails, it was such a crazy and brutal experience for me and i was hurt on my right hand, but i’m glad i still have my life. I need help flying back home, the authorities are not being 100% supportive, i have been to the embassy and the Police here in London, but they’re not helping issues at all, but the good thing is that i still have my passport but dont have enough money to get my flight ticket back home and some bills settled, please i need you to loan me some money, i promise to refund it as soon as I’m back home. You can get it to me through western union, email me back so that i can give you details to send it to.

    Larry Roberts
    (Irvine Renter)”

    1. IrvineRenter

      Yes, someone hacked my email account. I have already fixed it with Google, but I had hundreds of contacts that probably received the same email.


      I will be at JT Schmids this evening.

      Sorry for the inconvenience.

      1. es

        I replied and asked for the name of your coworker at Ideal Home Brokers. See what they say… I’m intrigued…

        did you not say recently that you’re going to the UK on vacation?

      2. Alan

        Yes, I just saw it too.

        Hey IR, I thought you were going to Wisconsin? The old jokes about trips ending up in London (Ontario) have been done anyway. And your writing was a lot better up to now. I guess them fancy writers ain’t so good when they can’t spell (or consistency) check on their desktop computers. 😉

    2. AZDavidPhx

      I just wired over my life savings. IrvineRenter if you are in UK then why was the recipient in Nigeria?

    3. Mark R

      Yes, I got that one.

      Yeah, boy, those thugs hanging around London Heathrow will get you every time.

      The first sentence with broken English gave it away. Only disappointed there wasn’t a “car boot” full of cash for me some where in the UK just waiting for me! 🙂

    4. MalibuRenter

      Ah,now that I check, I see that my deduction was correct. Your english is better than that email.

  11. newbie2008

    I sure hope you get your flight on time to make it to the Open House tonight. Where do I wire the money?

    Bye the way, can you donate to the ___ HOA to make up for all the squatters and vacant units with continued NoS and postponed NOoS units. My bank certainly own donate.

  12. TurtleRidgeRenter

    That Nigerian email scam made my day. Still laughing over “I’m sorry for this odd request because it might get to you too urgent…”

    Of course if it was really you in trouble, we would certainly PayPal you enough for at least a cocktail!

  13. ozajh

    The nuclear option for the HOA is to foreclose, and be prepared to foreclose again on the same property if the bank doesn’t pay dues. Maybe the point will come in some developments where the HOA will be forced into this approach to stay alive.

    In the initial foreclosure they will indeed be subordinate to the mortgage holder(s), and will likely get nothing.

    However, in the second foreclosure there won’t be a mortgage. They will be foreclosing on an outright owner, so the foreclosure auction will be absolute.

    This will yield the following:
    1. HOA gets dues (but only for the period after the first foreclosure).
    2. Some genuine price discovery.
    3. A higher probability of a final owner who will pay dues.

    What’s not to like?

  14. newbie2008

    A song to sing:

    Where have all the houses gone?
    Long time passing
    Where have all the houses gone?
    Long time ago
    Where have all the houses gone?
    Buyers have picked them every one
    When will they ever learn?
    When will they ever learn?

    Where have all the young buyers gone?
    Long time passing
    Where have all the young buyers gone?
    Long time ago
    Where have all the young buyers gone?
    Taken loan every one
    When will they ever learn?
    When will they ever learn?

    Where have all the loans gone?
    Long time passing
    Where have all the loans gone?
    Long time ago
    Where have all the loans gone?
    Gone for HEWs every one
    When will they ever learn?
    When will they ever learn?

    Where have all the HEWs gone?
    Long time passing
    Where have all the HEWs gone?
    Long time ago
    Where have all the HEWs gone?
    Gone to squatting every one
    When will they ever learn?
    When will they ever learn?

    Where have all the squatters gone?
    Long time passing
    Where have all the squatters gone?
    Long time ago
    Where have all the squatters gone?
    Covered with NoDs every one
    When will we ever learn?
    When will we ever learn?

    Today’s defaulter seems like a hardship case and not HEWer locking in the profits by defaulting. When will they ever learn. When will we ever learn.

  15. RecoverylessRecovery

    Orange County, CA. Isn’t that the BIRTHPLACE of mortgage FRAUD? I ask because I noticed that my comment in regards to how the U.S. government COOKS its data & stats was conveniently REMOVED.

    Typical American BULLSHIT, if the facts don’t jive with the REALTY of your Ponzi Scheme economy, you DELETE the facts!

    Fook all of you deadbeat war criminals.

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