As lenders delay the foreclosure process, many delinquent borrowers are settling in to their new way of life — a life where they don't have any housing expenses.
Irvine Home Address … 14902 ELM Ave Irvine, CA 92606
Resale Home Price …… $769,000
Darling you gotta let me know
Should I stay or should I go?
If you say that you are mine
I'll be here 'til the end of time
So you got to let me know
Should I stay or should I go?
Always tease tease tease
The Clash — Should I Stay or Should I Go?
When the Clash wrote their smash hit about a relationship on the rocks, they had no idea they would be speaking to the fortunes of millions of homeowners in the aftermath of the housing bubble. The question posed by this song, "Should I Stay or Should I Go?" is on every struggling homeowner's mind. If they go there will be trouble, but if they stay it could be double. With the fate of so many borrowers now in the hands of their lenders, most just want to know, "Should I Stay or Should I Go?"
Many Bay Area homeowners in real estate limbo
By Sue McAllister and Eve Mitchell
Posted: 07/25/2010 12:01:00 AM PDT
Updated: 07/25/2010 07:18:28 AM PDT
Tens of thousands of Bay Area homeowners are trapped in a bizarre real estate limbo, living in houses but no longer paying for them, waiting and wondering if someone will help them — or throw them out.
Yes. It's called squatting. Of course, this doesn't meet the technical definition of squatting which is possession of real estate without the owner's permission. In this instance, the squatters are technically still the owners of property, so there is nothing illegal going on, but these owners are generally hopelessly underwater and failing to make their mortgage payments. They are in possession of real estate that can be called to auction at the discretion of their lender at any time. Ultimately, they will lose their homes.
Some are victims of their own economic circumstances, unable to afford their mortgage and expecting to lose their homes if they can't get a break from their bank. Others are opportunists, choosing not to spend on a house worth less than they owe. Instead, they can live rent-free until their lender makes a move.
The limbo phenomenon is a radical departure from previous real estate crashes, when there were far fewer troubled loans and banks moved speedily on those who fell behind on payments. Now many lenders simply can't keep up, and others appear reluctant to flood a weakened market with foreclosed homes.
As I have stated on many occasions, I am shocked by the banks policy toward delinquent homeowners. There is no real reason for the squatting. Lenders would be far better served by forcing the deadbeats out and taking the property back in foreclosure. If they didn't want to flood the market with foreclosed homes, they could simply rent them out and at least get some income from the property. As it stands, they obtain no return on their invested capital. It sits there along with a squatter who is happy to enjoy the free ride.
The argument that squatters care for the property is silly. Why would a sqatter care for a property better than a renter? Because it used to be theirs? Or does the denial and the years of false hopes prompt squatters to care for the lender's property?
It all adds up to lingering instability for the Bay Area housing market, as lenders slowly work through the backlog while homeowners endure uncertainty that could last months or even years.
At this point, the only thing that is uncertain is when the foreclosure will occur. I think the fantasies of widespread principal foregiveness have long since faded. The false hope of imminent price recovery is all they have left.
"It's bad all the way around, for the neighbor, the community, the city, state, nation," said Chris George, founder and CEO of CMG Mortgage, based in San Ramon. "It's a continued indication that there are a lot of people in trouble, particularly with their job situations."
Some homeowners say ignoring the mortgage is the only option they have.
"I stopped paying payments about 12 months ago," said Jeff Dunkin, who has twice sought to modify the loan on his San Jose condo near Branham High School, and twice been denied. The 25-year-old construction worker has been employed only sporadically since early 2009, and the unemployment checks he's collected are less than half what he used to make.
How could he expect to get a loan modification to keep a property he can no longer afford. It would be a great deal if he could get a loan modification to make it affordable under his greatly reduced income. If that worked, you would see working couples have one spouse quit their job just to get the reduced payment, then go back to work and enjoy the lower cost of housing. If people can't afford the house they occupy, they need to get out. Home ownership on borrowed money comes with a responsibility, and if borrowers are not up to the task, they need to move on.
He knows some people may think living mortgage-free sounds like a cushy deal. But that's not how it feels to him.
"It's a lot of anxiety, a lot of stress," Dunkin said.
'On the edge'
Dunkin has plenty of company. An estimated 40,283 homeowners across a seven-county region spanning the South Bay, East Bay and the San Francisco metro area were at least three months behind on their mortgages but not yet in foreclosure as of April, according to CoreLogic, which tracks mortgage performance data. That's about 4.5 percent of total mortgages in those areas, and a drastic increase from 0.25 percent in January 2007. In the San Jose metro area in January 2007, only 513 loans were more than 90 days late but not in foreclosure. In April of this year there were 11,558. In the East Bay, the total grew from 1,435 in early 2007 to 23,155 in April.
"We have all these people who are really kind of on the edge," said Kevin Stein, associate director of the California Reinvestment Coalition, which fights for homeowners seeking loan modifications. "They're anxious because they know they're behind, and they know all these foreclosures are happening, and they know they could be next."
Let's be real; these people are doomed. They are over-extended, and they can't afford their properties. Without mortgage equity withdrawal to make up for a shortage of disposable income, these people are the waking dead. It is only a matter of time before they give up and become another statistic.
Dunkin, for example, bought his two-bedroom condo in September 2007 for $355,000. His fiancee and a roommate helped him pay the mortgage. But in early 2009 the relationship with his fiancee crumbled, and construction business in the valley plunged. As he scrimped to keep up with his $2,486 monthly mortgage payments, he let his homeowner association dues lapse, and the association sued him for the overdue amount. He spent months paying it, but let his mortgage slide.
Dunkin has yet to receive a notice of default, but he did receive letters this spring from his lender about the possibility of a short sale — selling the condo for less than he owes.
"I have not responded to that," he said. For now, he's sitting tight, saving money so he can rent a place after foreclosure, which he considers nearly inevitable.
Saving the payment money is the smartest thing he could do. Even smarter would be to respond to the lender and pretend to cooperate in order to string the process out and save even more money.
Nationwide "roughly 3.5 million loans are in this limbo land, and are not proceeding through very quickly. It could take years," said Sam Khater, an economist with CoreLogic, which tracks mortgage performance. "I have a feeling it's going to follow the path of unemployment and have a long tail."
Part of the reason homeowners wind up staying in their homes so long lies with the lending industry, Stein said. Many companies are overloaded with people who are behind in payments, and financial institutions are hesitant to process thousands of foreclosures at once, because dumping all those properties on the market would lower prices even more.
Khater said many lenders are moving slowly because they hope the government will eventually step up to help cover their losses. They also may be hoping an economic recovery will allow many borrowers to catch up with their payments, but "they're going to be waiting a while," he said.
Why shouldn't lenders expect more bailouts? We have already done everything possible to prevent them from feeling the pain of their incredibly stupid lending decisions and shift the losses to the US taxpayer. This expectation of a bailout is the most irritating feature of this whole debacle.
Too slow, critics say
Critics of loan modification programs say the housing market would be better served if foreclosures moved more quickly, and that any resulting drop in home prices is necessary to reset housing values to their pre-bubble levels. Allowing delinquent homeowners to remain in their homes for months or years means many of the owners will stop maintaining their properties, which hurts their neighborhoods, and their own delinquency may even encourage neighbors to default, prolonging the housing market's pain, some say.
The unnamed critics are right on every count. Prices need to get reset to pre-bubble levels so we can get back to a modestly appreciating market rather than endure several more years of slowly grinding declines (yes, I know some of the deluded believe we are at the bottom, but we aren't.) Long-term delinquency does cause neighborhoods to deteriorate, and it does foster more accelerated defaults as neighbors see the rewards obtained by those who stop paying their mortgages.
But Kenneth Rosen, chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, said banks and the government "are being quite rational" in stretching out the foreclosure process to avoid displacing homeowners and depressing prices. He estimated that fewer than 15 percent of Bay Area mortgage-holders who are 90 days overdue will get foreclosed on. "Most people will catch up if they can get a job" or a loan modification, he said. In the San Jose metro area, about 1.9 percent of mortgages were in foreclosure in May, or about 4,900 loans, CoreLogic said. In the East Bay, the rate was 2.5 percent, or about 10,090 loans. Bay Area median home prices, though rebounding from lows reached last year, are down 38 percent from their peak in July 2007.
Mr. Rosen is as wrong as wrong can be. How did he come about his estimate that fewer than 15% of those who are 90-days late will get foreclosed on? Rectal extraction? Cure rates are currently running less than 10% which means that 90% of those borrowers who get 90 days behind end up in foreclosure. Mr. Rosen is either completely misinformed as to what is really happening in the world, or he is engaging in the most foolish kind of wishful thinking. I suspect he is a homeowner who sees what he wants to see.
To wish away the problem by saying "Most people will catch up if they can get a job or a loan modification" is simply wrong. Nobody can afford to catch up because they have so many other debts that curing the loan is impossible. These debtors don't have huge cash reserves, or they wouldn't have fallen behind in the first place.
Foreclosure is certainly taking longer than it used to.
According to figures from ForeclosureRadar, for the California homes that were foreclosed on in June, it took an average of 234 days from the "notice of default" to the time the property was foreclosed. That's nearly eight months on average — meaning some homeowners stay in their homes much longer. In January 2007, the average time to foreclose was a little more than four months. New state laws have built more time into the foreclosure process, adding a requirement that lenders try to contact borrowers in person before they are allowed to file a notice of default, for example. Between legislated timelines, delays because lenders are swamped with loan modification cases, and possible strategic delays on the part of banks, many homeowners can stay put, payment-free, for months on end.
Jobs aren't enough
There's another unfamiliar wrinkle in delinquency trends now, said Hans Johnson, who studies housing at the Public Policy Institute of California. Any time unemployment rises, mortgage delinquency does too, he said, just as it has in the past few years. But this time around "even people who are employed are debating whether to keep paying the mortgage because they're so far underwater," he said.
Just because people go back to work doesn't mean they will be able to afford to make the payments on their mortgages. Many delinquent borrowers are employed and simply borrowed too much. Employment is prerequisite to making steady mortgage payments, but it doesn't make it certain.
New research from consulting firm Oliver Wyman found among borrowers nationwide who defaulted in the first half of 2009 and remained in default at the end of last year, 19 percent could have afforded to keep paying. In June, mortgage financing company Fannie Mae said it would punish such strategic defaulters by prohibiting them from getting a Fannie-backed loan for seven years after their foreclosure, instead of the typical five.
That should read two years, not five.
Pinole resident Charles Rinne, 63, is no longer employed, but the retired postal worker says he could keep paying the $1,300-a-month mortgage on his two-bedroom condominium. Instead, in February, he stopped.
He considers defaulting a way to live more affordably after years of racking up debt.
Rinne purchased his condo for $26,500 in 1973 and over the years refinanced it several times. He said he ran up credit card debt and had some dental surgery that was not fully covered by insurance.
That is the most pethetic explanation of HELOC abuse so far. He must have some seriously pimped-out grills.
"All of a sudden late last year I just could not pay all the bills down to zero," he said. So he plans to file for bankruptcy, which will delay foreclosure proceedings.
What he meant to say was "suddenly, I was cut off from Ponzi borrowing and couldn't go any further in debt."
"That will allow me to save as much money as possible so I have the money to move," he said.
There's no survey data on the demographics of nonpaying homeowners. But with unemployment and recession affecting all socioeconomic levels, the nonpaying phenomenon spans poor neighborhoods and rich ones, from tiny condos to multimillion-dollar houses, said Jon Maddux, CEO of YouWalkAway.com. The company provides legal and financial advice to homeowners who've stopped paying.
Maddux said defaulting is one way owners have of "lashing back" at lenders when they've been frustrated by a lack of response or denial of their loan modification. He rejects the notion that borrowers have an ethical obligation to keep paying, saying mortgages are contracts that specifically include language about what happens if the borrower stops paying.
"We've made it so sacred to pay your mortgage, when it shouldn't be that way. People shouldn't make their families suffer to pay a mortgage that has an exit strategy in the contract," he said, referring to foreclosure.
I have written on strategic default many times. Jon Maddox is right.
S.J. man fights back
San Jose homeowner and Santa Clara Valley Transportation Authority bus driver Darrell Thomas stopped paying his mortgage in late 2008 after he lost overtime pay and while he was seeking a loan modification.
Do you smell bullshit here? Did he lose overtime pay, or did he lie on his mortgage application and needed a justification after the fact?
He was offered a trial modification in April last year, but as he was about to start making the new payments, he learned he'd been foreclosed on. With help from an attorney, he successfully sued to get back his triplex, where he lives and has tenants.
But he's still pursuing legal action against his lender, Wells Fargo, because he feels he was improperly denied a loan modification under the Home Affordable Modification Program. In May he began making mortgage payments for the first time in almost a year and a half, as part of an agreement with Wells Fargo to ensure the bank would not foreclose on him during litigation.
What a loser. He probably lied on his loan application, and now he is trying to claim some kind of damages because he didn't get a loan modification on a loan he should never have received in the first place. I hope Wells Fargo wins and throws him out on his ass.
While some might find relief in walking away from their homes after prolonged struggle, "I don't look at it that way," said Thomas, 46. "That's home. I'm established, that's where my family's at, and it's hard to start over."
With unemployment still high in the Bay Area and home price stability not yet assured, San Jose condo owner Jeff Dunkin puts his own situation — in default, working infrequently and bracing to move out of his first home — in perspective. "I'm just one person in a sea of problems," he said.
His foreclosure will be part of what should have been a tsunami. Instead it will become part of a slowing rising tide that will take a bit longer to reach the coast, but it is still on its way.
Greenpoint Mortgage holds the bag
Once a Ponzi scheme starts to unravel, the last participants are the ones who lose the most. The buyer of today's featured property started with a very large cash down payment, but she was fortunate to extract all her equity through a Greenpoint Mortgage loan and leave them holding the bag.
- On 6/10/2005 this property was purchased for $749,000. The owner used a $495,000 first mortgage and a $254,000 down payment.
- On 11/10/2005 she refinanced with a $499,000 first mortgage.
- On 1/27/2006 she obtained a $190,000 HELOC.
- On 3/28/2007 she refinanced the first mortgage for $688,000, and obtained a HELOC for $86,000.
- Total property debt was $774,000.
- Total mortgage equity withdrawal is $279,000 including her down payment.
- Total squatting time was almost 2 years.
Recording Date: 04/23/2009
Document Type: Notice of Sale
Recording Date: 10/23/2008
Document Type: Notice of Default
This property was picked up by Paladio Properties at auction on 6/10/2005 for $625,000. If they get this near peak price, they will make a substantial profit. If you notice, each of the Palladio Properties flips I have featured have been renovated with pergraniteel. These guys are the best operators I have seen in our market. However, with the softening market, I expect to see price reductions before this goes into escrow.
If you would like to learn how you can get involved with trustee sales, please contact me at firstname.lastname@example.org.
Irvine Home Address … 14902 ELM Ave Irvine, CA 92606
Resale Home Price … $769,000
Home Purchase Price … $749,000
Home Purchase Date …. 6/10/2005
Net Gain (Loss) ………. $(26,140)
Percent Change ………. -3.5%
Annual Appreciation … 0.5%
Cost of Ownership
$769,000 ………. Asking Price
$153,800 ………. 20% Down Conventional
4.57% …………… Mortgage Interest Rate
$615,200 ………. 30-Year Mortgage
$151,526 ………. Income Requirement
$3,143 ………. Monthly Mortgage Payment
$666 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$64 ………. Homeowners Insurance
$43 ………. Homeowners Association Fees
$3,916 ………. Monthly Cash Outlays
-$752 ………. Tax Savings (% of Interest and Property Tax)
-$800 ………. Equity Hidden in Payment
$262 ………. Lost Income to Down Payment (net of taxes)
$96 ………. Maintenance and Replacement Reserves
$2,723 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$7,690 ………. Furnishing and Move In @1%
$7,690 ………. Closing Costs @1%
$6,152 ………… Interest Points @1% of Loan
$153,800 ………. Down Payment
$175,332 ………. Total Cash Costs
$41,700 ………… Emergency Cash Reserves
$217,032 ………. Total Savings Needed
Property Details for 14902 ELM Ave Irvine, CA 92606
Baths: 3 baths
Home size: 2,600 sq ft
($296 / sq ft)
Lot Size: 5,000 sq ft
Year Built: 1972
Days on Market: 50
Listing Updated: 40394
MLS Number: S621843
Property Type: Single Family, Residential
College Park Remodeled Home. Wood flooring, Crown Moldings & Recessed lighting throughout. Granite Countertop. 3 Bedrooms plus spacious bonus room. Mater bedroom with Deck. New Air-conditioner & New Stainless Steel Appliances installed. New interior paint. New light fixtures.Walking distance to school & Association Pool.
Mater bedroom? I won't go there….
From a reader, Steve Averill:
Irvine Hires Carl Sandburg to Pen a Poem
Video Game Designer for the World,
Botox Maker, Stacker of Integrated Circuits,
Player with Real Estate and the Nation’s Mortgage Broker,
Calm, quaint, quiet, City of the Perfect Plan:
They tell me you are dull and I believe them, for I have seen your streamlined streets and homogenous homes luring Los Angelenos.
And they tell me you are polite and I answer: Yes, it is true I have seen the car yield to the bicycle.
And they tell me you are quiet and my reply is: I once heard a hummingbird while sitting in a Starbucks.
And having answered so I turn once more to those who sneer at this my city and I give them back the sneer and say to them:
Come and show me another city so safe, so educated, built for children, groomed for adults determined to bounce back and thrive once more…
“There is no real reason for the squatting. Lenders would be far better served by forcing the deadbeats out and taking the property back in foreclosure. If they didn’t want to flood the market with foreclosed homes, they could simply rent them out and at least get some income from the property.”
Lest we forget the banks probably carry these assets on the books at fantasy prices until they decide to foreclose. Change back to mark to market and I bet the court house steps are full.
You should legally only be able to mark-to-model/fantasy a performing loan. Once a loan/deed goes bad, it should have to be assessed as to its market value. Not that the law is like that, just what it should be.
They’re not really “laws,” but rather accounting “rules.”
It’s the same fantasy that the IRS sez… legally and technically we don’t have tax laws, we have tax rules… but break the rules and see what happens
In 10 years, when that construction worker is 35, how will his situation be different than someone who rented and then possibly moved back in with his parents when he lost his job? People would talk about the moral hazard of mortgage modifications, but I think the stories about ‘living free on the mortgage credit card’ will probably cause more of that behavior.
I think this behavior is concentrated in bubble markets, or at least is happening at much higher rates there. The reason Rosen thinks that there will be an 85% cure rate is he believes that home prices will go back up. If we got a 25% run-up in home prices, people would refi into new loans, that many could afford.
That’s a flimsy bridge of an assumption. I would bet that is his logic, as if you go back to ratings agencies among others, it was the belief in constant appreciation that made using judgment unnecessary.
In my area of NC, owning is probably 25% cheaper than renting, and in general properties available for sale are nicer than those for rent.
In my area of NC, owning is probably 25% cheaper than renting, and in general properties available for sale are nicer than those for rent.
I sure wish it was like that here in Irvine. Things are slowly moving in the right direction, but they are nowhere near to that level.
“Slam Dunk Stimulus” – The Natural History of a Rumor
You write: “There is no real reason for the squatting. Lenders would be far better served by forcing the deadbeats out and taking the property back in foreclosure. If they didn’t want to flood the market with foreclosed homes, they could simply rent them out and at least get some income from the property. As it stands, they obtain no return on their invested capital. It sits there along with a squatter who is happy to enjoy the free ride.”
Well as we well know, the banks practice their FASB 157 Entitlement and they have enjoyed the benefits of the Federal Reserve QE which saw, the bank ETF, KBE, value rise from 9.10 on March 2, 2009 to 24.05 on August 10, 2010.
Had there not been the FASB 157 and had there not been a trading out of US Treasuries for toxic debt of all kinds held by the banks to the tune of 1.2 Trillion Dollars, there would have been an economic blackout, that is most banks would have simply all gone under.
So banks, homeowners, investors, everyone got a reprieve from the subprime scare, and from the more recent European sovereign debt scare.
Yes a reprieve so that currencies, could fall and rise again and make profits for the currency traders.
But yesterday August 10, 2010, the euro yen carry trade, sold off. So the stocks sold off rewarding those invested long gold or short the market. And they are going to continue to sell off, there is nothing the central banks can do now to stave off debt deflation.
Yes, the reprieve is over, and banks, that is the European Financials, EUFN, the emerging market financials, EMFN, and the financials, XLF, and the banks, KBE, will be awesomely decapitalized.
The downdraft in the economy is going to be so severe beyond description. The downdraft it is soon going to weigh on US Treasuries, IEF, and TLT, decreasing their value and sending interest rates, ^TNX and ^TYX, higher, causing a failed US Treasury auction, at which time, funding of the mortgage GSEs will stop. People will not be buying homes on credit.
Soon banks will turn to foreclosing and leasing the properties.
You write: “Why shouldn’t lenders expect more bailouts? We have already done everything possible to prevent them from feeling the pain of their incredibly stupid lending decisions and shift the losses to the US taxpayer. This expectation of a bailout is the most irritating feature of this whole debacle.”
That is one excellent observation. The Federal Reserve facilities effected a bloodless coup and integrated the banks into the government, so that they are now a combine. State corporate rule has commenced, and the gains of trading out Treasuries for toxic debt was capitalized to astute investors who went long in March 2009 and to the bankers. Those going long the bank shares got about a 150% gain. The losses were socialized the taxpayer. Quite ingenious of Bernanke really.
There exist a tremendous debt bubble today.
I believe that “Credit Bosses”, that is credit seigniors, will oversee the disbursement of credit both in the US and Europe as the debt bubble implodes and the economy shatters.
Here in the US, I envision, that out of a coming credit crisis, where there is no credit available, a Financial Regulator, will exercise Discretionary Governance, and announce a Home Leasing Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve. Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have done servicing mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value.
I also envision that this Credit Seignior, perhaps in public private partnership with American Express, AXP, and Capitol One Finance, COF, will provide seigniorage for credit. He will issue credit mostly to those companies which serve strategic national needs.
Finally, I really appreciate the Irvine Matrix, it very well could be called the Housing Investment Matrix. Thanks for providing the many articles on HELOC abuse and mortgage equity withdrawal, before reading your blog I never knew what a HELOC was, what mortgage equity withdrawal was and what moral hazard was. I am thankful for Wikipedia as they provided a definition of fall.
The only salvation is to be a red pill kind of guy or a red pill kind of gal.
I provide a link to my article The Debt Bubble Is About To Pop Creating A Debt Cemetery
I expect you will be correct someday. Unfortunately you are 50 – 200 years ahead of your time.
When I read your writing, I thought WOW such a knowledgable person about the financial market.
But at the end you said you didn’t even know what HELOC and MEW were.
i think he meant before IHB…i know i didnt know much about HELOCs and MBSs until 2006 and have to thank IR for the education
It’s nice to see someone admit to learning something (or not having known about something). It’s a good character trait.
The 25-year-old construction worker
His fiancee and a roommate helped him pay the mortgage
As he scrimped to keep up with his $2,486 monthly mortgage payments
OMG WTF!! This guy was depending on the income of 3 people to just scrimp by in a F_CKIN condo. I love it!
Give him a break. His unemployment pay is only half what used to earn. How can you expect him to pay for the house he owns on his new income?
Must have been a hell of a construction worker gig to qualify for a loan with 2500.00 monthly payments. Either that or he just used a liar’s loan and faked it with the help of 2 other roomers.
That is the thing about the construction trades… they pay EXTREMELY WELL when the market is hot and they are in work. We had a ten year period there when a worker could count on not only being in full-time work but getting overtime as well.
Electricians and plumbers, about $30-$40 an hour. Carpenters for unfinished, at least that much, finished carpentry more. Helpers, about $20. Iron workers, 430 clear to over $100,depending on the height they work at.
But it is very seasonal and very vulnerable to the business cycle.
Too many people out here did not see that the market of the noughties was anomalous and exceptional, and unsustainable.
“That is the thing about the construction trades… they pay EXTREMELY WELL when the market is hot…”
Having recently priced full-sized pickup trucks, I can confirm this: $50K for a Toyota Tundra.
To judge from still-high used truck prices, I suspect that the full weight of the housing construction downdraft has yet to crush these workers. The truck is the among the last things to be sold off, though.
The Bay Area – ah … home sweet home!
The city of San Jose housing market imploded the day liar loans stopped, but anywhere north has been almost as solid as Irvine.
The problem is that even at $300k, San Jose houses are still not worth it – they’re overpriced termite-infested stucco crapshacks from before 1940.
Love the poker graphic above.
Thankfully, 25 year old construction workers were not smart enough to buy on Nobb Hill or Irvine. They were trying to be somewhat reasonable with their liar loans and bought where the blue collar peasants live.
I too love the ridiculous argument that the squatters are “taking care” of the properties while waiting to be foreclosed. LOL That must be it, the squatters are using all that money to make repairs on the house rather than pay the mortgage. They don’t want the bank to seize a sloppy house – no sir.
These people don’t even have a damn security deposit to lose. WTF do they care? The banks would be way better off getting responsible paying renters into these places. I guarantee you that a security deposit is a great incentive to keep the property in good shape. Much more motivating than the false pride of ownership.
‘Buy and Bail’ Homeowners Get Past Fannie, Freddie Loan Hurdles
Good for them. If the banks are stupid enough to fall for it and the government does not allow the newly bought house to be seized. Tough luck Mr. Taxpayer – you got exactly what you voted for.
This flipper outfit buys the place at auction, puts in pergraniteel and now wants to sell it for peak bubble price. I guess we’ll never learn from past mistakes.
$2700 a month is easily rental parity. Homes like this may sell below rental parity at peak pricing as interest rates continue to decline with continued AND additional quantitative easing.
You have way too much confidence that the Fed can manipulate this market for eternity. The Fed has proven to be an outright failure with their decisions the last 15 years. I would not base my economic livelihood on those idiots, others can do so at their own peril.
0% interest rates don’t appear to be helping anything. Let’s just keep doing it then!
0% interest rates are the new permanent plateau.
The Federal Reserve has been manipulating the market since 1913, but the founders were manipulating the market long before that. It’s insane to think it will end, even in the absence of a federal reserve.
Since HELOC money is generally not available for upgrades post-purchase, a lot of buyers are opting to pay higher prices for flippers to do the upgrades, and just have those upgrades rolled into the purchase price.
I’ve actually talked to home buyers and shoppers who were shocked that the HELOC spigot has been turned off and were apalled to realize somebody else would not be financing their dream upgrades.
Record low mortgage rates fail to move market
Awesome poem! Love it.
Study: 1-in-53 short sales is fraudulent
“Mr. Rosen is as wrong as wrong can be. How did he come about his estimate that fewer than 15% of those who are 90-days late will get foreclosed on?”
Perhaps the reporter left out the final part of the sentence: … fewer than 15% of those who are 90-days late will get foreclosed on – this year.
With newspapers cutting back or going out of business, journalism isn’t necessarily doing all that well either. A lot of cheer leading and spinning for the realtors, who are still buying ads.
“With newspapers cutting back or going out of business, journalism isn’t necessarily doing all that well either. A lot of cheer leading and spinning for the realtors, who are still buying ads.”
I have noticed that too. They keep lowering their credibility each time they run a realtor written nonsense piece.
Reality for the indebted may be less rosy than IR paints it…
Barricaded man throws items from window
Couldn’t this be a reality TV show? “The Real Squatters of Orange County” – find some people that stopped paying on their loans six months ago or more and just follow them around…see how they live…see how long they continue to live in their homes! I think it would be great.
I thought they already have or had that show…except they didn’t call them squatters.
This is a great idea. Let the poor people in the midwest know why they are only making 1% on their money and where their tax dollars and retirement is going.
The following is an example of someone who took care of a $2 mil to $3 mil property for more than one year after the bank took it back and who knows how long before that.
HUD Offers Interest-Free Loans to Reduce Foreclosures (Update1)
Another lender bailout taxpayers are forced to pay.
I wonder how unemployed renters feel about this?
Interesting that all the comments I have read about this are about renter vs. homeowner, or taxpayer vs. homeowner. Not a single person seems to have realized that this is just another bank bailout, another way to funnel govt money to banks under another name.
Obama today announced another bull shit program of $2billion home owner assistance of $50k loan to each of the unemployed home owner, what a Joke!
I see one way to assess the real problem and separete those who are unemployed and in distress from those who are strategically defaulting would be to force the rule back on 100% liability for all taxes, losses, etc. incurred by all due to homeowner. You can get the squatter who has assets junp up and pay down his debt in no time. For those who are really in distress and cant afford, boot them out. if you cant afford, go rent! I cant afford a $1M home, doesnt mean that I should be provided with Govt. assistance because I once bought it knowing I cant afford it.
Govt. is corrupt and I think all BS that we are seeing will last until Nov elections. I think most banks will start taking actions leading to elections, 30-days before so dump is ready post elections.
No one makes a dime by folks squatting, other than the squatter. Penalize the squatter and we get to the solution a lot quicker.
If we all read into FED statement from yesterday, notice that FED clearly said that it will sell its $2 trillion MBS trash and buy treassuries.
The question is who is going to buy that $2 trillion worth trash from FED? IF banks are forced to buyback their own poop, then banks will go under and markets will crash again. FED then moves on to buy T-bills, and then Govt. gets on round 2 of Bank bailout.
In the end, problem got prolonged, debt got doubled while FED flipped the hat.
This nation has become corrupt! There is no fix for housing. No one thinks about creating jobs, corporates are still moving outside US for cost savings.
I would think investors would be willing to buy some of the loans, maybe for 20c on the dollar? And to make up for the loss the Fed just prints more money! Inflation=5%?
I just had an IHB reader call me. We offered on an REO about a month ago in Coto for a property listed at circa 1 million. The listing agent listed it even though they were still trying to evict the previous loan owners. It’s been over a month and my client drove by the property this weekend, he said that they had a gardener in the front yard and workers detailing their cars. Living the OC dream I guess. The squatting continues, at least the bank is trying on this one. Unbelievable!
14 Running Brook?
Sorry, should not dislcose. Have you been looking at 14 Running Brook in Coto?
So what is your favorite realtor line?
Mine currently is: “Your offer is low enough that the seller may get insulted!”
My response: “Why are you insulting my intelligence by listing the home @WTF pricing? Why should I pay for some guy stealing HELOC from the bank and the bank giving away free money??””
I always wonder, over the course of 10-15 years, you compare the prudent renter to the overextended borrower (100% financed, MEW, squatted for a year, etc…) who ends up financially ahead, or is it even?
Sometimes I feel like a sucker for choosing the former, the more I read about these…the more I wish I got on that gravy train and let the good times roll for a while.
I’ve seen quite a few people on this blog mention this. I can’t imagine living like those squatters. I understand that it may pencil out in the short run, but over the long run, there must be a consequence to them besides ruined credit.
The person who ends up “ahead” will ultimately have nothing to do with pure finance.
Most prudent renters and debt consumed people are unhappy because they want more and feel they deserve more.
The person who ends up ahead is probably the prudent home owner who wants exactly what they have.
The key term is prudent homeowner, which was nearly impossible in Irvine for those looking to purchase from circa 2004-2008. The situation is slowly improving though
A prudent renter is just as likely to end up ahead, especially if they do not care if they own or rent. For example, one may want a 2500+ square foot home on a nice lot in Irvine. To buy this home in nicer Irvine areas the seller will likely want between 900,000 and 1 million, while one can likely rent it for between $3000 and $3500. A prudent renter knows exactly what they want and just because they can’t or don’t want to pay a million bucks for it they can pay $3000 to $3500 to rent it, maintain mobility, and end up ahead.
That being said there is value to knowing what one wants and making it happen.
Lots of good quotes of defaulters in this link:
Bad Debts Rise, and Go Unpaid, as Bust Erodes Home Equity
Understanding the priniciples of home buying through reading Irvine Housing Blog IS taking the Red Pill, in that exposes all types of misconceptions and myths.
It was by fate, yes by Life’s Design that I came, read, and believed the things you wrote. It was fated that I do so.
Yes, all important decisions in life were chosen for us. We have no choice. The choice has already been made.
Interested? I write more in my linked article: I’m A Red Pill Kind Of Guy
We’ve had to kick out the same “tenant” from two houses that we’ve purchased. Some will hope from house to house knowing they can draw up fake lease agreements and go for cash for keys.
We have some stories about that. One of the main trustee sale buyers I work with said that there’s an attoreny that does that, parks his Porche in the driveway and squats.
the long involved post destructed from anti-spam-guard.
This one survived quite nicely, of course.
What a city Irvine is! They now have squatters, gay pride events, and a great pork that has burned through 200 million dollars and ONLY 19 JOBS CREATED! To sum it Irvine has a gay friendly, squatter friendly, military hostile, aviation hostile, business hostile climate!
Just wait until those 35,000 “low income” housing units that SCAG mandated get built. Adding a glut of low income homes to an already over-saturated market will do wonders for property values.
Now if El Toro was kept open, there would not be thousands of available acres in the buffer zone for immense amounts of residential development. Just saying.
2 years ago, in these very comments, I made the prediction Irvine was going to $140/sf. Not there yet. Still moving in that direction though.
I’ll check back again next year.