Former owners are breaking in to houses they were booted out of claiming their foreclosure was fraudulent.
Irvine Home Address … 43 TAROCCO Irvine, CA 92618
Resale Home Price …… $275,000
At the end of the week I get to keep your dinero.
Your fast asleep, when I sneak in your casa.
Your life sucks when your bankrupt and I'm laughing
And can trust me esse cause I'm Latin
I Lie, I Cheat, I Steal
I Lie, I Cheat, I Steal
Eddie Guerrero — Can You Feel The Heat
Last week when I wrote about Private Property Rights: A Casualty of the Housing Bubble, I didn't fully grasp the seriousness of the problem facing our system of property rights.
We live in a nation of laws. Our laws of ownership of property are the basis of our economic system. These laws are being threatened. Barry Ritholtz quoted Hernando de Soto, The Mystery of Capital:
“In the West, this formal property system begins to process assets into capital by describing and organizing the most economically and socially useful aspects about assets, preserving this information in a recording system—as insertions in a written ledger or a blip on a computer disk—and then embodying it in a title. A set of detailed and precise legal rules governs this entire process. Formal property records and titles thus represent our shared concept of what is economically meaningful about any asset. They capture and organize all the relevant information required to conceptualize the potential value of an asset and so allow us to control it . . .
The reason capitalism has triumphed in the West and sputtered in the rest of the world is because most of the assets in Western nations have been integrated into one formal representational system . . . By transforming people with real property interests into accountable individuals, formal property created individuals from masses. People no longer needed to rely on neighborhood relationships or make local arrangements to protect their rights to assets. They were thus freed to explore how to generate surplus value from their own assets.”
Today's featured news story is about a family fighting to keep their home… or not. It is really about a family of HELOC abusers who gamed the system as long as they could, and now they have broken into the home they no longer own, and they are squatting there under advice of their attorney who likely hopes to make a name for himself while encouraging his clients to break the law.
Sheree R Curry — Oct 12th 2010
Just as new owners were about to move in, the previous owners of a foreclosed house in Simi Valley, Calif. reoccupied it with locksmith, attorney and camera crew in tow.
Investors who had purchased the home at a lender's trustee sale had been hoping to have its new owners in it this week. But Jim and Danielle Earl and their nine children returned to the home because, she says, she believes it will be difficult for their family to find another permanent place to live if they comply with a court order to vacate the home.
Difficult to find a permanent place to live? WTF is she talking about? It will be difficult to find a stucco box with a built-in ATM machine, that much is true. It won't be difficult to find a rental. Oh wait, I get it… she is entitled to a permanent residence. It doesn't matter that other people have to work and pay bills, she doesn't have to pay her bills, and she is entitled to live in a permanent residence for which she does not pay.
That order, says their lawyer, was the end result of fraud.
Fraud? Perhaps her lawyer should go through the families previous loan applications and see how truthful they were about their income. This family filled out a bunch of paperwork and obtained a loan. When they didn't repay that loan, the lender exercised their contractual right to force a foreclosure sale of the property. If there are minor paperwork irregularities, it doesn't mean they don't have to repay the loan and keep the property. I can't believe people conceive these ideas.
"They broke in and are proceeding to squat in there," listing agent Chris Garvin of Troop Real Estate, told HousingWatch.
The Earls originally purchased the house for $500,000 in March 2001. Due to some refinances to take out equity, they owed at least $880,000 on a no-interest mortgage loan by the time of foreclosure.
Let's be real about who and what these people are: HELOC abusing squatters.
"When we were evicted we went to the Extended Stay America because they were the only hotel around that would let us have that many children, and a dog and two cats," Danielle Earl, 44, told HousingWatch. "We split up into two hotel rooms for a month." She is the part owner of a medical devices company and her husband is a stay-at-home dad. After their hotel stay they moved to a short-term rental, but their credit issues would keep them from obtaining a property that would permanently suit their needs, she said.
No kidding? I guess not making your house payment for a long time and going into foreclosure will do that. Whocouldanode?
But the bigger issues, says their attorney, Michael Pines, is that the lender fraudulently foreclosed upon their six-bedroom, five-bath home. "When I felt comfortable from a legal standpoint that they had a basis for moving back in, they did so on my recommendation," says Pines.
Garvin was not only the listing agent but also the acquisition and sales partner for his client, Conejo Capital Partners, the investors. He says that he purchased the home in good faith for $697,000 in January on behalf of his client, at an auction on the courthouse steps.
After gaining possession through eviction in July, his clients spent $40,000 rehabbing the home. Carpets were replaced, appliances updated, and granite countertops added. "The living condition was disgusting," he says. But once cleaned up, it went under contract to new buyers for $800,000. All other questions were referred to his attorney, Stan Yates, who had not responded to HousingWatch by publication time.
No wonder these squatters want to move back in. The flipper buys the property at auction, spends a great deal of money fixing the place up, and now the former owners want to move in? I suppose they are entitled to the new improvements for free too, right?
Danielle Earl (pictured) says that she and her husband have been foster parents to 43 children over the years and they currently home-school most of their school-age children (six of whom are adopted). So she admits that the walls were probably a bit scuffed and in need of a paint job, and some of the carpet was worn. But, she says, she and her family only had a day to collect their things and have movers haul it away, so it's not like they were leaving the home in a show-ready state.
I see this family works the bleeding heart angle. They can be proud of their work as foster parents. It's the way they managed their finances that's the problem.
The rehab she describes costs $4,000. The flipper needed to spend $40,000. I can tell you from experience that flippers do not spend $40,000 if they don't have to. It is a for-profit business.
About arriving back home Saturday, she says: "It was such an emotional moment. Everyone started hugging each other and crying."
Arriving back home? You mean after they broke in and started squatting they were overjoyed with all the new stuff the flipper gave them. This family is unbelievable.
Since possession doesn't necessarily mean ownership, the Earls still have a battle on their hands, says Pines, who says they were denied a trial by jury to argue why they never should have been foreclosed upon — and their eviction from the 2000-built home was unwarranted.
"The bank used the usual fabricated and forged documents to foreclose," the Earls wrote in their court petition, in which they describe signatures by bank personnel that do not match, from document to document — an indication to them that documents were not properly reviewed and were fabricated.
"We needed to get back in before the investor and the real estate broker moved in a new family," says Pines. "I didn't want to allow the situation to become worse, and we show up and we have to try to throw them out. Danielle and Jim would not have wanted to throw them out."
They moved in so that they wouldn't have to throw out the rightful owners. How nice of them!
The Earls question who owns the loan, as the foreclosure documents list GRP Financial Services, but there have been several lenders listed in the past few years. The original lender was Washington Mutual Bank, which became JPMorgan Chase after the banks merged. The loan went to Bank of America on the same day that Chase sent the homeowners a notice of default. The Earls argue that Chase never properly assumed the loan and thus did not have the right to sell it off. And in turn, the investors, Conejo Capital Partners, did not properly purchase the property either.
This attorneys argument is specious. Even if we assume Chase didn't properly assume the loan, that doesn't mean the family of squatters owns it. Of all the various parties to this fiasco, the one I am quite certain has no ownership claim is the family currently squatting there.
If the lender did not properly assume the loan, then some previous lender still has the loan. Someone, somewhere owns this loan, and that entity has the right to call an auction for the property. Best case for these people is they get to squat a little longer while the proper note holder is determined and a foreclosure can go forward. in the meantime, the title company that insured the note is going to have to pay the flipper their investment money back as part of a title claim. That title insurer will then sue the bank that improperly transferred the note for damages. The attorneys all get rich.
The courts generally can ignore a foreclosure sale when there has been fraud or the sale was improperly conducted.
The Earls, who admit to having fallen behind on their mortgage at one point due to a loss of income in Danielle's business, say that they were working with the bank to catch up on their payments.
What does it mean to be "working with the bank?" Either these people were making up the missed payments or they weren't. In all likelihood, they were gaming the system with loan modifications and other ploys and the bank finally got fed up.
However, she says, whenever they made a payment it was not being reflected on statements, even a $12,500 catch-up payment was not credited to the balance due. Ultimately, there was a $25,000 discrepancy between what they thought they still owed in arrears and what the bank said they owed.
They were probably charged late fees, collection fees, and any other fee the bank could think of — they weren't paying the mortgage. What did they expect?
Garvin testified at court that he successfully bid against four others for the property, and on Feb. 5 served the Earls with a three-day notice to vacate the property, and they failed to do so at that time. They are charging the Earls approximately $4,000 a month rent, or about $133 per day for their extended stay beyond that date.
In other words, the flipper was exercising his legal rights to clear the squatters from the house.
Pines says that he can't predict if the real estate investor will again evict the Earls, but adds, "I think that is unlikely." His firm, Pines & Associates, will be filing a lawsuit "against everybody," he says.
Did you recoil in fear when you read that? Oh no, the big, bad lawyer is going to sue everybody. What a loser.
Even if Conejo Capital Partners were a purchaser in good faith, the Earls believe that the investor group must still prove that the foreclosure process itself was proper.
The Earls, however, are just happy to be back in their home. "My kids have been begging to go home and we're finally home," said Danielle Earl.
I have expressed my opinion. What do you think? Are these people heroes of villains?
What happens if mortgage insurers lose faith?
The purpose of foreclosure is to clear title. All the financial encumbrances are cleansed from the property, and title clearly vests with the highest bidder at public auction. Without the vesting of clean title in foreclosure, real estate quickly becomes mired and our system of property ownership begins to crumble. If the winning bidder at a public auction cannot be sure of title, why would they bid? How would anyone know they really had title to anything?
What would happen if issuers of title insurance stop issuing new policies because they cannot guarantee title? No title insurance means no loans. No loans means properties fall immediately to cash value. Uncertainty about title in the cash market means those transactions stop as well. All real estate transactions would cease, and we would witness the complete collapse of our real estate market. We would truly become a banana republic.
Once title becomes uncertain, all transactions related to title cease. Would you buy a property if you thought someone could simply break in and take if from you? We would revert back to a feudal state where warlords claimed title by force of arms. Think Afghanistan. Do you think i am exaggerating the implications of this? I don't think so.
Paying up the mortgage
Somehow during the housing bubble, people forgot they are supposed to pay down a mortgage. Instead, everyone decided to pay it up by borrowing heavily and paying back as little as possible. The owner of today's featured property has owned it for 17 years. During that time, she should have made significant progress toward paying it off; however, she decided to spend her new-found wealth with a series of mortgage equity withdrawal refinances and HELOCs.
- This property was purchased on 6/18/1993 for $134,000. The original loan is not given, but it was likely a $107,200 loan with a $26,800 down payment.
- On 12/31/1998 she refinanced the first mortgage for $122,120.
- On 3/31/2003 she refinanced again for $164,500.
- On 1/30/2004 she opened a HELOC for $25,000.
- On 2/16/2005 she got a new first mortgage for $225,000.
- On 1/24/2006 she obtained a $250,000 first mortgage.
- On 8/17/2006 she refinanced with a $279,400 first mortgage.
- On 9/21/2007 she opened a stand-alone second for $42,000.
- Total property debt is $321,400.
- Total mortgage equity withdrawal is $214,200.
- She was recently issued a NOD.
Recording Date: 08/09/2010
Document Type: Notice of Default
Irvine Home Address … 43 TAROCCO Irvine, CA 92618
Resale Home Price … $275,000
Home Purchase Price … $134,000
Home Purchase Date …. 6/18/1993
Net Gain (Loss) ………. $124,500
Percent Change ………. 92.9%
Annual Appreciation … 4.1%
Cost of Ownership
$275,000 ………. Asking Price
$9,625 ………. 3.5% Down FHA Financing
4.21% …………… Mortgage Interest Rate
$265,375 ………. 30-Year Mortgage
$51,933 ………. Income Requirement
$1,299 ………. Monthly Mortgage Payment
$238 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$23 ………. Homeowners Insurance
$310 ………. Homeowners Association Fees
$1,871 ………. Monthly Cash Outlays
-$117 ………. Tax Savings (% of Interest and Property Tax)
-$368 ………. Equity Hidden in Payment
$14 ………. Lost Income to Down Payment (net of taxes)
$34 ………. Maintenance and Replacement Reserves
$1,434 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$2,750 ………. Furnishing and Move In @1%
$2,750 ………. Closing Costs @1%
$2,654 ………… Interest Points @1% of Loan
$9,625 ………. Down Payment
$17,779 ………. Total Cash Costs
$21,900 ………… Emergency Cash Reserves
$39,679 ………. Total Savings Needed
Property Details for 43 TAROCCO Irvine, CA 92618
Baths: 1 full 1 part baths
Home size: 995 sq ft
($276 / sq ft)
Lot Size: n/a
Year Built: 1983
Days on Market: 12
Listing Updated: 40455
MLS Number: P754822
Property Type: Condominium, Residential
According to the listing agent, this listing may be a pre-foreclosure or short sale.
GREAT LOCATION BACKING UP TO CHURCH PROPERTY – GIVES IT A MORE OPEN FEELING. DARLING LOWER END-UNIT IN PROCESS OF BEING PAINTED. LOTS OF NATURAL LIGHT AND OVERSIZED PATIO. KITCHEN & BATH CABINETS HAVE BEEN REFINISHED & COUNTERS REPLACED. ALL APPLIANCES REMAIN. NEW VINYL ENERGY EFFICIENT WINDOWS & SLIDERS TO PATIO OFF LIVING ROOM & MASTER BEDROOM. ADDITIONAL STORAGE ROOM ON PATIO. INSIDE LAUNDRY. COMPLEX IS NEXT TO IRVINE VALLEY COLLEGE. EZ ACCESS TO 5 & 405 FREEWAYS. NEAR IRVINE SPECTRUM AND OAK CREEK GOLF COURSE ACROSS THE STREET FROM THE COMPLEX. ASSIGNED COVERED CARPORT #17 WITH AMPLE GUEST PARKING