One of the biggest drags on the economy at every scale is unemployment among real estate agents, mortgage brokers, appraisers, home builders, engineers, architects, and a number of related fields.

Irvine Home Address … 6 BUTTERFLY Irvine, CA 92604

Resale Home Price …… $470,000

I'm tellin' you it's got to be the end,

Don't bring me down,no no no no no,

I'll tell you once more before I get off the floor

Don't bring me down.

Electric Light Orchestra — Don't Bring Me Down

Our current economic woes were caused by the real estate sector. Lenders emboldened by sophisticated risk-shifting and securitization pumped trillions of dollars into real estate loans — loans that ultimately went bad because incomes were not sufficient to support them.

The resulting collapse in real estate prices has caused residential investment to fall to record lows.

That plunging blue line is just another statistical measure. The human toll in suffering among everyone involved in the real estate industrial complex can't be captured by a graph.

Mortgage industry workforce plunges by more than 50% in five years

April 11, 2011 — E. Scott Reckard, Los Angeles Times

Here are some hard numbers for the downturn in mortgage employment I wrote about last week — and they show a reduction of more than 50% in home-lending jobs since the peak of the housing and commercial real estate bubble.

The news peg for the story was mortgage goliath Wells Fargo & Co. saying it had eliminated 1,900 home-lending jobs, mostly workers hired temporarily to deal with last year's mini-boom in refinancings.

But that's nothing compared with the industry's overall decline from more than 500,000 employees in late 2005 and early 2006 to 248,000 in February, according to Bureau of Labor Statistics data compiled by the Mortgage Bankers Assn.

The latest numbers are the lowest for the industry since August 1997, according to the mortgage bankers group. The data, which arrived too late to be included in last week's story, showed that employment peaked at 505,000 in February 2006.

The numbers probably overstate mortgage employment slightly, because the trade group combined the BLS categories “real estate credit” and “mortgage and nonmortgage loan brokers.” But the lion's share of the jobs are related to mortgages and the downturn is dramatic.

Following up on the story, Calculated Risk posted an interesting chart showing the correlation between 30-year fixed mortgage rates and refinancings. One notable detail is how round numbers catch the attention of homeowners. Check out the giant spike in refis when the rate dipped below 6% in 2003 and the also pronounced but smaller spike when it fell below 5% in 2009.

Mortgage employment also may have been affected by new licensing requirements for employees of nonbank lenders, adopted as part of regulations cleaning up the mess from the financial crisis. The licensing has made it more expensive for these independent brokers and mortgage bankers to maintain their payrolls, people in the industry say.

Chicago Bancorp, a large mortgage-banking firm, completed its purchase of Generations Bank, a Kansas City, Kan., savings and loan, last week to gain access to a nationwide lending market without the added licensing costs, Chicago Bancorp founder Stephen Calk told the Kansas City Star.

A spark from the outside

The economy will not fully recover until the real estate sector is put back to work. No, it doesn't have to attain the unsustainable heights of the housing bubble. A return to historic norms will feel like a boom compared to the last 4 years.

Real estate employment is an economic amplifier. Once people go back to work, new households begin to form, and demand for housing picks up, then and only then will residential investment pick up. Once residential investment improves, people working in real estate will add to demand for its own product, and the economy will gain a synergy from the real estate sector going back to work.

Unfortunately, it will require an outside economic stimulus to begin the chain reaction. In 2009, the federal reserve tried to prop up the housing market in hopes it would stimulate the economy and put the real estate sector back to work. Unfortunately, the policy was unsuccessful because the underlying problems with toxic mortgages was simply too big to be papered over by our central bank.

Until some other sector of the economy grows enough to put people back to work, the household formation necessary to stimulate real estate demand isn't going to happen. In the meantime, most of the real estate sector is unemployed, and the entire economy suffers along with it.

Severe HELOC abuse or mortgage fraud?

The owner of today's featured property weren't content to merely strip every penny from the walls the moment it appeared, she managed to process concurrent refinances at two different banks at the top of the real estate bubble. The timing certainly looks like mortgage fraud.

• Today's featured property was purchased on 3/30/1999 for $235,000. The owner used a $187,920 first mortgage and a $47,080 down payment. She waited four years before going Ponzi.
• On 3/18/2003 she refinanced with a $180,700 first mortgage and a $100,000 HELOC. At this point, she had been paying off his mortgage for four years, but the $100,000 HELOC was too tempting to resist.
• On 7/29/2003 she refinanced with a $273,000 first mortgage and a $78,000 stand-alone second.
• On 5/24/2004 she obtained a $154,000 HELOC.
• On 8/18/2005 she obtained a $238,000 HELOC.

This is where the mortgage activity looks like mortgage fraud. Ordinarily, people only process one loan at a time because each lender will want to be in first position. Lenders check the property records before funding a loan, but if a borrower can time the funding at both banks to happen within a few days of one another, the recording of the first loan will not show up before the second one funds. The lender on the second loan believes they are in first position because the other loan, the one that funded a few days earlier, has not shown up in the property records. It's only after a week or two that the lender who funded the second loan realizes they were ripped off.

• On 2/23/2006 they refinanced their first mortgage with Bank of America for $540,000. They recorded first, so they are in first position.
• On 2/28/2006 they obtained two loans from Hanmi Bank. The first was a $270,000 mortgage, and the second was a $129,000 mortgage. Hanmi Bank recorded second, so they are totally screwed.
• Between the three loans recorded within days of one another, the total property debt is $939,000.
• Total mortgage equity withdrawal is $751,080.

There is no telling when she quit paying, but one of the lenders finally recorded a NOD in March.

Foreclosure Record

Recording Date: 03/23/2011

Document Type: Notice of Default

With over $900,000 in debt and a recovery closer to $450,000, someone is going to lose a lot of money. Hamni Bank will have to go after this deadbeat for theft via mortgage fraud. I doubt they have any assets for the bank to recover.

Irvine House Address … 6 BUTTERFLY Irvine, CA 92604

Resale House Price …… $470,000

House Purchase Price … $235,000

House Purchase Date …. 3/30/1999

Net Gain (Loss) ………. $206,800

Percent Change ………. 88.0%

Annual Appreciation … 5.7%

Cost of House Ownership

————————————————-

$470,000 ………. Asking Price

$16,450 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$453,550 ………. 30-Year Mortgage

$102,808 ………. Income Requirement

$2,399 ………. Monthly Mortgage Payment

$407 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$98 ………. Homeowners Insurance (@ 0.25%)

$522 ………. Private Mortgage Insurance

$215 ………. Homeowners Association Fees

============================================

$3,641 ………. Monthly Cash Outlays

-$393 ………. Tax Savings (% of Interest and Property Tax)

-$558 ………. Equity Hidden in Payment (Amortization)

$31 ………. Lost Income to Down Payment (net of taxes)

$79 ………. Maintenance and Replacement Reserves

============================================

$2,799 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,700 ………. Furnishing and Move In @1%

$4,700 ………. Closing Costs @1%

$4,536 ………… Interest Points @1% of Loan

$16,450 ………. Down Payment

============================================

$30,386 ………. Total Cash Costs

$42,900 ………… Emergency Cash Reserves

============================================

$73,286 ………. Total Savings Needed

Property Details for 6 BUTTERFLY Irvine, CA 92604

——————————————————————————

Beds: 3

Baths: 2

Sq. Ft.: 1950

$241/SF

Property Type: Residential, Single Family

Style: Two Level, Other

Year Built: 1977

Community: 0

County: Orange

MLS#: P776205

Source: SoCalMLS

Status: Active

On Redfin: 9 days

——————————————————————————

Beautiful hard wood floor with high ceiling, Granite counter top and Newer cabinet in Kitchen. Morrored Wardrobes, Custom added storage area in Master bedroom closet. Large lush backyard Backing to Greenbelt, Spacious and airy floorplan. Great location for shopping, park, and schools.

With house prices falling, particularly at the high end, many of the wealthy are choosing to rent and wait out the storm.

Irvine Home Address … 52 FANLIGHT Irvine, CA 92620

Resale Home Price …… $1,190,000

I am, I'm too fabulous

I'm so, fierce that it's so nuts

I live, to be model thin

Dress me, I'm your mannequin

Fashion put it all on me

Don't you want to see these clothes on me

Fashion put it all on me

I am anyone you want me to be

Lady Gaga — Fashion

Renting is the latest fad. The rich are dumping their high end real estate and renting instead. Without house price appreciation, even the rich don't like to waste their money owning real estate. Prices at the high end are falling, and with large inventories both visible and shadow, prices will continue to fall.

Orange County asking prices by price range

Leasing is in fashion among wealthy house hunters

Niche data and anecdotal evidence point to a surge in high-end rentals. Instability in housing prices is one reason the rich are shying away from purchases.

Real estate agents have been hustling lately but not necessarily to sell homes. Instead, leasing is in vogue, particularly at the top of the price spectrum.

If phone inquiries are an indication, interest in leasing luxury homes is intense, said Justin Mandile, an agent in the Sotheby's International Realty office in Beverly Hills.

He and partner Mary Swanson received 10 to 15 calls a day for two months on a five-bedroom house in the Sunset Strip area priced at $3.5 million for sale or $10,000 a month to rent. After initially holding out for a sale, the owner recently accepted a short-term lease.

“Surprisingly, there are that many people looking for a $10,000 lease,” Mandile said.

The cost of ownership with a big loan would be about $20,000 a month. Not exactly a great cashflow deal, but some properties truly are special enough to command huge ownership premiums — not single-family detached homes in suburbia (see: Irvine). Unfortunately for this seller, there are too many special properties and not enough buyers who think they are that special.

No single clearinghouse tracks such data for all of Southern California, and many top-dollar leases are handled privately, away from the prying eyes of the public. Still, niche data and anecdotal evidence point to an upswing in upscale rentals.

Lease offerings priced at more than $10,000 a month were up 15% through the first part of April over the same period last year on the Combined L.A./Westside Multiple Listing Service, while those in the $7,500-to-$10,000 price range saw a 7% increase. OCHouseRentals.com, which specializes in luxury leases, reports that business has been brisk in Orange County as well.

“We're seeing increased leasing across the board — both luxury and non-luxury properties,” said Cary Hoffman, manager of Rodeo Realty's Encino office, which has more than 70 agents and listings from the Westside to the south San Fernando Valley.

Are people wising up to the renter's subsidy? When real estate prices aren't rising, it's much cheaper to rent high-end real estate than it is to own it. Wise rich people will chose to rent and let someone else be an owner who is subsidising their housing, particularly when prices are falling.

For instance, let's say you own a million dollar home like today's featured property where the cost of ownership is nearly $7,000 per month. This house, or one similar to it, could be rented for $4,500. If the price of the $1,000,000 property does not change, the renter saved $30,000 just in cost of living. If the value of the house also declines — as is happening at the high end — then the owner loses two ways. When you also take into account the fact that the renter got beneficial use of the property while the owner made huge payments and lost equity. I'd rather be the renter — at least until the market turns.

Underlying the activity in leasing is consumer uncertainty about the direction of housing, said Paul Habibi, a UCLA lecturer on real estate, investment and development.

“People want to wait to buy when they are sure there is a floor underneath the housing market,” Habibi said. “When government intervention pulls back, then we will see where the housing market really is.”

We are seeing where the housing market really is. Sales are weak and prices are down. The market is falling again because a natural bottom was not allowed to form the first time. We delayed the bottom two years, perhaps raised the bottom 15% to 20% locally, but we prolonged our agony to adjust to the reality of the housing crash.

Beyond the usual remodelers and divorcees, those seeking leases include people who can no longer qualify for mortgages.

“The high end got hit last with the wave of foreclosures” and short sales, said Hoffman, who has been an agent for 29 years. “People coming out of those homes have to have a place to go.”

They may want to stay in the same school districts or close to familiar shops and businesses. For others, it's a matter of keeping up appearances.

“Some people who are losing $3-million homes are very happy, happy to lease for $10,000 a month because they want to still look like they are making it,” said broker Anita Rich, who oversees the Rich Group Keller Williams in Encino. “It's really important they still have an address that goes along with the lifestyle.”

Interesting that posers turn to renting when the housing ATM gets shut off. Perhaps that's a renter's buy signal? Be a poser contrarian.

Leasing still represents a relatively small segment of the market compared with sales, but it's not uncommon to see homes listed both for sale or lease these days, creating a safety net for the homeowner if the house doesn't sell right away.

Rich recently completed three leases for $8,000 a month and up. One was a Hollywood Hills three-bedroom listed for sale at $1.7 million or for lease at $12,000.

“They got a lease offer before an offer on a sale,” said Rich, who has 30 years of real estate experience.

Adding to the supply of lease houses are absentee owners and investors who haven't been able to sell and decide to take their for-sale homes off the market, put them up for lease and “sit out for six months or a year” or more, Rich said. “They don't want the perception that the property is getting stale or old.”

Other houses for lease are owned by people who purchased at the height of the market. The owners are keeping their homes and renting them out to cut costs.

Floplords are everywhere. The failed plan B of any speculator is to rent the property out. Only when they try this do they realize the ramifications of negative cashflow. If held long enough, the property may go up in value, but it may never recover the accumulate negative cashflow while the floplord waited for prices to go up.

“I know of several cases where people moved into other arrangements that cost them less,” UCLA's Habibi said.

Downsizing is the reason that restaurant owner Benny Borsakian gives for leasing out his primary residence.

He recently signed up a two-year tenant for his 4,400-square-foot home in Encino with the help of Rodeo Realty agent Carol Wolfe, who also represented the renter. His family grown, Borsakian no longer needs a house of that size.

“It's just me, my wife and a housekeeper,” he said.

Borsakian, whose house is nearly paid off, plans to re-evaluate the situation when the lease is up.

Although she doesn't agree with the thinking, Wolfe is seeing more potential sellers choose to be landlords rather than sell now. “They are going to hold on to the property longer and sell when the market is better,” she said.

Everyone's playing the housing market. It's a big casino where timing your position to flip from renter to owner and visa versa has a major impact on your financial well being.

It's a sentiment also being expressed on the part of tenants unsure that the housing market has hit bottom. Luc Vanhal, who is renting Borsakian's home, looked at four or five other places before settling on the Encino house.

The first-time leaser needed a place close to his children's schools but didn't want to buy another house. “Why make a huge commitment to something that's clearly not worth it right now?” said Vanhal, president of a direct marketing company.

In Orange County, Jay Gordon of OCHouseRentals.com recently leased out a house on Newport Beach's Lido Isle, where homes can cost from $3 million to $25 million, for $9,500 a month. “You'd spend twice that to live in the same exact area” if you bought, said Gordon, chief executive of the Laguna Beach company.

“Renters are not worrying about losing money,” he said. “Leasing takes the guesswork out of where the market is going.”

lauren.beale@latimes.com

Was it all a dream?

What if prices grind lower for a decade or more here like they did in Japan?

Californians have come to believe their real estate market is truly magic. Prices go up at rates that far exceed inflation or wage growth enriching every home owner. If you own a house you have the potential for unlimited wealth and HELOC buying power for doing absolutely nothing. It is free money from the housing market gods.

Like a child outgrows magical thinking in their pre-teens, will Californians let go of their fantasies about real estate? Would a slow grinding decline squeeze the kool aid out of the California dream? The generation burned by the California housing market may continue to shun real estate just as a generation after the stock market crash of the 1930s stayed away from the stock market.

If the house doesn't provide the HELOC money to support an upscale suburban lifestyle, what's the point in the high price and huge payment?

If interest rates go up, HELOC money goes from being free to being very expensive. Falling interest rates to permit larger debts to be serviced with the same payment. Rising interest rates cause larger payments on the same debt.

Those people who come of of this recession with large debts need to hope the upcoming monetary inflation translates to higher wages. For those in the right industries, rising wages will enable them to at least tread water with their old debts. Those who are in stagnant industries, like real estate, may not see rising wages, and the upcoming inflation may make their debt service payments untenable, and many may be pushed into bankruptcy.

Was it all a dream? Will Californians realize their delusions about housing were all wrong? Or will the gold rush mentality of California's past stay alive and prompt a new generation to chase free money in the housing market? The market is always right, no matter how irrational it is.

A multi-generational house in Irvine

This property a semi-private room or casita for long-term guest stay or running a home business. There aren't many houses like this in Irvine, which is probably a good thing: I see the lure of staying home in Irvine. Many would probably never leave.

Peak buyers iin Woodbury are taking big losses to get out. The owners of today's featured property borrowed nearly the current asking price. After nearly 5 years of ownership, if they sell the property, they lose all their equity, and if they don't have other resources, it may become a short sale.

That's got to hurt.

Irvine House Address … 52 FANLIGHT Irvine, CA 92620

Resale House Price …… $1,190,000

House Purchase Price … $1,476,500

House Purchase Date …. 11/17/2006

Net Gain (Loss) ………. ($357,900)

Percent Change ………. -24.2%

Annual Appreciation … -4.9%

Cost of House Ownership

————————————————-

$1,190,000 ………. Asking Price

$238,000 ………. 20% Down Conventional

4.87% …………… Mortgage Interest Rate

$952,000 ………. 30-Year Mortgage

$215,793 ………. Income Requirement

$5,035 ………. Monthly Mortgage Payment

$1031 ………. Property Tax (@1.04%)

$450 ………. Special Taxes and Levies (Mello Roos)

$248 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$105 ………. Homeowners Association Fees

============================================

$6,869 ………. Monthly Cash Outlays

-$1371 ………. Tax Savings (% of Interest and Property Tax)

-$1172 ………. Equity Hidden in Payment (Amortization)

$446 ………. Lost Income to Down Payment (net of taxes)

$169 ………. Maintenance and Replacement Reserves

============================================

$4,942 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$11,900 ………. Furnishing and Move In @1%

$11,900 ………. Closing Costs @1%

$9,520 ………… Interest Points @1% of Loan

$238,000 ………. Down Payment

============================================

$271,320 ………. Total Cash Costs

$75,700 ………… Emergency Cash Reserves

============================================

$347,020 ………. Total Savings Needed

Property Details for 52 FANLIGHT Irvine, CA 92620

——————————————————————————

Beds: 6

Baths: 6

Sq. Ft.: 3649

$326/SF

Property Type: Residential, Single Family

Style: Two Level, Contemporary

Year Built: 2006

Community: 0

County: Orange

MLS#: S648953

Source: SoCalMLS

Status: Active

On Redfin: 52 days

——————————————————————————

Fabulous Mille Fleur plan 3, majestically sitting on a Cul-de-sac, this beauty offers 6 bedrooms and 6 1/2 bathrooms. main house has 5 bedrooms, each bedroom with their own bath and independent Casita with its own bath, ideal for in-laws, Teenagers, .. .Professionally designed landscaped and hardscaped, gorgeous brick steps with light collumns invites you in, Beautiful back yard with built-in BBQ and Bar. Rediscover passion in cooking in this grand gourmet kitchen with kitchen Island, granite counter tops and stone back splash and SS appliances. Just walking distances to Woodbury elementary school and Woodbury Town Center and to the Common. This is a must see.

Buyers often ignore short sale properties because the approval process takes too long and many deals fall through.

Irvine Home Address … 15 SAGE #41 Irvine, CA 92604

Resale Home Price …… $309,900

Sometimes, I get so tense

But I can't speed up the time

But you know, love,

there's one more thing to consider

Said woman take it slow

And things will be just fine

You and I just used a little patience

Guns N' Roses — Patience

Lenders, sellers, buyers, all are playing the patient waiting game. Lenders and sellers are waiting for prices to go up — which isn't going to happen as long as they need prices to go up because each needy sale prevents prices from appreciating. Buyers are also forced to be patient as lenders withhold product from the market they are afraid to sell because they know it would lower prices.

With everyone involved being forced to be patient, sales are near all-time lows, and the housing market languishes under the weight of distressed inventory.

Delays in Short Sales Frustrate Home Buyers

Short sales could accelerate the resolution of the housing crisis—if the process is streamlined by the big federal mortgage lenders

By Kathleen M. Howley

Charles Wright of Henderson, Nev., fell behind on his mortgage last year after a divorce squeezed his finances. He twice arranged to sell his house for less than its loan balance, a so-called short sale, only to see the buyers walk away because it took too long to get approval from the holder of the mortgage. “I couldn't even get a call back, never mind a yes or no,” says Wright, 30, whose loan was owned by Fannie Mae, the government-run mortgage-finance company. “Why make it so hard to sell when the alternative, foreclosure, means an even bigger loss for lenders?”

Good question. Thomas Popik, research director for Campbell Surveys in Washington, which conducts national monthly surveys of 3,000 real estate brokers, says more short sales could stem steep home-price declines. Although the home is sold for less than the mortgage in a short sale, it stays out of foreclosure, where the holder of the loan seizes the house and auctions it off at a steep discount to current value. “Any time a short sale can be substituted for a foreclosure, it's extremely good for the housing market,” says Popik.

Mr. Popik is wrong. Short sales do more damage to the housing market than foreclosures do. Let me explain.

Short sales are more damaging

I buy and sell foreclosures. The biggest market risk and uncertainty I face is the presence of short sales.

When I buy a foreclosure, the sale at auction is not considered by appraisers in the resale market. Since my auction purchase is all-cash, it is not considered indicative of resale market value. In short, foreclosures do not hurt resale market value unless and until they are resold on the MLS for less than current comps. Since most flippers are trying to maximize profits, they are trying to sell for the highest price they can get, so reductions from current comps are minimal. Short sales don't work the same way.

Short sales are a pain for buyers. They take forever to close, and there is no guarantee that the deal will close even after waiting months for the lenders to approve the sale. The only reason buyers go through the effort is because they either can't find other properties, or they expect a good deal for their patience. Short sales reset market values far more often than foreclosure resales do.

I deal with this market reality every day. Short sales are like ticking bombs waiting to take down the market comps when they close. It is common to Las Vegas to see short sales sell for 10% to 15% below recent comps. Two or three of these in a neighborhood, and appraisers cannot ignore the comparable resales, and the entire neighborhood is brought down. When lenders won't provide the loan, it doesn't matter if the buyer is willing, the sale isn't going to happen unless the buyer backs their willingness with cash. Short sales are comp killers.

And now back to the article:

There were 243,000 short sales in the first 11 months of last year, according to CoreLogic, a research firm in Santa Ana, Calif. That compares with 1.2 million notices of pending auctions in the same period. A lengthy consent process by loan holders deters potential buyers from agreeing to a short sale. In a normal home sale, people make an offer and get a decision from its owners within days, if not hours. For a short sale, the average time between a price bid and response is three and a half months, according to Campbell. The California Association of Realtors estimates that delays kill about half the short-sale deals in the state.

Who wants to wait around for a capricious lender?

The biggest mortgage holders, Fannie Mae and Freddie Mac, completed 7,768 short sales in January, down from 9,373 in the prior month. “I get the sense that Freddie and Fannie have been trying harder to make things work, say, over the last 8 or 10 months, but it still is a fight to get these deals through,” says Ron Wilczek, owner of Metro Phoenix Homes, a real estate agency in Tempe, Ariz.

Fannie Mae approved a short sale for Wright, the Nevada homeowner, after he found a third buyer. A deal went through on Feb. 15, two weeks before the house's scheduled foreclosure auction. The price was $265,000, 37 percent less than what Wright paid in 2007 and about $125,000 short of what he owed Fannie Mae.

If Wright's property had ended up in foreclosure and got sold at the local auction venue—a parking lot near the casinos and wedding chapels of the Las Vegas Strip—Fannie Mae's loss might have been greater. Foreclosed properties typically sell at a 28 percent discount to current market value, according to RealtyTrac, a real estate data company in Irvine, Calif. At least Wright, in his short sale, sold his house for close to its current value.

Did the lender really obtain a greater recovery at short sale? If they had foreclosed in a timely manner months ago when the borrower first went delinquent, prices were higher, and the recovery would have been greater. Plus, the real estate commissions and other sales costs not paid at auction eat into recovery amounts. Further when you factor in the portfolio cost of lowering neighborhood values, and short sales aren't the magic elixir they are made out to be.

When it comes to approving short-sale offers, what seems like dawdling to buyers and sellers may be lightning speed to the mortgage industry, says Faith Schwartz, executive director for the HOPE NOW Alliance in Washington, a group of home-loan investors, lenders, and mortgage servicers including Bank of America and Wells Fargo. Before a short-sale offer can be approved, the holder of the home loan must agree to the price, she says. Other parties may have to assent as well. About half of troubled mortgages involve homes that have so-called second liens such as home equity loans, according to the Treasury Dept. Mortgage insurers may get involved, too.

“All those pieces have to fall together, and that takes time,” says Schwartz. Fannie Mae has set up a program that lets real estate agents talk directly with Fannie when they run into roadblocks during a short sale, says Marcel Bryar, a vice-president at the mortgage financier.

Remember, a short sale is an extended negotiation between the borrower and the subordinate mortgage holders. It isn't usually the first mortgage holder who objects to the sale. Since the second mortgage is generally a complete loss and most borrowers are insolvent, this negotiation can easily get bogged down.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, wants short sales to be “consummated efficiently,” says Corinne Russell, a spokeswoman. Short sales can prevent neighborhood decay by limiting the number of vacant homes and can “ultimately help save taxpayer dollars,” she said in an e-mailed statement.

That's just stupid. Absentee owners generally don't bother with short sales. Most short sales are delinquent owners occupants squatting in the property. They have no incentive to move out until the short sale is completed because they will have to start paying for housing once they leave. Plus, what possible incentive does an short-sale occupant have to maintain the property? Any money they spend is not going to come back to them as equity.

Marie McDonnell, owner of Truth in Lending Auditing & Recovery Services in Orleans, Mass., says loan servicers may be responsible for the delays in short sales. Servicers earn fees by sending the monthly bills and collecting mortgage payments, though they typically don't own the mortgage. They also are in charge of communicating with the mortgage holder when the homeowner wants a short sale. That power gives the servicers the motivation to drag their feet as they rack up additional late fees. In Wright's case, Fannie Mae says it acted in a timely manner once it was told by the servicer of Wright's request.

Banks are in no hurry to recognize the losses on their second loan portfolio. With billions in bad debts on their books, the major banks — who are also major loan servicers — are not foreclosing on those homes where they hold the second mortgage. Those borrowers blessed with those circumstances will be allowed to squat indefinitely.

Chris Killian, a vice-president at the Securities Industry and Financial Markets Assn. in New York, says servicers dealing with an avalanche of defaulted mortgages generally don't have an interest in keeping loans in limbo. Says Wright: “Everyone could save a lot of headaches if the process could be speeded up.”

The bottom line: Short sales could accelerate the resolution of the housing crisis—if the process is streamlined by the big federal mortgage lenders.

The bottom line: short sales make the housing crisis worse by lowering neighborhood comparables. Until we stop messing around with short sales are begin expediting foreclosures, prices will continue to grind lower as each new short sale resets the comps to lower values.

When do we get our next HELOC?

The owner's of today's featured property have been bouncing along with the same maxed-out mortgage balance for the last 5 years. They must have gotten tired of waiting for the next HELOC cash infusion, and instead they are selling the property short. They don't want to hang around and pay off any debts. The house is supposed to do that.

• Today's featured property was purchased on 4/4/2000 for $160,000. The owners used a $127,920 first mortgage, a $23,985 second mortgage, and a $8,095 down payment. They waited two years before going Ponzi.
• On 4/30/2002 they refinanced with a $201,562 first mortgage and obtained a $21,500 HELOC.
• On 5/28/2003 they refinanced with a $206,000 first mortgage.
• On 12/2/2003 they refinanced with a $244,000 first mortgage.
• On 1/8/2004 they obtained a $30,000 HELOC.
• On 11/4/2004 they obtained a $100,000 HELOC.
• On 6/20/2006, right at the peak, they refinanced with a $378,000 first mortgage.
• On 3/28/2007 they refinanced with a $378,000 first mortgage.
• On 9/10/2007 they refinanced with a $377,000 first mortgage. They actually paid it down!
• On 6/19/2008 they refinanced with a $382,000 first mortgage.
• Total mortgage equity withdrawal is $230,095.

This property is being offered as a short sale. Perhaps the California Housing Finance Agency will provide them mortgage assistance. These borrowers seem worthy of a bailout, right?

Irvine House Address … 15 SAGE #41 Irvine, CA 92604

Resale House Price …… $309,900

House Purchase Price … $160,000

House Purchase Date …. 4/4/2000

Net Gain (Loss) ………. $131,306

Percent Change ………. 82.1%

Annual Appreciation … 5.9%

Cost of House Ownership

————————————————-

$309,900 ………. Asking Price

$10,847 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$299,054 ………. 30-Year Mortgage

$67,787 ………. Income Requirement

$1,582 ………. Monthly Mortgage Payment

$269 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$65 ………. Homeowners Insurance (@ 0.25%)

$344 ………. Private Mortgage Insurance

$377 ………. Homeowners Association Fees

============================================

$2,636 ………. Monthly Cash Outlays

-$148 ………. Tax Savings (% of Interest and Property Tax)

-$368 ………. Equity Hidden in Payment (Amortization)

$20 ………. Lost Income to Down Payment (net of taxes)

$59 ………. Maintenance and Replacement Reserves

============================================

$2,199 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$3,099 ………. Furnishing and Move In @1%

$3,099 ………. Closing Costs @1%

$2,991 ………… Interest Points @1% of Loan

$10,847 ………. Down Payment

============================================

$20,035 ………. Total Cash Costs

$33,700 ………… Emergency Cash Reserves

============================================

$53,735 ………. Total Savings Needed

Property Details for 15 SAGE #41 Irvine, CA 92604

——————————————————————————

Beds: 2

Baths: 2

Sq. Ft.: 1022

$303/SF

Property Type: Residential, Condominium

Style: Two Level, Traditional

View: Park/Green Belt

Year Built: 1976

Community: Woodbridge

County: Orange

MLS#: S654957

Source: SoCalMLS

Status: Active

——————————————————————————

Stylish and so sharp – 2-story END UNIT in Woodbridge located across from a large park with peaceful views. A sunny & bright remodeled kitchen has custom French doors leading out to your own large private patio with storage area and fountain. Offering 2 spacious bedrooms, 2 tastefully remodeled bathrooms, whirlpool tub, attractive wrought iron on staircase, 2 ceiling fans, inside laundry and cozy living room with crown molding. One of the best locations in the complex with all the amenities Woodbridge Village has to offer, including pools, tennis courts, lakes, parks and much more. Please visit www. wva. org for additional community photos and details. IMMACULATE HOME AND IN MOVE-IN CONDITION!

in an outrageous move, the California Housing Finance Agency is now offering mortgage relief to HELOC abusers.

Irvine Home Address … 50 BURLINGAME Irvine, CA 92602

Resale Home Price …… $549,900

I have no regrets

There's nothing to forget

All the pain was worth it

Not running from the past

I tried to do what's best

I know that I deserve it

Madonna — I Deserve It

The California Housing Finance Agency can't give away the cash allocated to needy borrowers — which isn't surprising considering responsible borrowers are not losing their homes. In fact, as today's post demonstrates, responsible homeowners are paying the price of irresponsible ones. So in an effort to keep their budgets, they are expanding the free-money offering to include HELOC abusers.

How do you like your tax money bailing out spendthrifts?

Isn't this government sanctioned theft?

When you follow the money, a transfer of wealth through tax dollars to forgive the indebtedness of individuals is theft from the collective to benefit the few.

A borrower and a lender agreed to a transaction. When borrower fails to meet the terms of the note, a lender can force an auction for sale of the collateral to recover their capital. The end. If government is asked to step in to the borrower's shoes and repay the loan, a loan that is not already government insured, then taxpayers are giving money to banks through the borrower.

Both parties to the transaction benefit from the government assistance. Lenders get their interest payments covered, or an increased recovery on their bad loan, and borrowers get to continue using the property they cannot afford. The only loser is the taxpayers, nearly 40% of which are renters, who are asked to pay the burden of supporting the two parties who entered into a bad private contract.

It looks like theft. It feels like theft. Isn't that theft?

Some may argue that all government taxation and spending is theft. But all government is merely organized thuggery. The direct transfer of wealth from one group to another is theft, particularly when their is no collective good obtained from the transfer. Proponents of the mortgage theft being perpetrated today would argue that rescuing the banks was necessary for society and keeping squatters in homes benefits neighborhoods. I think that is bullshit.

Bear rally buyer

The owner of today's featured property is paying the price of their poor timing. This property once sold for $745,000 back on 6/6/2006. The current owner bought this “bargain” as REO paying $550,000 on 11/29/2007. He borrowed $440,000 and put $110,000 down, a good chunk of which he is about to lose.

Despite getting it for $200,000 off it's peak price, the property is being offered for its purchase price, and with commissions, the owner is going to take a loss. Apparently, Irvine real estate was not the best place to park his money over the last 3 years. He should have read the IHB.

Irvine House Address … 50 BURLINGAME Irvine, CA 92602

Resale House Price …… $549,900

House Purchase Price … $550,000

House Purchase Date …. 11/29/2007

Net Gain (Loss) ………. ($33,094)

Percent Change ………. -6.0%

Annual Appreciation … 0.0%

Cost of House Ownership

————————————————-

$549,900 ………. Asking Price

$109,980 ………. 20% Down Conventional

4.87% …………… Mortgage Interest Rate

$439,920 ………. 30-Year Mortgage

$99,718 ………. Income Requirement

$2,327 ………. Monthly Mortgage Payment

$477 ………. Property Tax (@1.04%)

$100 ………. Special Taxes and Levies (Mello Roos)

$115 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$348 ………. Homeowners Association Fees

============================================

$3,366 ………. Monthly Cash Outlays

-$396 ………. Tax Savings (% of Interest and Property Tax)

-$541 ………. Equity Hidden in Payment (Amortization)

$206 ………. Lost Income to Down Payment (net of taxes)

$89 ………. Maintenance and Replacement Reserves

============================================

$2,723 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,499 ………. Furnishing and Move In @1%

$5,499 ………. Closing Costs @1%

$4,399 ………… Interest Points @1% of Loan

$109,980 ………. Down Payment

============================================

$125,377 ………. Total Cash Costs

$41,700 ………… Emergency Cash Reserves

============================================

$167,077 ………. Total Savings Needed

Property Details for 50 BURLINGAME Irvine, CA 92602

——————————————————————————

Beds: 3

Baths: 3

Sq. Ft.: 1821

$302/SF

Property Type: Residential, Condominium

Style: 3+ Levels, Contemporary

View: Courtyard, Panoramic, Peek-A-Boo, Trees/Woods

Year Built: 2001

Community: Northpark

County: Orange

MLS#: P776324

Source: SoCalMLS

Status: Active

——————————————————————————

Bring your checkbook & RUN DON'T WALK! Equity Seller * PRICED 2 STEAL! * DROP-DEAD GORGEOUS w/ Walls of Windows & DRAMATIC Open Layout offering ARCHITECURAL FLAIR, Designer Paint, Elegant Shutters, & Stylish Decor! SURPASSES Every Home in this Price Range! IDEAL FOR ENTERTAINING Inviting Family Room w/ IMPRESSIVE Fireplace & Soaring Ceilings opens to GENEROUS Dining & BRIGHT Charming Kitchen. * SHOWS LIKE A MODEL! * Retreat upstairs to SPACIOUS Master w/ Romantic VIEWS, Walk-in Closet & Relaxing SPA-LIKE BATH w/ Large Soaking Tub. Spacious Secondary Bedrooms, including Generous Main-Floor Suite, offer PRIVACY & CONVENIENCE for Family, Guests or Roommates. Enjoy Summer BBQ's in Spacious Tree-Lined Patio. Convenient Indoor Laundry & Direct Access Garage w/ Built-in Storage make this HIGHLY DESIRABLE floor plan a * MUST SEE! * RESORT-STYLE Amenities include 5 Pools & Spas, Tennis & Sports Courts, Clubhouse, Parks & Tot Lots, & Meandering Walking Trails WELCOME HOME! ACT FAST! Only ONE at this Price!

ARCHITECURAL?

The California housing market continues to sputter with declining sales and declining prices.

Irvine Home Address … 4 AMBERWOOD Irvine, CA 92604

Resale Home Price …… $464,900

They waitin' for that decline

Pray that I lose my mind

They never want me to shine

Uh-huh I know what's on your mind

You don't think were gonna shine

I face you to prove you wrong

Chiddy Bang — Decline

The largely unexpected decline in house prices has been deep and long lasting, particularly in markets outside of Coastal California. Since lenders have embarked on the amend-extend-pretend policy, sales volumes have dried up, and prices edge lower as supply begins to weigh on the market.

Southland Home Sales Still Slow, Prices Edge Down

April 13, 2011

La Jolla, CA—Southern California home sales turned in another lackluster month in March, the result of a fussy mortgage market, slow job growth and a continued wait-and-see attitude among potential buyers and sellers. There were signs, however, that the market was a little less dysfunctional than in recent months, a real estate information service reported.

I think it's sad that DataQuick feels they need to punch up their reporting with feel-good realtor nonsense. The market shows no signs of strength whatsoever. Sales are weak and prices are falling.

A total of 19,412 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in March. That was up 35.1 percent from 14,369 in February, and down 5.2 percent from 20,476 in March 2010, according to DataQuick of San Diego.

Sales were dismal last year, for sales to be down despite the lower prices is surprising, and it isn't a good sign.

Sales always increase from February to March. Last month’s sales count was 21.4 percent below the 24,706 average for all the months of March since 1988. Sales so far this year are 20 percent below the norm. During the last half of 2010 sales were 25-30 percent below average.

Sales of newly built Southland homes totaled 1,144, the lowest March in DataQuick’s statistics, which go back to 1988. The peak March was in 2006 with 7,205 sales. The March new-home average is 3,661.

New home sales are at the lowest levels ever. Wow! Sales are 50% off their historic averages and 85% below the peak.

Not to worry, all is well in Irvine. Or so they say.

Irvine home sales drop 11%.

• Citywide sales totaled 210 – that's down 26 purchases or 11.0% vs. a year ago. Countywide, sales were down 4.3% vs. a year earlier.
• Irvine home sales were 8.6% of the countywide market in the latest period vs. 9.2% in the year-ago period.
• Of Irvine's 8 ZIP codes, 4 had sales gains vs. a year ago while 3 had a gain in their median selling price vs. a year ago.
• Medians within the city's ZIPs ran from $386,500 to $830,000 – while the price gap was $442,500 to $874,000 a year ago.
• 3 of these 8 ZIP codes beat the -0.1% overall performance of the countywide median for the past year.

Back to the DQ News press release:

The median price paid for a Southland home last month was $280,500, up 2.0 percent from $275,000 in February, and down 1.6 percent from $285,000 for March a year ago.

Sales volumes are down and prices are down. If sales volumes pick up, lenders will release more inventory. It doesn't look like prices will go up any time soon.

The median’s low point for the current real estate cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially inland foreclosures.

“As an indicator of upcoming trends, the month of March is actually pretty reliable. We got off to a slow start with sales this year and it doesn’t look like that will change anytime soon. Two of the likely game changers in the short run would be a surge in job creation or another round of price corrections,” said John Walsh, DataQuick president.

It's more likely we will see another round of price corrections before we see a surge in hiring.

“The foreclosure issue is going to be with us for a good while. But mortgage availability, or rather the lack thereof, is key. If a well-crafted home loan program comes down the pike, it’s going to make some lending institution the dominant player, at least for a while,” he said.

This is the holy grail of lending, isn't it? Financial innovation is folly. There is no mortgage innovation beyond the 30-year fixed-rate mortgage. Only the event horizon of the Ponzi abyss awaits those who eschew amortization through complicated financial innovation schemes.

Adjustable-rate mortgages (ARMs) accounted for 7.8 percent of last month’s Southland purchase loans, up from 7.7 percent in February and 4.9 percent a year ago. While still at a low level, last month’s ARM usage was the highest since 10.3 percent in August 2008. Over the past decade, a monthly average of about 42 percent of purchase loans were ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 15.9 percent of last month’s purchase lending, up from 15.6 percent in February and the same as a year earlier. In the months leading up to the credit crisis that struck in August 2007, jumbos accounted for 40 percent of the market.

Think about the Orange County housing market. How many properties require a jumbo loan for financing. More than 15.6% i imagine. If high end prices were inflated by debt, and if both loan balances and the number of transactions is declining, the only support for this market is the large down payments of the few active buyers that remain.

Foreclosure resales – properties foreclosed on in the prior 12 months – made up 36.4 percent of resales last month, down from a revised 37.0 percent in February and down from 38.3 percent a year ago. Foreclosure resales hit a high of 56.7 percent in February 2009 and a low of 32.8 percent last June.

In the post 2008 era of amend-extend-pretend and shadow inventory, foreclosure numbers don't really mean much.

Short sales – transactions where the sale price fell short of what had been owed on the property – made up an estimated 18.5 percent of Southland resales last month. That was down from an estimated 19.6 percent in February but up from 18.0 percent a year earlier and 12.2 percent two years ago.

Absentee buyers – mostly investors and some second-home purchasers – bought 26.0 percent of the Southland homes sold in March, paying a median $205,000. The absentee share of the market reached a peak in February at 26.4 percent. Over the last decade, absentee buyers purchased a monthly average of 16.3 percent of homes.

Are these the elusive foreign cash buyers being active in the high-end market? Perhaps, but increased investor activity both foreign and domestic at the low end is more likely.

Cash purchases accounted for 30.5 percent of March home sales, paying a median $205,250. The cash purchase share was down from 32.3 percent in February, the all-time high, but up from 27.9 percent a year earlier. The 10-year monthly average for Southland homes purchased with cash is 13.3 percent. Cash purchases are where there was no indication in the public record that a corresponding purchase loan was recorded.

Government-insured FHA loans, a popular low-down-payment choice among first-time buyers, accounted for 32.0 percent of all mortgages used to purchase homes in March – the lowest level since August 2008, when 26.8 percent of purchase loans were FHA. Last month’s FHA level was down from 32.2 percent in February and 36.5 percent in March 2010. Two years ago FHA loans made up 36.5 percent of the purchase loan market, while three years ago it was just 10.5 percent.

interesting that FHA sales are dropping off. It may be partly due to the increased cost of private mortgage insurance on FHA loans. In fact, I have updated my cost of ownership spreadsheet to reflect the 1.15% PMI currently being charged FHA borrowers. The cost is so high that it no longer makes sense to use FHA financing in many circumstances. This increased cost is also contributing to the continued weakness in pricing across all price levels.

Last month 19.2 percent of all sales were for $500,000 or more, up from a revised 18.7 percent in February and down from 20.3 percent a year earlier. The low point for $500,000-plus sales was in January 2009, when only 13.8 percent of sales were above that threshold. Over the past decade, a monthly average of 26.9 percent of homes sold for $500,000 or more.

Viewed differently, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 35.8 percent of total sales last month. That was up from 34.8 percent in February and up from 35.2 percent a year ago. Over the last decade, those higher-end areas contributed a monthly average of 37.0 percent of regional sales. Their contribution to overall sales hit a low of 26.2 percent in January 2009.

Last month the percentage of Southland homes bought and re-sold on the open market within a six-month period was 3.2 percent, the same “flipping” rate as the month before but down slightly from 3.3 percent a year ago. Flipping varied last month from as little as 2.5 percent in Ventura County to as much as 3.5 percent in Orange County.

Not surprisingly, the flipping rate is close to the foreclosure rate.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,185 last month, up from $1,174 in February and down from $1,220 in March 2010. Adjusted for inflation, current payments are 48.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 57.4 percent below the current cycle’s peak in July 2007.

Affordability is becoming widespread in Southern California — just not here in Irvine.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

	Sales Volume			Median Price
All homes	Mar-10	Mar-11	%Chng	Mar-10	Mar-11	%Chng
Los Angeles	6,747	6,590	-2.3%	$329,000	$320,000	-2.7%
Orange	2,652	2,615	-1.4%	$432,000	$430,000	-0.5%
Riverside	4,156	3,843	-7.5%	$198,000	$198,000	-0.0%
San Bernardino	2,955	2,544	-13.9%	$152,000	$150,000	-1.3%
San Diego	3,227	3,063	-5.1%	$330,000	$325,000	-1.5%
Ventura	739	757	2.4%	$375,000	$349,000	-6.9%
SoCal	20,476	19,412	-5.2%	$285,000	$280,500	-1.6%

Source: DQNews.com Media calls: Andrew LePage (916) 456-7157

The spent most of it

• The owners of today's featured property paid $269,000 on 1/12/2001. The used a $215,200 first mortgage, a $40,350 second mortgage, and a $13,450 down payment. A whopping 5% down.
• On 9/3/2002 they refinanced with a $257,000 first mortgage and obtained about $12,000 for whatever.
• On 1/10/2005 they obtained a $25,000 HELOC.
• On 10/18/2005 they refinanced with a $254,600 first mortgage.
• On 5/10/2006 they obtained a $125,000 HELOC.
• On 10/18/2006 they refinanced again with a $305,600 HELOC.
• On 12/26/2007 they got another $75,000 HELOC.
• On 7/20/2009 they refinanced with a $370,000 first mortgage.
• Total mortgage equity withdrawal is $114,500.

Irvine House Address … 4 AMBERWOOD Irvine, CA 92604

Resale House Price …… $464,900

House Purchase Price … $269,000

House Purchase Date …. 1/12/2001

Net Gain (Loss) ………. $168,006

Percent Change ………. 62.5%

Annual Appreciation … 5.2%

Cost of House Ownership

————————————————-

$464,900 ………. Asking Price

$16,272 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$448,628 ………. 30-Year Mortgage

$101,692 ………. Income Requirement

$2,373 ………. Monthly Mortgage Payment

$403 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$97 ………. Homeowners Insurance (@ 0.25%)

$516 ………. Private Mortgage Insurance

$320 ………. Homeowners Association Fees

============================================

$3,709 ………. Monthly Cash Outlays

-$389 ………. Tax Savings (% of Interest and Property Tax)

-$552 ………. Equity Hidden in Payment (Amortization)

$30 ………. Lost Income to Down Payment (net of taxes)

$78 ………. Maintenance and Replacement Reserves

============================================

$2,876 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,649 ………. Furnishing and Move In @1%

$4,649 ………. Closing Costs @1%

$4,486 ………… Interest Points @1% of Loan

$16,272 ………. Down Payment

============================================

$30,056 ………. Total Cash Costs

$44,000 ………… Emergency Cash Reserves

============================================

$74,056 ………. Total Savings Needed

Property Details for 4 AMBERWOOD Irvine, CA 92604

——————————————————————————

Beds: 3

Baths: 2

Sq. Ft.: 1520

$306/SF

Property Type: Residential, Condominium

Style: Two Level, Contemporary

Year Built: 1976

Community: 0

County: Orange

MLS#: S654402

Source: SoCalMLS

Status: Active

On Redfin: 7 days

——————————————————————————

Get the most for your money in Irvine! Convenience and comfort set this townhome apart. Near freeways and shopping while being adjacent to a city park, tennis courts, and bike trails (and across from a golf course) allow you to live in the city with room to breathe! Bright and open, it includes a master retreat with fireplace, garden window in the kitchen, and tons of storage space. Custom upgrades: hardwood floors, high quality carpet, duel paned windows, new doors, remodeled staircase, large entertaining patio/yard, and $25k spa-inspired bathrooms! Come for a visit. Make it your home.