The push to drive squatters from houses they are not paying for has begun. We have eclipsed our previous foreclosure records, and foreclosures will continue to increase in number for the remainder of 2010.

Irvine Home Address … 43 PARTISAN Pl Irvine, CA 92602

Resale Home Price …… $655,000

{book1}

Oh yes, I'm the great pretender

Pretending I'm doing well

My need is such

I pretend too much

I'm BROKE but no one can tell

Oh yes, I'm the great pretender

Adrift in a world of my own

I play the game but to my real shame

You've left me to dream all alone

Freddie Mercury — The Great Pretender

Californian's are great spenders living in a world of their own. They play the game with no real shame pretending they really have wealth. They are below broke and left alone dreaming of lives they do not own.

Today's HELOC-abusing squatters

Usually, I conclude with the sordid details about the property owner's finances, but today I am starting with it. When presented with statistics about macroeconomic events like "foreclosure activity goes up," it is easy for readers to lose the connection between the decisions lenders and borrowers made and the macroeconomic event. The increase in foreclosure findings I am reporting today is the direct result of thousands of families making bad financial decisions just like the owners of today's featured property.

When I first started covering HELOC abuse, many readers thought I was searching through many property records to find an isolated case. In reality, I have to search through many property records to find an owner who didn't spend their house. The HELOC abuse and debt dependency is the rule not the exception.

Policy makers have scared everyone into bailing out the banks ostensibly to help loan owners stay in their houses. In reality, this is a poorly disguised bailout of the banks. For the banks to stay in business, they will need to obtain income from their non-performing assets. That means they need to foreclose on people and either rent the place out or sell it to be rid of it.

It is appropriate to feel compassion for people losing their homes, but this compassion must be tempered by wisdom. For the most part, the people losing their home made bad decisions — remember, responsible homeowners are NOT losing their homes. Expressing compassion does not mean bailing these people out. That is enabling. Do California debtors really deserve our financial assistance?

Let's take a careful look at the loans that were made and how these owners lived and see if the lending or the borrowing is wise behavior we want to see more of.

• This property was purchased for $321,000 on 12/18/1998, near the last market bottom. The mortgage information is not available, but the borrower likely put 20% or more down.
• The first mortgages was refinanced on 4/11/2002 for $200,000. A second party appears on the mortgage. Apparently, when the owner was single, the demands for money were a bit less.
• On 2/4/2005 the first mortgage was refinanced for $480,000. A HELOC was also opened for $195,750.
• On 7/31/2006 the owners refinanced with a $693,000 first mortgage and a $153,000 HELOC.
• On 10/2/2006 the HELOC was increased to $200,000.
• Total property debt is $893,000.
• Total mortgage equity withdrawal was $693,000 since April of 2002.

They have since been squatting for more than a year:

Foreclosure Record

Recording Date: 10/29/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 07/22/2009

Document Type: Notice of Default

What prompted these people to spend nearly $700,000 in just a few years? And does it matter? Are there any circumstances where you believe these debts should be forgiven at the expense of the US Taxpayer? How do you feel about their squatting for over a year on your dime?

When you read the grim statistics about foreclosures, do you tear up for the poor families who lost everything or rejoice for their new lives free of entitlement and debt? Foreclosure is not the crisis; it is the cure.

FORECLOSURE ACTIVITY INCREASES 7 PERCENT IN FIRST QUARTER

By RealtyTrac Staff

New Quarterly Records for Scheduled Auctions and Bank Repossessions

All Foreclosure Types Spike in March, Which Posts Highest Monthly Total for Report

IRVINE, Calif. – April 15, 2010 — RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 properties in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009. One in every 138 U.S. housing units received a foreclosure filing during the quarter.

Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.

“Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March,” said James J. Saccacio, chief executive officer of RealtyTrac. “One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs increasing 9 percent on a quarterly basis in the first quarter of 2010 compared to a 13 percent quarterly decrease in REOs in the first quarter of 2009.

“This subtle shift in the numbers pushed REOs to the highest quarterly total we’ve ever seen in our report and may be further evidence that lenders are starting to make a dent in the backlog of distressed inventory that has built up over the last year as foreclosure prevention programs and processing delays slowed down the normal foreclosure timeline.” …

… California foreclosure activity decreased 6 percent from the first quarter of 2009, but the state still documented the nation’s fourth highest foreclosure rate — one in every 62 housing units receiving a foreclosure filing. …

… California alone accounted for 23 percent of the nation’s total foreclosure activity in the first quarter, with 216,263 properties receiving a foreclosure notice — the nation’s highest foreclosure activity total.

Readers here are not surprised by these numbers. Last year, there were stories planted in the mainstream media that the foreclosure crisis is ending because filings were down. Well, filings were down because banks stopped filing, not because borrowers stopped defaulting. Shadow inventory is a disgraceful squatter's paradise. Fortunately, lenders are finally moving to clean up their books. It is about time.

Irvine Home Address … 43 PARTISAN Pl Irvine, CA 92602

Resale Home Price … $655,000

Home Purchase Price … $321,000

Home Purchase Date …. 12/18/1998

Net Gain (Loss) ………. $294,700

Percent Change ………. 104.0%

Annual Appreciation … 6.1%

Cost of Ownership

————————————————-

$655,000 ………. Asking Price

$131,000 ………. 20% Down Conventional

5.24% …………… Mortgage Interest Rate

$524,000 ………. 30-Year Mortgage

$139,354 ………. Income Requirement

$2,890 ………. Monthly Mortgage Payment

$568 ………. Property Tax

$117 ………. Special Taxes and Levies (Mello Roos)

$55 ………. Homeowners Insurance

$0 ………. Homeowners Association Fees

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

$3,629 ………. Monthly Cash Outlays

-$714 ………. Tax Savings (% of Interest and Property Tax)

-$602 ………. Equity Hidden in Payment

$272 ………. Lost Income to Down Payment (net of taxes)

$82 ………. Maintenance and Replacement Reserves

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

$2,667 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,550 ………. Furnishing and Move In @1%

$6,550 ………. Closing Costs @1%

$5,240 ………… Interest Points @1% of Loan

$131,000 ………. Down Payment

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

$149,340 ………. Total Cash Costs

$40,800 ………… Emergency Cash Reserves

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

$190,140 ………. Total Savings Needed

Property Details for 43 PARTISAN Pl Irvine, CA 92602

——————————————————————————

Beds: 5

Baths: 3 baths

Home size: 2,300 sq ft

($285 / sq ft)

Lot Size: 8,500 sq ft

Year Built: 1998

Days on Market: 17

MLS Number: S611660

Property Type: Single Family, Residential

Community: West Irvine

Tract: Heri

——————————————————————————

According to the listing agent, this listing may be a pre-foreclosure or short sale.

One of the Larger lot in the Tract. Cover Patio, Extra Long Drive Way. Formal Living Room, Downstairs Bedroom with full bath. Large Master Bedroom and Bath, Walk-in Closet. 4th Bedroom Upstairs is the size of a 2 Rooms combined and can easily be converted into a 5th Bedroom to become a SIX BEDROOM house. Award Winning Schools, NO HOA, Low Tax.

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.

Have a great weekend,

Irvine Renter

In The Great Housing Bubble, I predicted Irvine resale prices would not reach their bubble peak for over 15 years. The analysts at Fiserv Case-Shiller have drawn a similar conclusion.

Of course, the owner of today's featured property doesn't believe that. In his world, prices never stopped appreciating in 2006.

Irvine Home Address … 35 WOODS Trl Irvine, CA 92603

Resale Home Price …… $2,589,000

{book1}

If I could … Maybe I'd give you my world

How can I … When you won't take it from me

You can go your own way Go your own way

You can call it … Another lonely day

You can go your own way Go your own way

Tell me why … Everything turned around

Packing up … Shackin’ up’s all you wanna do

If I could … Baby I'd give you my world

Open up … Everything's waiting for you

Fleetwood Mac — Go Your Own Way

Every seller must go their own way. Some accept the reality of the market and price accordingly. Some do not. Every owner wants house prices to take flight, particularly those who are underwater. Unfortunately, fundamentals that support the housing market can only go up so fast, and in case you didn't notice, wages are going down.

Fiserv Case-Shiller Home Price Insights: For Many U.S. Markets, the Return to Peak Home Prices Will Be a Long, Slow Road

Bubble-era home prices won't be seen again until 2025 or beyond in California, Florida, Arizona and Nevada

BROOKFIELD, Wis., Apr 08, 2010 (BUSINESS WIRE) — Fiserv, Inc., the leading global provider of financial services technology solutions, today released an analysis of home price historical trend data and forecasts for more than 375 U.S. markets based on the Fiserv(R) Case-Shiller Indexes(R), which is owned and generated by Fiserv, data from the Federal Housing Finance Agency (FHFA) and Moody's Economy.com.

The Fiserv analysis indicates the markets that experienced the greatest price bubble, including certain metro areas in California, Florida, Arizona and Nevada, won't see home prices return to peak levels until 2025 or later. That represents an unprecedented market cycle that will last a full generation from the top of the market in 2006-2007. Many other markets, including major urban centers in the Northeast and industrial Midwest, may need to wait a decade or more until prices return to their market peaks.

"Nationally, Fiserv Case-Shiller data points to a further seven percent decline in home prices through the end of this year, with a prolonged recovery beginning early in 2011. In many markets, the emphasis is on the word 'prolonged,'" said David Stiff, Chief Economist, Fiserv. "We see several powerful forces in the market that will severely hinder the housing recoveries of many metro areas, particularly in the hard-hit states of California, Florida, Arizona and Nevada. It will take these markets 15 or more years before home prices climb back to their peaks."

… Home sales grew dramatically, jumping from 4.5 million units in January to 6.5 million units in November 2009, the highest gains since 2006. This was attributed to lower prices, almost record-low mortgage interest rates, and the $8,000 tax credit for first-time home buyers. Another factor that temporarily slowed the erosion of home prices has been the financial institutions' inability to effectively sell homes with distressed mortgages.

… Detailed home price data and information on the Indexes can now be found at the new Fiserv Case-Shiller website at www.caseshiller.fiserv.com. At that site, users can get the latest housing news and find detailed information and home price forecasts for 381 U.S. markets.

In The Great Housing Bubble, I noted the following:

Table 11: Summary of Predictions for Irvine, California Home Prices

Method	Total Decline	Appreciation Rate	Recovery Year
S&P/Case-Shiller Inflation Support	55%	3.3%	2039
Median House Price and Historic Appreciation	45%	4.4%	2023
Price-To-Rent Ratio	22%	4.7%	2019
Price-To-Income Ratio	43%	3.2%	2029
=====================================	========	============	=========
	41%	3.9%	2028

The range of predictions for the decline of home prices in Irvine, California, is from 22% to 53% with an average of 41%. The predicted time of peak-to-peak recovery ranges from 2019 to 2033 with an average of 2028. Of course, since Irvine is in the heart of a bubble-prone market, recovery may happen more quickly, but then again, that would mean prices have entered another unsustainable price bubble.

My predictions of the bottoming price look unlikely at this point. The Federal Reserve has raised the trough with its activity. I think this pushes the bottom forward, perhaps to 2012 or 2013 and raises it. Nothing changes the underlying fundamentals. Unless we inflate another housing bubble, prices will take a very long time to reach the peak.

What is happening in Irvine?

One measure of price activity in a market is dollars-per-square-foot. In The Great Housing Bubble, I described it this way:

The median is a good measure of general price activity in the market, but it does have a significant weakness: it does not indicate the value buyers are obtaining in the market. The houses or structures built on the land compose the most significant portion of real estate value in most markets. These structures deteriorate over time and require routine maintenance that is often deferred. During times of prosperity, many people renovate homes to add value and improve their living conditions. The impact of deterioration and renovation of individual properties is not reflected in the median resale value. Also, at the time of sale, there are often buyer incentives which inflate the recorded sales price relative to the actual cost to the buyer. These buyer incentives also distort the median sales price as a measure of value.

Many data reporting services measure, record, and report the average sales cost on a per-square-foot basis to address the problem of evaluating what buyers are getting for their money. For instance, in a declining market if people start buying much larger homes at the limit of affordability, the generic median sales price would remain unchanged, but since buyers are getting much larger homes for the same money, the average cost per-square-foot would decline accordingly. This makes the average cost per-square-foot a superior measure for capturing qualitative changes in house prices; however, this method of measurement does not capture the relative quality of the square footage purchased, only the price paid for it. High quality finishes may justify a higher price per square foot. There is no way to objectively evaluate the impact finish quality has on home prices. The main problems with using the average cost per-square-foot to measure price is that it does not provide a number comparable to sales prices since it has been divided by square feet, and it is not widely measured and reported.

The change in market mix will also impact the $/SF measure. Larger properties generally sell for less than smaller properties on a $/SF basis; therefore, when the mix changes to larger properties, the $/SF will decline. That is much of what is driving the slide witnessed in the $/SF measure since last September, a period within which the median went up.

If the Federal Reserve had not propped up the market last year, we would likely be seeing $275/SF to $300/SF across most of Irvine. We still might get there depending on interest rates and inventory. It doesn't seem likely that prices will go up given the current market head winds.

Didn't get the press release

The owner of today's featured property obviously did not get the Fiserv press release. In his world, there was no housing bubble, and his house kept on appreciating while the remaining housing market collapsed around him. This property value went up 20% since the peak in summer of 2006. WTF?

The owner put a large amount down, and he has only recently obtained a few private loans to get him through the recession. In his mind, he is still a millionaire.

Irvine Home Address … 35 WOODS Trl Irvine, CA 92603

Resale Home Price … $2,589,000

Home Purchase Price … $2,171,500

Home Purchase Date …. 6/18/2006

Net Gain (Loss) ………. $262,160

Percent Change ………. 19.2%

Annual Appreciation … 4.4%

Cost of Ownership

————————————————-

$2,589,000 ………. Asking Price

$517,800 ………. 20% Down Conventional

5.24% …………… Mortgage Interest Rate

$2,071,200 ………. 30-Year Mortgage

$550,820 ………. Income Requirement

$11,424 ………. Monthly Mortgage Payment

$2244 ………. Property Tax

$417 ………. Special Taxes and Levies (Mello Roos)

$216 ………. Homeowners Insurance

$410 ………. Homeowners Association Fees

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

$14,711 ………. Monthly Cash Outlays

-$1851 ………. Tax Savings (% of Interest and Property Tax)

-$2380 ………. Equity Hidden in Payment

$1076 ………. Lost Income to Down Payment (net of taxes)

$324 ………. Maintenance and Replacement Reserves

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

$11,879 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$25,890 ………. Furnishing and Move In @1%

$25,890 ………. Closing Costs @1%

$20,712 ………… Interest Points @1% of Loan

$517,800 ………. Down Payment

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

$590,292 ………. Total Cash Costs

$182,000 ………… Emergency Cash Reserves

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

$772,292 ………. Total Savings Needed

Property Details for 35 WOODS Trl Irvine, CA 92603

——————————————————————————

Beds: 5

Baths: 4 full 1 part baths

Home size: 3,583 sq ft

($723 / sq ft)

Lot Size: 9,270 sq ft

Year Built: 2006

Days on Market: 12

MLS Number: U10001525

Property Type: Single Family, Residential

Community: Turtle Ridge

Tract: Arez

——————————————————————————

Beautiful Tuscan-style home in the Arezzo enclave of the guarded Summit development with 5 bedrooms & 4.5 baths. The home has approx. 3600 sq ft & is situated on a premier lot with 9270 sq ft. Beautiful panoramic views to Shady Canyon, the mountains, parkland & city lights views at night. The stylish flag-stone patio with fountains, built-in stainless steel BBQ & sideyard offers an incredible venue for outdoor entertaining. The gourmet kitchen with stainless steel appliances & granite countertops opens to a great room leading out to the backyard. A formal dining room is adjacent to the living room. Bedroom & full bath on the main floor. 2nd level has 4 bedrooms including a spacious master bedroom with private master bath appointed with Travertine. Large balcony from the master bedroom offers another incredible viewing opportunity out to the mountains & gorgeous parkland. Over $450K in upgrades! The Summit development offers a resort-style pool & clubhouse. Go to www.35WoodsTrail.com

Holders of HELOCs and second mortgages are going to lose a great deal of money. So far, few of these losses have been recognized, and lenders are in no hurry to do so.

Irvine Home Address … 41 MOJAVE Irvine, CA 92602

Resale Home Price …… $900,000

{book1}

This bloody road remains a mystery

This sudden darkness fills the air

What are we waiting for?

Won't anybody help us?

What are we waiting for?

We can't afford to be innocent

Stand up and face the enemy

It's a do or die situation

We will be Invincible

This shattered dream you cannot justify

We're gonna scream until we're satisified

What are we running for?

We've got the right to be angry

What are we running for?

When there's no where we can run to anymore

Pat Benetar — Invincible

None of us knows how the housing bust will play out. Some contend it already has, but those living in the reality-based community know we have a tremendous problem with delinquencies lenders are unable to resolve. What are we waiting for? Lenders to take losses.

The delinquency problem will be resolved through a combination of loan modifications, short sales and foreclosures. Those are the only three viable options. Loan modifications are proving to fail, so that leaves short sales and foreclosures. Either solution will push prices lower.

Short sale approval takes many months, and many times, no approval is given. Lenders fail to foreclose on houses even when the borrowers quit paying and make no effort to work out a deal. These strange lender behaviors are caused by the same root problem: pending losses exceed the value of capital in our banking system.

When short sales are not approved, and when squatters are allowed to stay in property without paying, resale transactions do not occur that would ordinarily would be happening. Therefore, sales volumes are well below normal.

Our local inventory is still very low relative to historic norms.

Prices are only sustained by very low inventories which are a result of lenders refusing to foreclose. The inventory we do have looks more abundant than it really is because a significant portion of that inventory is short sales that have been sitting on the market for months with 20 waiting offers.

Lenders are not going to let borrowers squat until prices come back. Why would they? If they are not going to get any wage income from the borrower, it makes more sense financially to boot them out, rent the property to a paying tenant and wait for appreciation to bail them out. They are going to receive the benefit of appreciation either way, so they might as well get some income from the occupant.

Once lenders can absorb the losses on their financial statements, they will begin to push squatters out. The only question is when this will happen. Since Bank of America to Increase Foreclosure Rate by 600% in 2010 and The Debt Star Has Cleared the Planet, it looks as if now is the time. Or perhaps it is more accurate to say that now is the beginning of a process that will go on until the excess debt is cleared from the system.

Second Lien Position is a total loss

Lenders are concerned about losses on their first mortgage portfolios, but the array of market props has likely provided a stable floor in many markets (not ours) that should limit losses. However, second mortgages — and that includes HELOCs — only recoup their capital after the first mortgage is paid in full. If the first mortgage takes any loss at all, the second mortgage is completely wiped out.

When you look at a lender's balance sheet, they show loans as an asset. The value of that asset is based on the likelihood of repayment and the claim to underlying capital in foreclosure. In the case of second mortgages and HELOCs, the likelihood of repayment is very low, and the value of the claim to underlying collateral is less than zero. In short, holders of second lien mortgages are screwed.

Refusal of holders of second lien mortgages to recognize their losses is the primary barrier to market clearing through increased short-sale volume.

Look at a short sale transaction from the perspective of a second lien holder: If the house sells, the second lien is wiped out, so the asset is worth nothing. If the second lien holder blocks the sale, there is a chance, either someone will pay them something to go away, or appreciation will bail them out. They have no incentive to consummate a transaction today that wipes them out, and they have every incentive to block the sale until a better day. The only power they have in the negotiation is the power of no, and since they have everything to lose and nothing to gain, they say no most of the time.

HAFA is designed to give something to second lien holders to get them to participate in the short sale process. If lenders take the government payoff through HAFA, short sales will occur in large numbers. If lenders do not take the deal, foreclosures will clear out the rest. Since the short sale nets something whereas the foreclosure nets nothing, lenders are strongly encouraged to take what they can get.

The HELOC Bust: Next Problem for Big Banks?

By Charles Feldman Apr 13th 2010

Say it ain't so. If a prediction from a leading research firm turns out to be accurate, three of the country's biggest banks are poised for colossal losses of up to $30 billion — this time because of their exposure to home-equity loans.

The research firm, CreditSights Inc., says that Bank of America, Wells Fargo and JPMorgan Chase — the three biggest U.S. consumer banks — are particularly vulnerable to "changes in the consumer cycle," reports Britain's Telegraph. And HELOCs, as the home-equity loans are known, are shaping up to be the next problem area in housing.

HELOCs and seconds are just now surfacing as problems because lenders have ignored the truth of these loans with a few years of mark-to-fantasy accounting. The problem was always there. Its shape was formed years ago. Now is the first time the media has paid any attention to it, so more bank write downs from HELOCs and seconds is merely the next of the many housing market problems the media is finally making the weary masses aware of.

In case you forgot how we got here:

Irresponsible lending caused this problem.

In the last quarter of 2009, late payments on home-equity loans hit record highs, according to the American Bankers Association. The loans, typically taken out on top of a primary mortgage, are a source of dispute among lenders and those who advocate reducing mortgage principal to stem foreclosures — and the subject of a Congressional hearing being held today. Second loan holders are forced to take a loss when the first mortgage loan is modified, which they are loathe to do.

JPMorgan Chase CEO Jamie Dimon, says Bloomberg, told investors in the bank's annual report in February that quarterly writedowns in home-equity lending "could reach $1.4 billion" this year. But CreditSights believes the HELOC problem could be so bad that the three banks could see their 2010 profits — estimated at $30 billion — completely wiped out, the Telegraph reported.

Do you see the game the Federal Reserve is playing? By giving banks money at 0% and allowing them to earn 5%, the Federal Reserve allows them to make billions of extra dollars. Unfortunately, they lost so much money from their bubble foolishness, that an entire years earnings will only cover their losses on HELOCs and seconds (if the estimates are correct). What about their derivative losses? What about the commercial real estate losses they have not written down yet? Despite the common belief that inflation will come, the deflationary winds are still blowing hurricane force.

CreditSights, by the way, reputedly predicted the housing downturn back in 2006, so people are taking notice of its latest warning.

In an interview with Bloomberg, CreditSights' senior bank analyst Baylor Lancaster said: "While a lot of people are looking for dramatic improvement in the short term, one area that still has to be worked through in a material way is home equity." The writedowns from HELOCs are not likely to show up in earnings reports until later this year, Lancaster said.

Together with Citigroup the banks hold about 42 percent of the $1.1 trillion in second-home liens. Unlike first mortgages, they are typically not bundled and sold off to investors but kept on the banks' books. The biggest home-equity lender in the U.S. is Bank of America, holding some $138 billion in such loans. Wells Fargo has about $123.8 billion of home-equity loans.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour New Cycle." He has written about real estate related issues for several years.

The endless array of failed bailouts and the neverending mortgage crisis occurs to disguise the insolvency of our banks. Lenders have not taken the write downs on what will likely be huge losses on all these loans. I have profile massive losses day after day just here in Irvine. The HELOCs and second mortgages are almost always a total loss, and our market hasn't fallen as much as others.

The dance between lenders and borrowers has gone on for so long because lenders had few viable options in 2008 and 2009. If they would have processed their foreclosures in a timely manner, their losses would have been staggering, bank insolvency would have been exposed, and we would have been forced to nationalize the banking system. By pretending for a couple of years, they made enough money to expose their dirty laundry, take their necessary write downs, and keep their jobs and their bonuses.

Punished for restraint

• This property was purchased on 4/21/2004 for $1,175,000. The owners used a $881,250 first mortgage and a $293,750 down payment.
• On 12/28/2004 they obtained an $82,200 HELOC.
• On 3/27/2006 they refinanced the first mortgage with a $915,000 Option ARM.
• On 4/13/2006 they obtained a $200,000 HELOC.
• Total property debt is $1,115,000.
• Total mortgage equity withdrawal is $233,750.

Today's HELOC abusers are not as bad as most. I give them a D. They put a sizable amount down, but they steadily withdrew it and added to their mortgage balance. They didn't take out more than they paid, so they didn't get back all of their down payment. They probably wish they had because now they are losing their house, their credit is trashed, and their down payment is lost. I hope the down payment money wasn't a gift from parents or something like that. The parents would be pissed.

If this family had been more foolish, they probably could have taken several hundred thousand more than they paid out of the property. They received no reward for prudence. What are they going to do next time?

Irvine Home Address … 41 MOJAVE Irvine, CA 92602

Resale Home Price … $900,000

Home Purchase Price … $1,175,000

Home Purchase Date …. 4/21/2004

Net Gain (Loss) ………. $(329,000)

Percent Change ………. -23.4%

Annual Appreciation … -4.3%

Cost of Ownership

————————————————-

$900,000 ………. Asking Price

$180,000 ………. 20% Down Conventional

5.24% …………… Mortgage Interest Rate

$720,000 ………. 30-Year Mortgage

$191,479 ………. Income Requirement

$3,971 ………. Monthly Mortgage Payment

$780 ………. Property Tax

$333 ………. Special Taxes and Levies (Mello Roos)

$75 ………. Homeowners Insurance

$90 ………. Homeowners Association Fees

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

$5,250 ………. Monthly Cash Outlays

-$981 ………. Tax Savings (% of Interest and Property Tax)

-$827 ………. Equity Hidden in Payment

$374 ………. Lost Income to Down Payment (net of taxes)

$113 ………. Maintenance and Replacement Reserves

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

$3,928 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,000 ………. Furnishing and Move In @1%

$9,000 ………. Closing Costs @1%

$7,200 ………… Interest Points @1% of Loan

$180,000 ………. Down Payment

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

$205,200 ………. Total Cash Costs

$60,200 ………… Emergency Cash Reserves

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

$265,400 ………. Total Savings Needed

Property Details for 41 MOJAVE Irvine, CA 92602

——————————————————————————

Beds: : 4

Baths: :3

Sq. Ft.: : 3456

Lot Size: : 5,775 Sq. Ft.

Property Type:: Residential, Single Family

Style:: Two Level, Other

Community: : Northpark

County: : Orange

MLS#: : P717754

Source: : SoCalMLS

——————————————————————————

Beautiful home in Northpark, totally remodeled.