Category Archives: HELOC Abuse

Evicted HELOC Abusers Break In and Squat in Foreclosed Home

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.

Evicted Family Breaks Into Foreclosed Home

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.

Foreclosure Record

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


Beds: 2

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

Community: Orangetree

Tract: Og


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


Wells Fargo: Full Speed Ahead with Foreclosures

Despite the political pressure, Wells Fargo is pressing ahead with its planned foreclosures.

Irvine Home Address … 14492 GUAMA Ave Irvine, CA 92606

Resale Home Price …… $499,000

If you believe in the power of magic,

I can change your mind

And if you need to believe in someone,

Turn and look behind

When we were living in a dream world,

Clouds got in the way

We gave it up in a moment of madness

And threw it all away

Don't answer me, don't break the silence

Don't let me win

Alan Parsons Project — Don't Answer Me

Borrowers believe in the power of magic. Either the market will save them or the government will. Fortunately, not every bank answered the politicians' call to stop foreclosures. B of A answered this call and in a moment of madness, they threw it all away.

Wells Fargo Foreclosures Proceed After Data Queried

Wells Fargo & Co. is standing by the accuracy of its foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records.

The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

In a May 20 deposition, a Wells Fargo Home Mortgage employee said he signed 50 to 150 documents a day, including statements describing debts and borrowers used to justify foreclosures, without personally confirming the information was correct. His testimony related to a civil claim against the bank in a Washington state court. A judge dismissed the case in June.

Can you guess why the judge dimissed the claim? Because it was baseless. Who cares if some employee batch signed a few documents. Supervisors do this all the time. These documents were probably already reviewed by an army of staff before the signer ever saw them. The statement above implies that the banks were not reviewing these documents which is crazy.

Mortgage firms have drawn fire from borrowers, lawyers and state officials for letting employees sign affidavits for court- monitored foreclosures without personally checking loan records. JPMorgan Chase & Co. and Bank of America Corp. last week delayed foreclosures to review the accuracy of their filings. Last month, Ally Financial Inc. said its GMAC Mortgage unit would halt evictions for a similar review.

Let's be clear here: mortgage holders do not have the power of eviction. If they did, we wouldn't have so many squatters. They only have the power to foreclose, an act that leads to auction and later an eviction if the former owner doesn't leave on their own.

The Wells Fargo employee said he relied on foreclosure lawyers and personnel in other departments to check files, according to a deposition transcript provided by Melissa Huelsman, the Seattle attorney representing the homeowner. The employee said he confirmed the date on the file before signing without verifying other information.

‘Out of Context’

Those comments “should not be taken out of context,” Wells Fargo said in yesterday’s statement, e-mailed by a spokeswoman, Vickee Adams. The judge “reviewed Wells Fargo’s procedures, documents and declarations and summarily dismissed the borrower’s case, confirming that the foreclosure was valid,” the bank said in the statement.

For once, I agree with a bank. These lawsuits are silly.

Such a dismissal doesn’t necessarily invalidate testimony, said Peter Henning, a professor at Wayne State University Law School in Detroit and a former federal prosecutor.

“It’s not that the judge rejected the deposition, or found that the deposition was incorrect,” he said. “The firm probably went back into court and said ‘Here you go, you can inspect all the documents.’ Maybe that was enough.”

Wells Fargo is the second-largest servicer of U.S. home loans, according to industry newsletter Inside Mortgage Finance. The San Francisco-based bank handles about $1.8 trillion of residential mortgages, according to company filings. Bank of America, JPMorgan, Citigroup Inc. and Ally round out the top five. Through June, 92 percent of Wells Fargo’s mortgages were current, according to the statement.

If 92% of its loans are current, then 8% are delinquent. That is still an astonishingly high number.

‘How Do You Know?’

Andrew Yates, a Seattle-based lawyer representing the employee, didn’t return calls for comment. Adams declined to comment beyond the statement.

During questioning from Huelsman, the bank employee described his efforts before signing filings.

“So you’re simply signing the document that’s presented to you and you’re just making sure the date is correct?” Huelsman asked during the deposition.

“Correct,” the employee said.

“So how do you know when you’re signing this document that it’s true and correct?” Huelsman said.

There are people that are responsible for” maintaining the paperwork, the employee said.

This is akin to asking the guy on the assembly line who installs doors if he knows anything about the motor mounts. If it isn't his responsibility, how is he supposed to have knowledge of it?

States Take a Stance

The employee said he oversaw 53 full-time staff and 15 contract workers, and that other supervisors within the department signed the same amount of paperwork. That would amount to each supervisor signing 1,000 to 3,000 documents during 20 business days each month.

In a separate case in Florida, an employee at New York- based JPMorgan said in May that her team of managers signed about 18,000 documents a month. In a December deposition, an employee at Detroit-based Ally said he signed about 10,000 documents a month. Attorneys general in at least seven states including Texas, Illinois and Ohio are investigating practices at Ally’s GMAC Mortgage unit.

In Wells Fargo’s home state, California Attorney General Jerry Brown asked JPMorgan to prove its foreclosures are legal or else freeze them, and made a similar request to Ally in September.

“This goes to the internal processes and oversight at these institutions with respect to the conduct of their employees,” said Jacob Frenkel, a partner at Potomac, Maryland- based law firm Shulman Rogers Gandal Pordy & Ecker, which isn’t representing any lenders in foreclosure proceedings. “It’s not in the banks’ interest for the records not to be right. As a lawyer I want to go into court with papers that are solid.”

If the fact that banks are processing large amounts of documents is the best these plaintiffs can do, no wonder the judges are dismissing these cases.

Published: Thursday, 7 Oct 2010 — Diana Olick

I'm not going to tally the number of Attorneys General filing lender lawsuits or lawmakers demanding foreclosure moratoria, because the minute I do the number will change.

Suffice it to say that you're not in political fashion these days if you're not "demanding" a federal investigation into shoddy foreclosure procedures or "ordering" a freeze on foreclosures for the foreseeable future, even though you might not exactly have the jurisdiction to do so.

“Our families deserve to know that an action with such a huge and lasting impact is the absolute last resort, and that every effort has been made to keep them in their homes prior to foreclosure,” wrote Oregon Senator Jeff Merkley. He's a Democrat, by the way, and they appear to be in the majority of those screaming at the wind; gee I wonder why.

No less than the Speaker of the House, Nancy Pelosi, and her cadre of California lawmakers noted that, "Avoidable foreclosures end up being unnecessarily costly for homeowners, lenders and servicers, and our housing market, whose health is essential to our economic recovery," in a letter addressed to the U.S. Attorney General, Fed Chairman and the acting Comptroller of the Currency. "Recent reports that Ally Financial (formerly GMAC), JP Morgan, and Bank of America may have approved thousands of unwarranted foreclosures only amplify our concerns that systemic problems exist," she adds.

And it's not just the Dems posturing on this one. Far be it for Republicans to pass up a chance to use the scandal as a weapon. Alabama Senator Richard Shelby, ranking Republican on the Banking Committee is calling for a hearing: "I am highly troubled that once again our federal regulators appear to be asleep at the switch.”

I'm not going to feign surprise at any of this. It's to be expected, especially given this particular upcoming election. I just wish these folks would stick to the facts. This scandal is largely about bad paperwork, not "unwarranted foreclosures." Right now close to 10 percent of borrowers in this country are delinquent on their loans.

Translation: They're not paying their mortgages.

Another 4 percent have been delinquent for so long that they're now in the foreclosure process.

Yes, the process is flawed because the banks clearly aren't equipped to handle the numbers.

Yes, there may be some loans that could have been saved, but the vast majority can't.

Still lawmakers want to freeze all foreclosures to make sure all of them are fair because, as Speaker Pelosi writes, "People in our districts are hurting."

Boo Hoo.

The question is, how much would a foreclosure freeze hurt the greater housing market?

I asked some mortgage mavens and got the following responses:

Josh Rosner, Graham-Fisher: With REO sales being a large part of supply we would see home prices artificially and unsustainably rise, foreclosure volumes paint a false picture of stability and investors in MBS would be further harmed as their losses grow. Once the moratorium ended prices would fall and foreclosures would skyrocket. But, it would paint a prettier picture than reality heading into mid-term elections.

That is a brilliant synopsis of what would happen if this moratorium continues and becomes more widespread.

Guy Cecala, Inside Mortgage Finance: Instead of having a ton of mortgage borrowers who haven’t made any payments in at least a year, we would have a ton who haven’t made a payment in a year-and-half. Keep in mind we will have new problem loans entering the system throughout any moratorium whether we acknowledge them or not. Do we seriously believe that a foreclosure moratorium can change the outcome of potentially 5 million or more homeowners losing their homes over the next two years? Ultimately, if we don’t do something to handle distressed properties more efficiently (and faster), the housing market is going to remain stuck in limbo with no recovery in sight.

Right again. any widespread moratorium will encourage strategic default.

Janet Tavakoli, Tavakoli Structured Finance: Banks are vulnerable to lawsuits from investors in the [securitization] trusts. This problem could cost the banks significantly more money, which could mean TARP II (Washington Post)

Another very likely outcome. Banks are going to either lose money through foreclosure or lose money through lawsuits due to their failure to foreclose.

Rick Sharga, RealtyTrac: If foreclosure sales are prohibited, home sales would tail off dramatically…foreclosures and REOs accounted for over 30% of all sales during the quarter [Q3] Fewer home sales will put more pressure on home prices, reduce tax receipts for already-strapped municipal and state governments, and put even more pressure on an already-moribund economy. This could cause at least a temporary loss of jobs in a number of sectors. A 90-day moratorium would also extend the housing market downturn, pushing the anticipated recovery from early 2014 into late 2014 – and possibly even longer.

Any foreclosure moratorium would be a disaster. Since B of A is at least temporarily going that route, perhaps Wells Fargo and other banks will take advantage and push a few more foreclosures through the system. If I were in their shoes, I would.

They got their share of the HELOC riches

  • The owners of today's featured property paid $486,000 on 5/29/2003. The used a $388,800 first mortgage, a $48,600 second mortgage, and a $48,600 down payment.
  • On 6/4/2004 they refinanced with a $437,000 first mortgage.
  • On 9/27/2004 they obtained a $75,000 HELOC.
  • On 3/16/2005 they refinanced with a first mortgage for $439,000.
  • On 1/26/2006 they refinanced the first mortgage for $555,000.
  • On 8/28/2006 they refinanced with a $564,000 Option ARM with a 1.25% teaser rate, and they obtained a $100,000 HELOC.
  • Total property debt is $664,000.
  • Total mortgage equity withdrawal is $226,600.
  • Total squatting time is about 18 months.

Foreclosure Record

Recording Date: 10/29/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 07/24/2009

Document Type: Notice of Default

Irvine Home Address … 14492 GUAMA Ave Irvine, CA 92606

Resale Home Price … $499,000

Home Purchase Price … $486,000

Home Purchase Date …. 5/29/2003

Net Gain (Loss) ………. $(16,940)

Percent Change ………. -3.5%

Annual Appreciation … 0.3%

Cost of Ownership


$499,000 ………. Asking Price

$17,465 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$481,535 ………. 30-Year Mortgage

$94,234 ………. Income Requirement

$2,358 ………. Monthly Mortgage Payment

$432 ………. Property Tax

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

$42 ………. Homeowners Insurance

$43 ………. Homeowners Association Fees


$2,875 ………. Monthly Cash Outlays

-$371 ………. Tax Savings (% of Interest and Property Tax)

-$668 ………. Equity Hidden in Payment

$26 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves


$1,924 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,990 ………. Furnishing and Move In @1%

$4,990 ………. Closing Costs @1%

$4,815 ………… Interest Points @1% of Loan

$17,465 ………. Down Payment


$32,260 ………. Total Cash Costs

$29,400 ………… Emergency Cash Reserves


$61,660 ………. Total Savings Needed

Property Details for 14492 GUAMA Ave Irvine, CA 92606


Beds: 4

Baths: 1 full 2 part baths

Home size: 1,897 sq ft

($263 / sq ft)

Lot Size: 5,130 sq ft

Year Built: 1971

Days on Market: 9

Listing Updated: 40457

MLS Number: S634529

Property Type: Single Family, Residential

Community: Walnut

Tract: Cp


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

Ready to work, Here is great opportunity for you. Located in cul-de-sac. Walking distance to elementary school. Large house for little money.

Politicians Encourage Strategic Default with Foreclosure Moratoria

The announcement by BofA — who was blackmailed by numerous government officials — to suspend all foreclosures strongly encourages strategic default. Why would anyone pay their mortgage when they know they can stop paying and keep their house?

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price …… $415,000

C'mon and hold me

Just like you told me

Then show me

What I want to know

Why don't we steal away

Why don't we steal away

Into the night

I know it ain't right

Robbie Dupree — Steal Away

Steal away. No, i don't mean to move quietly off into the night, I mean brazenly steal the house your living in. Why don't borrowers steal away? Why don't they keep the house and ignore the mortgage. With news like this, I really don't understand Why Struggling Homeowners Keep Paying Their Mortgages; after all Squatting is Becoming a Way of Life for Many Delinquent Borrowers, and now, the bank is stopping all foreclosures. Given these circumstances, isn't strategic default the most prudent course of action?

Not everyone will strategically default. Many borrowers really can afford their payments, and they rightfully figure the foreclosure moratorium will end; however, the struggling masses who are considering accelerating their defaults have just been given the green light to bail because they know the bank isn't going to foreclose on them. This is a dumb policy the banks will later regret.

BofA Halts Foreclosures

Bank Expands Freeze After Pressure From Government-Run Mortgage Firm


Bank of America Corp. imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after it came under intense pressure from a government-run housing-finance giant worried about documentation problems, people familiar with the situation said.

The bank called the halt as concern mounted from legislators and state prosecutors about procedures used by lenders to foreclose on homes. Many banks use so-called robo signers, employees who sign hundreds of documents a day, without carefully reviewing their contents, when foreclosing on homes. Critics say that could result in improper foreclosures.

Improper foreclosures? Has anyone anywhere documented a case where a borrower who was current on their payments was foreclosed upon? Anyone who is not making their payments who ends up in foreclosure has experienced a "proper foreclosure." The notion of an improper foreclosure is simply a politician's fantasy. It gives those seeking election to public office something emotional to bluster about. The reality is there are no improper foreclosures.

Freddie Mac, the government-run mortgage-finance company that along with Fannie Mae owns many of the mortgages serviced by banks, pressed Bank of America to expand its search for problems with the foreclosure documentation process, said the people familiar with the situation.

On a call Thursday with several banks that included Bank of America, a Freddie official said the mortgage company wanted the institutions to look at foreclosure documentation across all 50 states, and asked them to consider putting a stop to the entire foreclosure process, say people familiar with the call.

Freddie Mac, an entity under government conservatorship and run by the Treasury department, asked major commercial banks to stop foreclosing on delinquent borrowers. This is one of two things: (1) It is a purely political act of desperate Democratic incumbents (Harry Reid and others) to make themselves look good going into next month's elections, or (2) the GSEs want to ramp up their own foreclosures while prices are still elevated and they don't want competition from the major banks (Government Expedites Foreclosures, Threatens Banking Cartel). I lean more toward political causes, but the economic issue cannot be dismissed.

Many in the banking industry fear that the widening paperwork problem could cause further delay on foreclosures and threaten an already weak housing market, which in turn is stalling the broader U.S. economic recovery. On the other hand, it could provide a brief financial respite to people who have defaulted on their mortgages and are still occupying their homes.

Could provide a respite? Do we need to give squatters any more breaks? For those of you waiting for these squatters to move out of your future home, how do you feel about this? You are paying a subsidy to the people living in your future home while you continue to work, pay bills, and rent.

As of August, there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due, according to mortgage research firm LPS Analytics. Since 2006, about 6.4 million homes have been lost through the foreclosure process.

Lost through the foreclosure process? Where did those houses go? Into the black hole of shadow inventory? The idea that these houses have been "lost" is very irritating. Any of those homes "found" on the MLS have been purchased by an owner-occupant or a cashflow investor who rented it out. While the squatter is living in the house, it is a completely non-productive asset; it costs money to maintain, but it produces no income. Foreclosure is the process by which we recycle these homes and obtain value from them. Nothing is lost in the foreclosure process.

Edward DeMarco, who heads the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, said in an interview that officials were working to find a "tailored" response to the foreclosure problem that won't cause broader problems for the fragile housing market. "We are trying to be quick but measured in the approach and the response taken," he said. "We're concerned about the whole housing market, and we're concerned about what this means for taxpayers and other market participants."

Can you find any substance to Mr. DeMarco's comment above? I read only bullshit.

Last week Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. agreed to more closely examine documents used in 23 states where a court's approval is required to foreclose on a home. J.P. Morgan said its review suspended nearly 56,000 foreclosures.

In conversations with Bank of America, Freddie said financial penalties or litigation could result if the bank did not take additional steps, said a person familiar with the conversations. Bank of America told Freddie that an audit of procedures in the 23 states uncovered no errors, this person said.

But Freddie said the work didn't go far enough and asked for a review in all 50 states, as well a stop to any foreclosure sales, said people familiar with the situation. Freddie Mac declined to comment.

Of course Freddie Mac declined to comment, they just threatened B of A with a lawsuit if B of A didn't do what Freddie Mac asked. This is government extortion through an intermediary.

Bank of America Chief Executive Brian Moynihan said Friday that the bank hasn't found problems in its foreclosure process, but opted to temporarily halt all foreclosures to "clear the air." He said the bank wants to "go back and check our work one more time."

Its decision is expected to stop "a couple of thousand" foreclosure sales scheduled for the next week, according to one person familiar with the matter said. The bank declined to specify how many homes it has in the foreclosure pipeline.

All this is only expected to stop a few foreclosures for a single week? Talk about a tempest in a teapot. i hope the politicians get some mileage out of this.

So far, Bank of America is the only lender to expand its foreclosure freeze, but others may be forced to begin or broaden a review, banking executives say. Wells Fargo & Co., one of the nation's largest mortgage lenders, says it hasn't stopped foreclosing on any properties.

Apparently, the government is threatening other major banks, and they fully expect them to capitulate. Unbelievable.

At this point, J.P. Morgan isn't expanding its foreclosure moratorium, but is widening its document review beyond the 23 states where it has frozen foreclosures, according to a person close to the bank.


Bank of America services 14 million mortgages, or one out of every five in the U.S., and its loan-servicing portfolio exceeds $2.1 trillion in size. Of its mortgages, 10 million came from its 2008 acquisition of troubled California lender Countrywide Financial Corp. More than 80% of its delinquent loans were acquired through Countrywide.

What a great bargain that deal turned out to be, right?

A push over the last week from politicians and law-enforcement officials troubled by reports of foreclosure problems only intensified the pressure on Bank of America, which has been working to improve its relations in Washington. It concluded that reviews in just 23 states wouldn't cut it with elected officials in the other states, a person close to the bank said.

"In this intense political season we are in, it didn't play well to say do it in some states but not your state," this person said.

That confirms this is nothing but a political ploy. Disgusting.

Senate Majority Leader Harry Reid (D., Nev.), whose state has been hit hard by foreclosures, and House Oversight and Government Reform Committee Chairman Edolphus Towns (D., N.Y.), both said Friday they welcomed Bank of America's move and called on other banks to follow.

Cassandra Toroian, chief investment officer at Bell Rock Capital LLC, a money-management firm, says the additional reviews are unlikely to significantly impact the outcome for homeowners who are facing foreclosure. "It's just delaying the inevitable," she says.

Actually, this policy is likely to have impact — it is going to cause more accelerated default.

Momentum builds for full moratorium on foreclosures

By Ariana Eunjung Cha, Steven Mufson and Jia Lynn Yang

Washington Post Staff Writers

Saturday, October 9, 2010

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation's housing market and economic recovery.

Their remarks were made as pressure for a nationwide moratorium mounted Friday when Bank of America, the nation's largest bank, halted evictions in all 50 states. Senate Majority Leader Harry M. Reid (D-Nev.), who is locked in a tight reelection campaign, called on other major lenders to follow suit.

The White House has so far resisted joining the election-season calls for action but convened two interagency meetings this week to discuss reports that banks filed fraudulent documents to evict borrowers who missed payments as well as fundamental questions about whether banks are seizing properties without having clear ownership of the mortgages.

I know the Democrats are desperate right now, but this kind of pandering is a major turnoff. It's the kind of thing that makes me want to see them lose. It's also clear evidence that the pressure being exerted by Freddie Mac is coming directly from the Obama administration and Harry Reid.

One meeting was made up mostly of groups that regulate the housing industry, including the Department of Housing and Urban Development, the Treasury Department and the White House. The other, which involved the U.S. Securities and Exchange Commission, the Internal Revenue Service and U.S. attorneys from across the country, was focused on the question of whether financial fraud was committed.

With foreclosed properties comprising one in every four homes sold in the United States, the spreading moratorium could disrupt real estate deals in progress, slow down the process of clearing the backlog of troubled home loans and prolong the economic recovery, analysts said.

A freeze would also strike at the financial sector, just two years after it suffered one of the worst crises in its history. One government official who has been in discussions with several big financial firms said the banks are bracing themselves for a wave of lawsuits from homeowners who are fighting to keep their homes and from investors who had bought mortgage loans on Wall Street. On Friday, while the Dow Jones Industrial Average crossed 11,000, most major bank stocks fell.

It looks as if the government is going to delay the recovery by keeping a huge overhang of shadow inventory despite the inevitably lawsuits.

… Also Friday, the Federal Housing Administration said it had asked agency-approved mortgage servicers – which includes the nation's largest banks – to immediately audit their foreclosure operations. The FHA can impose financial penalties on companies that do not follow rules set by housing regulators.

Questions over the legal standing of banks in foreclosure proceedings as well as reports that these firms cut corners as they pushed foreclosures through the legal system fueled calls in Congress for a nationwide freeze and federal investigations.

Another tool of threat the government has is the FHA.

Reid, who had earlier sent a letter to major banks asking them to suspend foreclosures in Nevada, expanded that call Friday after Bank of America's announcement.

"I thank Bank of America for doing the right thing by suspending actions on foreclosures while this investigation runs its course," he said.

The Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), said Friday that his panel will hold hearings Nov. 16 to investigate the morass.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, said the top 10 mortgage lenders should immediately suspend foreclosure proceedings in all states.

"The implications of ignoring the foreclosure problems are far too great to be ignored," he said Friday.

Bullshit. I can't believe these guys have the nerve to say these things. I suppose they are politicians in close elections, so nothing should surprise me. These guys are unbelievable.

… "Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy," the industry letter said.

Suspending foreclosures could end up forcing banks, which act as service companies for the loans, to spend billions of dollars to compensate investors who own the pools of mortgages they manage. And it could add to the losses at Fannie Mae and Freddie Mac, the two government-owned mortgage financiers.

Pension funds and other investors in the pools of mortgage securities are worried that the big banks will get special treatment from Washington.

"What's happened is a gross mishandling of paperwork and often times a misrepresentation of the transaction," said Chris Katopis, a spokesman for the Association of Mortgage Investors. "The banks have to have some responsibility and accountability for this."

The only people who benefit from a moratorium are politicians and squatters. Everyone else gets screwed.

HELOC abusing squatters will benefit from a moratorium

As you contemplate whether or not this moratorium idea is good or bad, take a hard look at the people who will benefit the most. Today's featured property is a particularly bad case of HELOC abuse and squatting. They went to the housing ATM every year for another withdrawal. The income subsidy was enormous. After you see how these people lived over the last decade, ask yourself if this is the kind of behavior we want to subsidize and see more of.

  • This house was purchased on 7/22/1998 for $132,000. Their original mortgage and down payment does not show up in my records. Let's assume they used an 80% first mortgage ($105,600) and a $26,400 down payment. This may have been a 3% down FHA purchase, but I don't know.
  • On 10/4/2001 they refinanced with a $130,000 first mortgage.
  • On 12/24/2002 they refinanced with a $175,000 first mortgage.
  • On 10/30/2003 they refinanced with a $279,300 first mortgage.
  • On 11/15/2004 they refinanced with a $385,000 first mortgage.
  • On 11/14/2005 they refinanced with a $450,000 first mortgage.
  • On 12/28/2006 they refinanced with a $524,000 Option ARM.
  • Total mortgage equity withdrawal is $418,400.

  • Total squatting time is about 20 months.

Foreclosure Record

Recording Date: 09/11/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/08/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 05/12/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 05/06/2009

Document Type: Notice of Default

This family lived off their housing ATM machine. They were pulling out an average of $83,680 per year. That was roughly the median income in Irvine during that time.

Do you think we should encourage this kind of financial management? If we bail these people out or let them keep their house, we are ensuring we will have many more borrowers who emulate them in the future.

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price … $415,000

Home Purchase Price … $132,000

Home Purchase Date …. 7/22/1998

Net Gain (Loss) ………. $258,100

Percent Change ………. 195.5%

Annual Appreciation … 9.2%

Cost of Ownership


$415,000 ………. Asking Price

$14,525 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$400,475 ………. 30-Year Mortgage

$78,371 ………. Income Requirement

$1,961 ………. Monthly Mortgage Payment

$360 ………. Property Tax

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

$35 ………. Homeowners Insurance

$320 ………. Homeowners Association Fees


$2,675 ………. Monthly Cash Outlays

-$309 ………. Tax Savings (% of Interest and Property Tax)

-$556 ………. Equity Hidden in Payment

$22 ………. Lost Income to Down Payment (net of taxes)

$52 ………. Maintenance and Replacement Reserves


$1,884 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,150 ………. Furnishing and Move In @1%

$4,150 ………. Closing Costs @1%

$4,005 ………… Interest Points @1% of Loan

$14,525 ………. Down Payment


$26,830 ………. Total Cash Costs

$28,800 ………… Emergency Cash Reserves


$55,630 ………. Total Savings Needed

Property Details for 13 GREENWOOD Irvine, CA 92604


Beds: 3

Baths: 1 full 2 part baths

Home size: 1,642 sq ft

($253 / sq ft)

Lot Size: 2,110 sq ft

Year Built: 1976

Days on Market: 128

Listing Updated: 40459

MLS Number: S619881

Property Type: Condominium, Residential

Community: El Camino Real

Tract: St


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

Wonderful 3 bedroom 2.5 bath, two car garage with enclosed paito. Close to shoping, fwy, school and parks. Price to sell!

paito? shoping? That description is fewer than 20 words, and the realtor managed to misspell two of them.

Private Property Rights: A Casualty of the Housing Bubble

Paul Jackson from HousingWire persuasively argues that private property rights are being trampled.

Irvine Home Address … 4152 HOMESTEAD Irvine, CA 92604

Resale Home Price …… $640,000

And all the clouds come in day by day

No one stop it in anyway

And all the peacemaker third war officer

Hear what I say

Police and thieves in the streets

Scaring the nation with their guns and ammunition

Police and thieves in the street

Fighting the nation with their guns and ammunition

The Clash — Police and Thieves

What do you do when the people who are supposed to protect you and serve your interests steal from you? Protest? To whom? What do you do when the government that is supposed to look out for us steals our money and gives it to greedy and corrupt corporations and bankers? It's happening to you right now.

The greatest heist in our country’s history

by PAUL JACKSON — Tuesday, October 5th, 2010, 5:29 pm

Our economy is being stolen from us, and our nation’s real estate crisis is providing cover for what will — if it goes unchallenged — go down as one of the greatest heists in our country’s history.

Yes, a mortgage crisis of historic proportions has now suddenly become a foreclosure crisis of historic proportions. And it’s front page news, too, bringing the market pundits out of the woodwork to exclaim as loudly as they possibly can that the entire U.S. mortgage system is a fraud.

Those three links are great supporting materials. If you are inclined to explore them, they are worthy of your time to read.

Banks are admitting to having taken shortcuts with their paperwork, or not having notarized documents properly, or delegated signing authority when they should not have. Yes, procedures haven’t been followed. And, yes, banks are going to pay for it, some far more than others.

Paul is referring to this tempest in a teapot: Paperwork storm hits nation's biggest bank. This news story isn't really news, but it serves to stoke the false hopes among debtors that mortgage relief is forthcoming. It isn't.

I’m even sure all of these procedural errors — and some that have yet to come to light — are on varying levels endemic and common throughout the mortgage servicing industry.

But in the end, am I the only one asking: who really cares? Does any of this make it more likely that a borrower will suddenly be able to afford their mortgage? Isn't that what really matters?

The Fallacy of Financial Innovation.

What really should matter is this: as a nation, we have lost at least $2 trillion in wealth thanks to the economic downturn, led by an absolute collapse of our housing and mortgage markets. It’s a collapse we have all yet to recover from, as a host of well-intentioned but ill-fated policies have done nothing except prolong pain — not only for banks, who are still playing hide-and-seek with bad assets on their balance sheets, but also for borrowers, who are being lied to by our government and by the very consumer advocates who claim to wish to help them.

The results emerging here threaten our nation’s very system of private property rights — a fundamental aspect of our democracy. But not because the banks have abused procedure, as so many pundits have conveniently alleged; instead, it’s because the very procedures designed to protect our nation’s property rights are now being used as a weapon against us.

And most of America doesn’t even know it’s happening.

An economy of lies

Just how much hide-and-seek is still out there, playing games within balance sheets of major financial institutions? Plenty. In March, I highlighted analysis from Laurie Goodman at Amherst Securities, who found that of more than $1 trillion in second mortgages outstanding, $963 billion remained on the balance sheets of commercial banks, thrifts and credit unions. As another way of slicing it, a look at Federal Reserve data shows that as of Sept. 22, U.S. commercial banks held $592.1 billion in revolving home equity loans — essentially unchanged from August of 2009, when banks held $605.2 billion.

Banks Refuse to Recognize HELOC and Second Mortgage Losses.

If you believe that the second liens and home equity loans banks are holding on their balance sheets are worth anything close to what they’re being booked at, you haven’t looked at what second liens tend to bid at on the secondary market: anywhere from 5 to 7 cents. And that’s for performing second liens.

Let that sink in a moment. Our banks are holding a trillion dollars of worthless second mortgages on their balance sheets. Do you see why short sales take forever? Banks don't want to recognize these losses, so they use the short-sale process as a means of facilitating negotiations with delinquent borrowers to get some recovery on their second mortgage loan debt.

Most properties that go to foreclosure quickly are those where the first mortgage is held by one bank and the second is held by another. Rarely do banks go to foreclosure if they hold both mortgages. Instead they endlessly amend-extend-pretend in hopes that these second mortgages will come back in-the-money from their currently worthless position. Banks live in a state of perpetual denial concerning these bad second mortgages. The horror of the reality of their situation is too terrible to be accepted.

Layer on top of that millions of borrowers who aren’t deleveraging yet, because Uncle Sam is telling them not to, and consumer advocates have swooped in to help. We’ve sold the American populace on the idea that their home truly is the American Dream, and that saving that dream is worth wallowing in bad debt and insolvency for years — rather than simply leaving it behind, deleveraging and moving on with their lives.

Foreclosure Is a Superior Form of Principal Reduction.

Toward this end, the HAMP program is an outright and unmitigated disaster: Consider that through August 2010, 468,000 of the 1.4 million homeowners offered trial mods had received "permanent" modifications. Even if only 40% of these “permanent” modifications redefault — an incredibly low redefault rate — that’s 280,800 borrowers that get to stay in their homes. Assume that number triples between now and 2012, when HAMP is slated to expire: that means 842,400 borrowers will be assisted by HAMP when all is said and done.

HAMP's program cost? $50 billion. The final price tag? $60,000 per success. We might as well have just given the whole lot of our nation’s delinquent borrowers a year’s worth of mortgage payments as a cash advance — it would have been just as effective.

But HAMP’s real crime isn’t its inefficiency and cost to the taxpayer. It’s the culture of ‘indentured servitude’ that it has spawned upon an unwitting American public. Our government has convinced millions that it is better for them to wait to resolve their bad debt, to wallow in insolvency — that they should attempt to see that debt restructured into some other bad debt, with much of this new, still-bad debt now guaranteed and backed directly by the U.S. government.

The Mechanism For Diverting Bank Losses to the US Taxpayer.

The result is that bad debt lurches along in our financial system, never really cleaning itself out; and borrowers are left with horrible credit for years as they work through attempting to restructure their debt again and again, damaging their future hopes of ever really contributing to GDP growth again.

It’s a crime upon our nation, financially and socially, yet it’s one that the American people have allowed themselves to be subject to. We are, after all, a government by the people and for the people.

But the real reason we aren’t seeing the sort of economic growth most have expected is precisely because we haven’t allowed the consumer to repair their balance sheets, a necessary and positive thing for the economy in general: we’ve encouraged them to do the exact opposite.

Eliminating Government Housing Subsidies Will Improve the Economy.

It’s somewhat convenient for the nation’s banks, too, that consumers decided to hold onto all of this debt, too — because doing so allows our financial institutions to continue to play hide-and-seek with their bad assets. Which avoids the need for messy additional government bailouts, politically untenable as they are these days.

So everyone plays along with the ruse.

Regardless, the inconvenient truth here is that until we allow this billions of dollars worth of bad mortgage debt to truly course through our economic veins, to work itself out, we won’t see an economic recovery. Deleveraging privately — and now, through transfer of debt, publicly — is a necessary prerequisite to future economic growth in our country.

Foreclosures Will Drive the National Economic Recovery.

Love me tender

Foreclosures, then, aren’t really the enemy at our gates; they’re instead a necessary and healthy indicator of market correction. They are proof that our nation’s well-developed system of private property rights is, indeed, actually working as it should.

Foreclosure is not the problem; foreclosure is the cure.

But our government has instead made foreclosures into a “last stop” measure instead, something to be avoided at all costs as well as something that probably rates just below Big Tobacco on most American’s scale of corporate loathing — this is a huge mistake, as NYU law professor Richard Epstein notes in a brilliant column published in Forbes magazine.

By giving in to sensationalism over robo-signers and who notarized what, we’ve allowed procedural gaffes to substitute for true substance. And we’ve forgotten why those procedures really exist in the first place — not to protect the hapless borrower, who has already defaulted, but to instead protect our nation’s sacred system of land rights. To protect the foundations of our very democracy.

Money Rentership: Housing and the New American Dream

“Foreclosure should be understood as a healthy form of market correction of prior transactions. It should not be regarded as a form of original sin, to be tolerated only under the most extreme circumstances,” writes Epstein. “The older rules were designed to allow strict foreclosures in order to clear title. The new rules will result in short-term victories for some besieged landowners — and fresh losses for everyone else.”

California, at least, seems to have had its priorities straight. Under California law, borrowers looking to challenge a foreclosure sale on grounds of any irregular procedure (like affidavit signing, notarization, and the like) must first make a “valid and viable” tender offer to the lender for the amount due on the loan. In other words: a procedural error doesn’t matter, if the borrower still can’t pay the debt.

After all, as I noted before and will say again: our nation’s detailed and paperwork-heavy procedural requirements don’t exist for the protection of the borrower in default. They exist to protect our nation’s very system of property rights.

I wasn't aware of this law prior to reading this article. It is a good law, IMO.

California’s "tender rule" has helped the courts in the Golden State avoid much of the same fate as those in Florida, which have quite literally been besieged by claims of procedural irregularities. It’s why California is more able to work through foreclosures, and the single largest reason why the state is closer to finding an equilibrium in housing than Florida is.

Actually, we are only at an equilibrium because we aren't foreclosing and putting supply on the market, but I don't want to take away from Paul's larger point.

But California attorneys I speak with now say that the “tender rule” in California is under heated attack from consumer attorneys that would see the rule turned around, allowing California’s courts to resemble the mess that is Florida’s.

Rather than fighting California’s “tender rule,” what we really ought to be doing is considering a national, federal law that makes something like the “tender rule” a national requirement. In other words, if you can’t make good on your debts anyway, procedural missteps in a foreclosure are immaterial and something for attorneys and their bar to worry about.

By subverting our nation’s real estate law to favor borrowers who have no intention of fulfilling their debts, we risk undermining everything that establishes private property rights in our country — and perhaps the coup de grâce of it all is that the American public will be cheering when it happens.

How very eerily Orwellian of it all.

The enemy at our gates threatening our very republic isn’t Wall Street, isn’t banks, isn’t foreclosure mills, isn’t botched paperwork, isn’t loan officers making empty promises, isn’t investment banks rolling loans into CDOs and other esoteric investments, isn’t rating agencies. Instead, we've met the enemy, and it’s us.

Paul Jackson is the publisher of HousingWire Magazine and Follow him on Twitter: @pjackson

Obviously, I think Paul Jackson really gets it.

$300,000 in HELOC abuse

Nearly every day I profile a house where someone extracted hundreds of thousands of dollars in HELOC money. Since these are almost always short sale and foreclosures, you know that these people have nothing to show for all that spending. They couldn't have buried it in the yard because they are losing the yard too.

  • Today's featured property was purchased for $475,000 on 10/15/2003. The owners used a $380,000 first mortgage and a $95,000 down payment.
  • On 11/5/2004 they refinanced with a $530,000 first mortgage.
  • On 5/3/2006 the obtained a HELOC for $150,000. We know they spent it because this property is listed as a short sale.
  • Total property debt is $680,000.
  • Total mortgage equity withdrawal is $300,000.

Do you want to pay off their debts? The bank is willing to loan you money at 4.3% to do it.

Irvine Home Address … 4152 HOMESTEAD Irvine, CA 92604

Resale Home Price … $640,000

Home Purchase Price … $475,000

Home Purchase Date …. 10/15/2003

Net Gain (Loss) ………. $126,600

Percent Change ………. 26.7%

Annual Appreciation … 4.3%

Cost of Ownership


$640,000 ………. Asking Price

$128,000 ………. 20% Down Conventional

4.74% …………… Mortgage Interest Rate

$512,000 ………. 30-Year Mortgage

$128,624 ………. Income Requirement

$2,668 ………. Monthly Mortgage Payment

$555 ………. Property Tax

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

$53 ………. Homeowners Insurance

$45 ………. Homeowners Association Fees


$3,321 ………. Monthly Cash Outlays

-$451 ………. Tax Savings (% of Interest and Property Tax)

-$645 ………. Equity Hidden in Payment

$230 ………. Lost Income to Down Payment (net of taxes)

$80 ………. Maintenance and Replacement Reserves


$2,535 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,400 ………. Furnishing and Move In @1%

$6,400 ………. Closing Costs @1%

$5,120 ………… Interest Points @1% of Loan

$128,000 ………. Down Payment


$145,920 ………. Total Cash Costs

$38,800 ………… Emergency Cash Reserves


$184,720 ………. Total Savings Needed

Property Details for 4152 HOMESTEAD Irvine, CA 92604


Beds: 5

Baths: 3 baths

Home size: 2,100 sq ft

($305 / sq ft)

Lot Size: 5,000 sq ft

Year Built: 1972

Days on Market: 77

Listing Updated: 40448

MLS Number: S625484

Property Type: Single Family, Residential

Community: El Camino Real

Tract: Gt


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



The Market Is Accepting That House Prices Will Not Go Up

Hope springs eternal, and denial rules downtrodden financial markets. However, locally it appears that housing market watchers are beginning to accept that house prices will not be going up soon.

Irvine Home Address … 22 BUTTERFLY Irvine, CA 92604

Resale Home Price …… $460,000

There's gonna come a time when the scene'll seem less sunny

It'll probably get druggy and the kids'll seem too skinny

There's gonna come a time when she's gonna have to go

With whoever's gonna get her the highest

The Hold Steady — Stay Positive

No matter how bad things get, some people just choose to stay positive. It is a healthy way to manage one's emotions, but it is an incredibly poor way to manage one's finances.

Is 'flat' the new 'normal'

BY JONATHAN LANSNER — Sept. 30, 2010

Perhaps "flat" is the "new normal."

It's hard to find anybody who's really excited about housing's short-run outlook as the real estate market seems to be having some difficulty adjusting to homebuying without federal tax incentives.

LOL! Having some difficulties? If by difficulties he means that New Home Sales Plummet with Expiration of Tax Credits and Existing-Home Sales Sink to Lowest Level Ever Recorded, then yes, the market is having some difficulties.

Take housing tracker Veros from Santa Ana. They project Orange County home prices will rise 2.2 percent in the year ended September 2011.

Eric Fox, Veros' economic modeling VP, says "affordability is the driver" that will keep local housing prices up. Previously, Veros' forecast that home price will be up 1.8 percent in the year ending June 2011.

To Fox, local home affordability – a mix of depressed values and cheap mortgage rates — will largely offset the area's relatively weak job market. Fox also think rent-seeking investors will play a big role in supporting local home prices, as these cash-rich buyers won't have the tall hurdles — overall angst or loan qualification challenges — that currently chill some buyers seeking their own shelter.

Nearly every market myth in one brief statement. I can't say Mr. Fox has earned much of my respect.

First, market values are not depressed. We are recovering from a housing bubble, and prices are still artificially elevated not depressed.

Second, cheap mortgage rates are not offsetting the weak job market. Low Interest Rates Are Not Clearing the Market Inventory. The banking cartel's withholding of inventory is what is offsetting the weak job market. Demand is very low as sales volumes are well off historic norms. Only the lack of inventory is preventing a total price collapse.

Third, rent-seeking investors are not attracted to Orange County's housing market. Why would anyone accept a 4% return in Orange County when they can get an 7% return in Riverside County or a 9% return in Las Vegas? Only foolish speculators who believe rapid appreciation will return to Orange County are buying at current valuations.

Forth, foreign cash buyers can not, will not, and are not saving the Orange County housing market. This dumb idea is brought up periodically, and it is crazy. Perhaps FCBs have some small impact in some small neighborhoods and isolated enclaves where the activities of a few buyers can make a difference, but the OC housing market is much too large, and the number of FCBs is much too small to stem the tide.

That outlook for essentially flat pricing fits a pattern we've seen lately: Home-price gains – at least what's reported in various indexes — have been shrinking.

The latest reading of the price pulse in Los Angeles and Orange counties in July's Standard & Poor's/Case-Shiller housing indexes:

  • On a month-to-month basis, LA/OC prices rose 0.35 percent in July — fourth consecutive gain but the smallest since a drop in March.
  • On a year-over-year basis, LA/OC home prices rose 7.5 percent in July — seventh consecutive gain but also the smallest since March.
  • Sobering thought: Even with the recent gains, LA/OC prices by this measure are 35.6 percent below the 2006 peak.

Be prepared to watch the Case-Shiller index roll over in the coming months. We all know that the market hit some severe "turbulence" in May when the tax credits expired. Since the Case-Shiller is both a moving average and delayed by three months, we are only now seeing the impact of the sudden drop in demand and pricing. Nobody watching the market since May has reported increasing demand or rising prices. Going into the fall and winter with elevated inventory, these numbers can only get worse.


And it's not just pricing, as buyers pull back in many parts of the market

In the 22 business days ending September 8, DataQuick found 52 of 83 O.C. ZIPs had year-over-year sales declines as overall countywide sales were off 14.9 percent vs. a year ago. The current sales pace is 69 percent of the average 3,597 homes sold per month in the 20 years ended in 2009.

Statewide, California Association of Realtors said August's homebuying was down 14.9 percent from a year ago. And what sells takes more effort: CAR's unsold inventory index for single-family resales in August was 6.1 months (to deplete the supply of homes on the market at the current sales rate) vs. 4.6 months a year earlier.

These sales numbers are a catastrophe. If the majority of the market were not tied up by banks who refuse to sell, prices would crater.

As expected, homeowners sense house shoppers' change of heart.

According to surveying by online real estate trackers HomeGain, 15 percent of Californian homeowners predicted this summer that their home's value will rise in the next six months — slightly less than half of the 34 percent who foresaw appreciation just three months earlier in the spring. Nationwide, the drop off wasn't as steep as 18 percent expected appreciation in the most recent survey vs. 27 percent in the second quarter.

But here's what really noteworthy: when just 15 percent of Californian homeowners see appreciation — and that makes our state a national leader in property optimism!

That is a very low number. Homeowners are the group most likely to have a rosy outlook for appreciation because they all want home prices to go up. Position bias is strongest among those who stand to make large amounts of money if a position goes in their favor.

HomeGain's third-quarter survey placed California in a tie for 9th place ranking among the states (along with Maryland) for the share of folks predicting upcoming appreciation. (Back in the second quarter, optimism was tied for 7th with New York and Colorado!)

California real estate agents, who were also polled, had equally and curiously "high" relative optimism — as 14 percent told HomeGain pollsters that they foresaw appreciation within six months. That tied us for the 6th most upbeat real estate pros among the states (withTexas.)

I am shocked! realtors think house prices are going up? Actually, I am surprised that so few (only 14%) do believe house prices are going up. Of course, all of them are telling their buyer-clients that house prices are going up in order to manipulate them into buying, but secretly only a small handful truly believe prices will rise. The duplicity is disgusting.

Perhaps, growing Californian pessimism comes from what buyers (or the lack thereof) are saying, as pollsters found agents saying 25 percent of California homebuyers currently believe homes are overpriced by 10 percent or more vs. 13 percent in the second quarter


Still, the market watchers at Beacon Economics don't think the current malaise will turn to anything ugly.

"Although home prices are not going to rocket back to pre-recession peaks anytime soon, fears of a significant double dip in home prices are likely exaggerated," Beacon economists wrote in a recent forecast. "The fundamental drivers of long-term home prices paint a picture of a housing market that has emerged from collapse healthier. Home prices have largely stabilized despite a small drop in the wake of falling sales; the price of an existing home is still more than 16% above the April 2009 trough. Additionally, measures of affordability show that California appears poised for slow but steady growth once the labor markets have healed. At roughly 6-times per capita income in the state, home prices are beginning to make sense again. As income continues to grow at a moderate pace, home prices will likely follow suit at a more tepid but sustainable pace."

Six-times income is now a good measure of affordability? It is amazing how super-low interest rates distort reality. Ordinarily, I embrace most of what I read from Chris Thornburg and Beacon Economics, but the above statement reads a bit like market cheerleading. I'm sure many loan owners read that will a small sense of relief. Denial requires constant reinforcement.

Flat is not where it's at

House prices are going to head lower in Orange County. When the bulls start to accept that prices may actually stay flat, it becomes pretty obvious that prices will head lower. We are not witnessing the despair after the crash which signals the bottom, we are witnessing the acceptance that comes before capitulation. Expect to see house prices grind lower for the next two or three years with greater declines at the high end than at the low end. Afterward, expect tepid appreciation until the overhang of distressed inventory is pushed through the system. The bear rally engineered by the Federal Reserve is over. The second leg down — a less steep and more controlled decline — is about to begin.

HELOC Metamorphosis

I don't think most HELOC abusers set out to be thieves. It is a slow transformation. Like Patty Hearst went from being a shy heiress to a gun-toting bank robber, most HELOC abusers get a taste of free money, like what they get from it, and then they just dig the hole deeper and deeper until there is no escape. Perhaps HELOC abusers will blame banks for keeping them financially hostage and claim mass insanity as another manifestation of the Stockholm syndrome.

  • The owners of today's featured property paid $317,000 on 10/31/2001. They used a $253,600 first mortgage, a $31,700 second mortgage and a $31,700 down payment.
  • On 2/26/2003 they refinanced with a $290,000 first mortgage.
  • On 10/23/2003 they took out $100,000 in a HELOC.
  • On 4/7/2004 they got a $150,000 HELOC.
  • On 5/7/2004 they obtained a $136,000 HELOC.
  • On 3/17/2006 they opened a $250,000 HELOC.
  • Finally, on 8/3/2006 they refinanced the first mortgage with a $560,000 Option ARM.

In short, these people committed every sin of bad mortgage management including periodic refinancing and obtaining an Option ARM. The worst part is that they probably don't realize they did anything wrong. I imagine they think they were behaving responsibly and if the housing market hadn't crashed, everything would be fine. I believe people have failed to learn the lessons of poor financial management, and I also believe we will likely repeat this cycle because of the poor lessons people have learned.

Irvine Home Address … 22 BUTTERFLY Irvine, CA 92604

Resale Home Price … $460,000

Home Purchase Price … $317,000

Home Purchase Date …. 10/31/2001

Net Gain (Loss) ………. $115,400

Percent Change ………. 36.4%

Annual Appreciation … 4.2%

Cost of Ownership


$460,000 ………. Asking Price

$16,100 ………. 3.5% Down FHA Financing

4.74% …………… Mortgage Interest Rate

$443,900 ………. 30-Year Mortgage

$92,448 ………. Income Requirement

$2,313 ………. Monthly Mortgage Payment

$399 ………. Property Tax

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

$38 ………. Homeowners Insurance

$215 ………. Homeowners Association Fees


$2,965 ………. Monthly Cash Outlays

-$377 ………. Tax Savings (% of Interest and Property Tax)

-$560 ………. Equity Hidden in Payment

$29 ………. Lost Income to Down Payment (net of taxes)

$58 ………. Maintenance and Replacement Reserves


$2,115 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$4,600 ………. Furnishing and Move In @1%

$4,600 ………. Closing Costs @1%

$4,439 ………… Interest Points @1% of Loan

$16,100 ………. Down Payment


$29,739 ………. Total Cash Costs

$33,300 ………… Emergency Cash Reserves


$63,039 ………. Total Savings Needed

Property Details for 22 BUTTERFLY Irvine, CA 92604


Beds: 3

Baths: 2 full 1 part baths

Home size: 2,000 sq ft

($230 / sq ft)

Lot Size: 2,720 sq ft

Year Built: 1976

Days on Market: 122

MLS Number: S619416

Property Type: Single Family, Townhouse, Residential

Community: El Camino Real

Tract: Ig


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

Great Value for SQ/Footage, Spacious Home with Vaulted Ceilings, Open Floor Plan. HUGE Family Room with Lovely Bricked Fireplace and Wet Bar. Living Room with Fireplace, Formal Dining Room, Kitchen with Newer Appliances and Countertops. Extra Room with air conditioner off of the Large Master Bedroom that can be used as an office, den, playroom or storage. Central air through rest of the house Large Private backyard that backs to Greenbelt 2 Car Garage with newer roll up door. Walk to shopping, Restaurants, Award winning Schools