A local attorney is suing her lender for failing to give her a loan modification. Are loan modifications now an entitlement?

Irvine Home Address … 51 CEZANNE Irvine, CA 92603

Resale Home Price …… $1,849,000

Yeah owe me back like you owe your rent

Owe me back like its money I spent

Pay me back when you shake it again

Nas — You Owe Me

Are borrowers owed a loan modification? Is it a right or an entitlement? Once upon a time, loan modifications were a gift generously offered by a lender — a gift of a lower payment, a reduced interest rate or some other term modified in favor of borrowers as an enticement to keep paying their mortgage. Somewhere along the way, this unilateral change in terms in favor of buyers became something they are supposed to get, something they are entitled to. I am not sure why foolish borrowing should be rewarded this way, but fixing this problem after the fact is so important to the government that many programs exist to make these loan modifications happen, and now borrowers who have tried to use these programs are suing if the loan modification does occur to their satisfaction.

Irvine woman sues over loan mod ‘hoax’

September 17th, 2010 — Marilyn Kalfus

An Irvine homeowner is suing a large national mortgage servicing company, saying they perpetrated a “loan modification hoax” and committed fraud by promising but never granting her a permanent home loan modification.

So this woman is claiming the entire loan modification program was a hoax to induce her to apply for something she probably isn't qualified for. That seems like a stretch to me, but if she can squeeze a few bucks out of the bank, why not?

Jean C. Wilcox, who also is a real estate lawyer, is seeking class-action status on behalf of other homeowners whose mortgages have been serviced by EMC Corporation.

EMC is based in Texas with offices in Irvine. The company used to be owned by Bear Stearns and is now a subsidiary of JP Morgan Chase, which is not named as a party in the suit. The lawsuit was filed by attorneys Anthony Lanza and Brodie H. Smith of Lanza & Goolsby in Irvine and Thomas Mauriello of Mauriello Law Firm in San Clemente.

Wilcox claims in the suit:

“Through its orchestrated loan modification hoax, EMC has induced consumers, including plaintiff, to continue making excess or other unjustified payments in pursuit of illusory permanent loan modifications. EMC has thereby avoided the need to initiate, prosecute and conclude multiple foreclosures … and has avoided the need to liquidate excessive and under-valued real estate inventory … and has artificially bolstered its financial statements, including balance sheets and related SEC filings … by minimizing mandatory reporting of toxic loans, defaulted loans or distressed loans.”

We’re requesting a response from EMC.

Wilcox bought her home in 2004. Three years later, she says in the suit, she refinanced her WAMU purchase money loan with a subprime loan from Freemont Investment and loan, which has since been dissolved. A few months after the refi, she was notified that EMC was her new servicer, but she wasn’t told who holds the loan. She said to this day, she doesn’t know who it is.

I found her mortgage records in my database. She purchased her home for $992,000 using a $695,000 first mortgage and a $297,000 down payment. She opened a $40,000 HELOC shortly thereafter, and she refinanced with an $800,000 loan on 12/29/2006. Perhaps she needed that extra $100,000 to pay for upgrades? It is the $800,000 loan with $100,000 cash out that she is seeking to modify. I'm thinking that if she wouldn't have pulled out that $100,000, she might not need a loan modification. Do we want to reward her behavior?

Wilcox says in the suit that she underwent 4 temporary or trial modifications with EMC but never received the permanent modification that she was promised. The goal posts kept changing, she said, as she was shuttled from person to person at the company.

In the suit she relays the various steps she took to fulfill the requirements she was told she needed to meet to obtain temporary loan mods. She says at one point an EMC employee advised her to stop making payments on her debts because it would prevent her loan from being modified. As she missed her payments, she said, her FICO score plunged. She said she postponed selling her house, while its value decreased significantly, because she was relying on receiving the permanent loan mod.

“I poured every penny I had into this house,” Wilcox, a single mother of two, said in a brief interview. ”We just lavished everything we could on this house. This is our ultimate dream home.”

And all of us are supposed to pay for that stupidity by subsidizing her mortgage. Great!

The lawsuit, filed in Orange County Superior Court, alleges violations of the California Consumers Legal Remedies Act, unlawful, unfair and deceptive business practices, breach of contract, unjust enrichment and fraud.

A judge would have to approve the suit’s class-action status. The law firm of Lanza & Goolsby states on its Website, ”It is estimated that the class may include hundreds or thousands of California homeowners who were victims of EMC’s fraud — while struggling to keep their homes through this recession.”

Investigative Website Pro Publica has delved into the denial of loan modifications in an extensive series of reports. Reporter Paul Kiel wrote in February:

“The largest servicers have lagged in approving homeowners for modifications. Together, those servicers account for more than 60 percent of the 3.4 million mortgages eligible for the program, but very few homeowners have been approved for lasting modifications. About 425,000 Chase customers are eligible for loan mods, according to the Treasury Department. Only a little more than 7,000 have received permanent modifications.”

“There are a number of adverse consequences of a trial period’s dragging on, said the [National] consumer law center’s [Diane] Thompson. Because a homeowner is not making a full payment, the balance of the mortgage grows during the trial period. The servicer reports the shortfall to credit reporting agencies, so the homeowner’s credit score can drop. And most important, says Thompson, the homeowner isn’t saving money in case the modification fails and the home is foreclosed. ‘Keeping someone in a trial modification really does not do them a favor,’ she said.”

Earlier this year, borrowers in Washington state and Arizona filed lawsuits against Bank of America over loans that were not modified. Those homeowners also were seeking class-action status.

I don't know about you, but I don't feel good about this lawsuit. The behavior it rewards is troubling to me. All loan modifications are fraught with moral hazard, and if we allow lawsuits to compel them, we are inching ever closer to full principal forgiveness on the backs of the US taxpayer.

BTW, I want to commend Marilyn Kalfus on her great reporting. Lately I have noticed a series of excellent stories from her with hard-hitting truths about the activity in our housing market. Kudos, Marilyn, your good work is noticed and appreciated.

The illusion of wealth

People who live in Orange County are fantastic pretenders. The previous owner of today's featured property lived the good life courtesy of their house.

• This property was purchased on 4/21/2004 for $1,460,500. The owners used a $1,00,000 first mortgage and a $465,500 down payment. So far so good.
• On 6/30/2005 they refinanced with a $1,471,458 Option ARM and withdrew their entire down payment plus some extra spending money.
• On 2/20/2007 they refinanced again with a $1,650,000 first mortgage and a $220,000 HELOC.
• Total property debt was $1,870,000.
• Total mortgage equity withdrawal was $870,000 including their sizable down payment.
• Total squatting time was about 10 months.

Foreclosure Record

Recording Date: 04/13/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 11/20/2009

Document Type: Notice of Default

The property was purchased at auction for $1,485,500 on 7/16/2005. It looks as if the hard money lender put a $1,633,500 loan on the property staking claim to the first $148,000 plus interest. Whoever talked this hard money lender into the deal stands to make the rest — if there is any.

Irvine Home Address … 51 CEZANNE Irvine, CA 92603

Resale Home Price … $1,849,000

Home Purchase Price … $1,485,500

Home Purchase Date …. 8/16/2010

Net Gain (Loss) ………. $252,560

Percent Change ………. 17.0%

Annual Appreciation … 138.8%

Cost of Ownership

————————————————-

$1,849,000 ………. Asking Price

$369,800 ………. 20% Down Conventional

4.52% …………… Mortgage Interest Rate

$1,479,200 ………. 30-Year Mortgage

$362,209 ………. Income Requirement

$7,512 ………. Monthly Mortgage Payment

$1602 ………. Property Tax

$400 ………. Special Taxes and Levies (Mello Roos)

$154 ………. Homeowners Insurance

$410 ………. Homeowners Association Fees

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

$10,079 ………. Monthly Cash Outlays

-$1503 ………. Tax Savings (% of Interest and Property Tax)

-$1941 ………. Equity Hidden in Payment

$620 ………. Lost Income to Down Payment (net of taxes)

$231 ………. Maintenance and Replacement Reserves

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

$7,486 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$18,490 ………. Furnishing and Move In @1%

$18,490 ………. Closing Costs @1%

$14,792 ………… Interest Points @1% of Loan

$369,800 ………. Down Payment

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

$421,572 ………. Total Cash Costs

$114,700 ………… Emergency Cash Reserves

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

$536,272 ………. Total Savings Needed

Property Details for 51 CEZANNE Irvine, CA 92603

——————————————————————————

Beds: 4

Baths: 3 full 1 part baths

Home size: 3,600 sq ft

($514 / sq ft)

Lot Size: 9,327 sq ft

Year Built: 2004

Days on Market: 6

Listing Updated: 40435

MLS Number: S632282

Property Type: Single Family, Residential

Community: Turtle Ridge

Tract: Chau

——————————————————————————

TUSCAN BEAUTY!! Gate guarded in Turtle ridge..Very impressive and emotional neighborhood. Exceptional elevations and endless views. Extenxive stone exterior finishes. The emotion starts at the curb…Enter thru a private gate into the courtyard with cozy fireplace and dramatic water feature. Newly updated with new carpet, paint and lush landscaping. Extensive marble floors downstairs. Gourmet kitchen with granite counters and stainless appliances. Seperate wine room as well with a wrought iron door. Three bedrooms in the main house and a detached casitas with private bedroom/bath and an optional family room which also can be used for a gym or private office. Oversized master suite with walk in closets. dual sinks and large sitting area. Large view windows to give you a light and bright ambiance.Entetainers backyard is complete with extended family room area, built in bbq, fireplace and endless views of the mountains and city lights. MODEL PERFECT!!

Entetainers?

Environmentally friendly housing features have been hawked as a value add for builders and sellers. Buyers simply do not agree. So far, the green movement in housing has been a bust.

Irvine Home Address … 20 JULIAN 1 Irvine, CA 92602

Resale Home Price …… $639,000

"Break the bough and strip all of it.

Fell this forest, make a profit!"

"Are there more so brave and honest;

Who would die to save my forest?"

Skyclad — The Disenchanted Forest

Builders hate green building

I am going to let you in on a little secret: homebuilders hate the new trend toward Green Building. A homebuilder's motivations are pretty basic. They will provide anything a buyer is willing to pay for. If buyers want granite countertops, and if buyers are willing to pay the builder more than what it costs, then the builder will provide plenty of granite countertops.

Builders do not like to be forced to provide those items that buyers are not willing to pay for. Have you noticed that builders don't provide back yard landscaping? That is no accident. Study after study has shown that landscaping adds about $0.50 for every dollar spent. When a builder puts in back yard landscaping, they lose money, so they don't do it. The same is true of solar panels, low-flow toilets, and a number of other environmentally friendly items. Buyers give lip service to wanting these items, but they won't put enough dollars to green products to make it worthwhile for the builder to provide them.

Builders are being forced to put in Green Building features by local municipalities, but they resist this strongly because buyers won't pay for it. These environmentally friendly features become a cost to the builder with no increase in revenue. Like any wise business people, builders resist throwing away money.

The Green Building movement has a long way to go.

Big Green Home Bust

By Ernest Beck Sep 16th 2010

A well-appointed green home outfitted with energy-saving appliances and other eco-friendly features might save money on utility bills and ease your conscience, but it won't always help close a sale in a tough real estate market, a California homeowner has learned.

The warning sign for the green residential market: A house for sale in Costa Mesa that was the first in Orange County to receive a coveted LEED Platinum certification (green building's Good Housekeeping Seal) had its price slashed by half a million.

The seven-bedroom, 4,900-square foot Craftsman-style house is the ultimate green showcase, boasting everything from low-flow faucets to solar panels (see "Home Energy Saving Projects for Every Budget"). But even those hallmarks of sustainable design were no match, it seems, for the crappy economy and skittish buyers. According to the Orange County Register, the green home's list price recently dropped from $299,000 to $2,499,999.

The hefty drop underscores the continuing debate about the resale value of green homes. Many have believed that green would command a premium among buyers who aspire to a sustainable lifestyle, but now it appears that green might not be as big a selling point in a market that has gone off the rails.

The only people who ever believed green homes would command a premium are those vendors pushing green products and a few tree huggers. If there was real demand for these products, homebuilders would provide them in limitless quantities. There is no demand, so builders stay away.

So how green do prospective buyers want to go?

There's not much hard evidence to go by. Anecdotes suggest that sustainable homes can sometimes sell faster than conventional ones, especially if energy-efficiency is the main marketing theme, according to the National Association of Home Builders. On the other hand, some green condo buildings in urban markets like New York, that were expected to fly off the market in the boom, have had a rough ride.

Green or not, buyers are still constrained by the market's current tight financial conditions, the NAHB says, and even the prospect of lower monthly energy bills "has not gained the attention of the lending community."

Lenders don't really care how much a homeowner spends on utilities. Perhaps they should, but the DTI parameters don't include utility costs, and until they do, green products that tout energy savings will not get any financing dollars put toward them.

One problem is that most people are in the dark about what green building really means, and more importantly, if it's worth paying for. Green can also be confusing: Quick, what's the difference between LED and LEED? (Answer: LED is energy-efficient light emitting diodes, used in lighting and LEED is Leadership in Energy and Environmental Design, the much touted green certification program that includes a checklist of environmental standards).

Although the price gap between green and standard housing is reportedly closing, buyers aren't always interested in the technical aspects of how and why green will improve their lives, especially if they are agonizing over a big financial commitment. The Costa Mesa home, for example, which sits on a golf course, features dual-flush toilets, an internal gray water system, and drought-tolerant native plants in the garden (see "Landscaping With Low-Maintenance Lawns Saves Money").

Sounds great, but most buyers are more likely to wonder whether they can afford the mortgage.

The cold truth is that buyers don't care about green features. They care about costs, and green features add costs that are never recovered through use or added value.

$500K price cut on ultimate ‘green’ home

August 23rd, 2010 — Marilyn Kalfus

A Costa Mesa residence that became the first single family home in Orange County to snag the nation’s highest rating under the LEED green building program has had a nearly $500,000 price chop.

The 7-bedroom, modern Craftsman-style house at 1811 Gisler Ave. is now listed at $2,499,999, down from $2,999,000 in January.

The home, priced at $510 a square foot, sits on 0.32 of an acre at the 11th green of the Mesa Verde Golf Course.

As Register reporter Pat Brennan wrote in February, the developer began planning to build the 4,900-square foot house from scratch 2 years before it hit the market.

Wrote Brennan:

“It’s loaded with features — solar panels, a gray-water system, natural lighting, low-flow water fixtures, landscaping with drought-tolerant native plants …”

All these elements helped Steve Blanchard earn the platinum rating from LEED — “Leadership in Energy and Environmental Design”:

• Solar power
• Internal gray water system, recycling sink and shower water for toilet flushes and outside irrigation
• Low-flow, dual-flush toilets and faucets
• An interior built with materials free from volatile organic compounds, a common pollutant
• LED lighting throughout
• Energy Star appliances
• Natural lighting throughout the house
• Tankless water-heating system
• High-efficiency heating and cooling units
• Gas-burning fireplaces
• Low-flow drip irrigation
• Landscaping with Orange County native plants, which won’t require any irrigation once established.

Other features include folding walls of glass that lead to a private courtyard, a formal dining room, 3 fireplaces, including in the master bedroom suite, a gourmet kitchen and an outdoor Dacor kitchen.

Another Ponzi implosion

• Today's featured property was purchased for $362,000 on 6/20/2002. The owner used a $289,500 first mortgage, a $72,150 second mortgage, and a $350 down payment.
• On 1/23/2003, he refinanced with a $365,000 first mortgage.
• On 4/3/2003 he obtained a $50,000 HELOC.
• On 8/6/2003 he refinanced with a $369,500 first mortgage.
• On 5/16/2006 he got a HELOC for $250,000.
• On 12/22/2006 he was approved for a $315,200 HELOC.
• Total property debt was $684,700.
• Total mortgage equity withdrawal was $322,350.

Foreclosure Record

Recording Date: 05/13/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 02/10/2009

Document Type: Notice of Default

Palladio Properties picked this up at auction for $536,500. They will net 8% to 12% for their investors.

Irvine Home Address … 20 JULIAN 1 Irvine, CA 92602

Resale Home Price … $639,000

Home Purchase Price … $536,500

Home Purchase Date …. 6/1/2010

Net Gain (Loss) ………. $64,160

Percent Change ………. 12.0%

Annual Appreciation … 53.6%

Cost of Ownership

————————————————-

$639,000 ………. Asking Price

$127,800 ………. 20% Down Conventional

4.52% …………… Mortgage Interest Rate

$511,200 ………. 30-Year Mortgage

$125,177 ………. Income Requirement

$2,596 ………. Monthly Mortgage Payment

$554 ………. Property Tax

$217 ………. Special Taxes and Levies (Mello Roos)

$53 ………. Homeowners Insurance

$128 ………. Homeowners Association Fees

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

$3,548 ………. Monthly Cash Outlays

-$434 ………. Tax Savings (% of Interest and Property Tax)

-$671 ………. Equity Hidden in Payment

$214 ………. Lost Income to Down Payment (net of taxes)

$80 ………. Maintenance and Replacement Reserves

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

$2,738 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,390 ………. Furnishing and Move In @1%

$6,390 ………. Closing Costs @1%

$5,112 ………… Interest Points @1% of Loan

$127,800 ………. Down Payment

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

$145,692 ………. Total Cash Costs

$41,900 ………… Emergency Cash Reserves

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

$187,592 ………. Total Savings Needed

Property Details for 20 JULIAN 1 Irvine, CA 92602

——————————————————————————

Beds: 3

Baths: 2 full 1 part baths

Home size: 1,650 sq ft

($387 / sq ft)

Lot Size: n/a

Year Built: 2002

Days on Market: 21

Listing Updated: 40418

MLS Number: S630611

Property Type: Condominium, Residential

Community: Northpark

Tract: Tibu

——————————————————————————

Beautiful Detached Home in Northpark Square Community. New Paint & Carpet. Stainless Steel Appliances. Open Floor Plan. Living Room with Fireplace. 3 Bedrooms upstairs. Spacious Master Bathroom with walk-in Closet. Close to Community Park. Move-in Ready.

Working through the inventory of distressed properties will likely take several years. Many forecasters are now warning of a three-year slide.

Irvine Home Address … 133 DANBROOK Irvine, CA 92603

Resale Home Price …… $300,000

Don’t tell me how life is

Cause I don’t really want to know

Don’t tell me how this game ends

Cause we’ll just see how it goes

Catch me when I fall

Or you’ll need me when I’m not here at all

Miss me when I’m gone again, yeah

I’m going down in flames

I’m falling into this again

3 Doors Down — Going Down in Flames

Is the US housing market going down in flames again. A precipitous drop in 2008 was temporarily halted by a massive government effort, but with the market props removed, it looks like house prices are going to resume their decline.

U.S. home prices face three-year drop as inventory surge looms

By John Gittelsohn and Kathleen M. Howley

(c) 2010 Bloomberg News

Wednesday, September 15, 2010; 12:24 AM

Shadow inventory — the supply of homes in default or foreclosure that may be offered for sale — is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody's Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

"On a national level, you have never seen a decline of this sort," Deb said in a telephone interview. "I would caveat that by saying you also have not seen an increase on a national level like we saw from 2002 or 2003 to 2006."

"I'm stuck," Miner said. "I thought it was a stepping stone to a house."

I never quite understood this "stepping stone" idea. If you buy a house because houses are going up in price, both the house you are in and the house you want are going up together. How does buying the stepping-stone house get you any closer? Or is it good enough to stay within reach?

Bullshit. The foolish series of mistakes made by people in our government and their lending overlords has squandered our resources and accomplished nothing — expect perhaps to shift these losses to US taxpayers. The market will not recover faster, nor will it regain good sales volumes until prices are lowered to levels where the inventory can be cleared.

949 Days on the Market

I first profiled this property in the post Mistake 2008. Bank in 2008, this property had already been on the market for nearly a year. Here is your chance to pay $300,000 for a glorified apartment.

• This property was purchased on 3/25/2005 for $445,000. The owner used a $400,500 Option ARM first mortgage and a $44,500 down payment.
• Not to worry, on 4/5/2006 he opened a HELOC for $60,000 and likely withdrew his down payment plus $14,500.
• So far the owner has been squatting for nearly three years.

How does a house spend 949 days on the market?

This is shadow inventory. This is lender denial. This is ridiculous.

How many days on the market will this house see? Are lenders waiting for some buyer to step forward and pay $445,000 for a 1 bedroom apartment condo? This listing may be around in 2020 if they are waiting for that to happen.

This property is scheduled for auction on Wednesday. Perhaps the lender will finally put this listing out of its misery and foreclose. I see no evidence of any attempt at a loan modification, so the lender's failure to foreclose skips the first step of amend-extend-pretend. Based on recent trends, there is an 80% to 90% chance they will continue the extend and pretend dance for another month.

Irvine Home Address … 133 DANBROOK Irvine, CA 92603

Resale Home Price … $300,000

Home Purchase Price … $445,000

Home Purchase Date …. 3/25/2005

Net Gain (Loss) ………. $(163,000)

Percent Change ………. -36.6%

Annual Appreciation … -6.4%

Cost of Ownership

————————————————-

$300,000 ………. Asking Price

$10,500 ………. 3.5% Down FHA Financing

4.52% …………… Mortgage Interest Rate

$289,500 ………. 30-Year Mortgage

$58,768 ………. Income Requirement

$1,470 ………. Monthly Mortgage Payment

$260 ………. Property Tax

$200 ………. Special Taxes and Levies (Mello Roos)

$25 ………. Homeowners Insurance

$225 ………. Homeowners Association Fees

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

$2,180 ………. Monthly Cash Outlays

-$135 ………. Tax Savings (% of Interest and Property Tax)

-$380 ………. Equity Hidden in Payment

$18 ………. Lost Income to Down Payment (net of taxes)

$38 ………. Maintenance and Replacement Reserves

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

$1,721 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$3,000 ………. Furnishing and Move In @1%

$3,000 ………. Closing Costs @1%

$2,895 ………… Interest Points @1% of Loan

$10,500 ………. Down Payment

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

$19,395 ………. Total Cash Costs

$26,300 ………… Emergency Cash Reserves

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

$45,695 ………. Total Savings Needed

Property Details for 133 DANBROOK Irvine, CA 92603

——————————————————————————

Beds: 1

Baths: 1 bath

Home size: 822 sq ft

($365 / sq ft)

Lot Size: n/a

Year Built: 2004

Days on Market: 949

Listing Updated: 40423

MLS Number: S521349

Property Type: Condominium, Residential

Community: Turtle Ridge

Tract: Ashg

——————————————————————————

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

Best deal in Turtle Ridge! Better then a model, granite counters, designer paint, berber carpet, upgraded bathroom, and much more. There is a garage with direct access, a fireplace, and air conditioning. This is a primo location with access to Newport Beach, Fashion Island, The Spectrum and the Beach! There is a really nice community pool and spa with clubhouse and nearby walking trails. only way to be in the area for this price! Only one of a few 1 bedrooms every built!

every built? After three years on the market, the realtor can't be bothered to fix this error.

primo location? That sounds professional, doesn't it?