Mortgage brokers and realtors are united: the end of the Federal tax credit was the end of the world.

Irvine Home Address … 14541 GUAMA Ave Irvine, CA 92606

Resale Home Price …… $749,000

{book1}

Bones, sinking like stones,

All that we fought for,

And homes, places we've grown,

All of us are done for.

Coldplay — Don't Panic

One of the hallmarks of an economic recession is the ongoing stress and periodic panic of the citizenry, particularly when there is no light at the end of the tunnel. The mainstream media becomes littered with feel-good stories about this statistic or that trend that is supposed to signal the end of the recession and the return to properity. Of course, each one turns out to be false, but the accuracy of the story was never the point; the story was written to provide emotional comfort.

It's rare to find a real sense of panic in news stories, and it is even more rare when the permanently bullish realtors lose their veneer of positivity and show their frightened inner selves. Today, I have a story of panic from the Mortgage News Daily and a freak out from a local realtor. Enjoy.

Purchase Demand In Freefall. Housing Industry Unraveling

by Adam Quinones

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending May 28, 2010.

"With another week of historically low mortgage rates, the trend from the prior three weeks continued, as refinance applications increased while purchase applications dropped. Purchase applications are now almost 40 percent below their level four weeks ago, while the refinance share, at 74 percent, is at its highest level since December," said Michael Fratantoni, MBA's Vice President of Research and Economics. "In addition, the ARM share dropped last week to its lowest level since March of this year, as borrowers took the opportunity to lock in at historically low fixed mortgage rates."

The Mortgage Bankers Association application survey covers over 50% of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a look into consumer demand for mortgage loans. In a low mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out a lower monthly payment which can increase disposable income and consumer spending (or give consumers a chance to pay down other debts like credit cards). A falling trend of purchase applications indicates a decline in home buying interest, a negative for the housing industry and the economy as a whole.

Everyone knew purchases would drop off when the Federal tax credit expired, but few expected the drop to be as severe as it has been. I had the following data forwarded to me. It was written by Mark Raymond Godleski, a realtor with Altera Real Estate:

There has been a huge drop in Demand for Orange County residential Real Estate — 12% in just two weeks, and 17% in four weeks, to only 3303 new escrows within the past 30 days! Looks like the expiration of the first time Home Buyer tax credit has had a bigger effect than we thought. We are now 10% Below 2009 Demand for May! Where we go from here is anybody's guess.

Inventory has slowly increased, unabated since the beginning of the year to 9839 residences for sale in OC — an increase of 2674 homes, 37%! And an increase of 3% in just the last 2 weeks! CAUTION TO SELLERS: current Buyers just are not ready to pay more than the most recent comparable sale. They are very price conscious.

Market Time has increased from 2.53 months to 2.98 months, a 18% increase in just 2 weeks! When Demand drops and Inventory rises, this is what happens. It is Great News for Buyers as this will reduce the fierce competition for Homes. This is still a Sellers' Market, just less so.

When the positive spinmeisters start freaking out, you know something bad is brewing.

Back to Purchase Demand In Freefall. Housing Industry Unraveling

Excerpts Taken From The Release…

The Market Composite Index, a measure of mortgage loan application volume, increased 0.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 0.3 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is up 3.5 percent.

The Refinance Index increased 2.4 percent from the previous week. This was a smaller increase than in previous weeks, but was still the fourth consecutive weekly increase for the Refinance Index and it remains at its highest level since October 2009. The four week moving average is up 11.5 percent for the Refinance Index. The refinance share of mortgage activity increased to 73.8 percent of total applications from 72.2 percent the previous week.

The seasonally adjusted Purchase Index decreased 4.1 percent from one week earlier. The Purchase Index decreased for the fourth consecutive week and is currently at the lowest level since April 1997. The unadjusted Purchase Index decreased 5.2 percent compared with the previous week and was 16.8 percent lower than the same week one year ago. The four week moving average is down 12.1 percent for the seasonally adjusted Purchase Index.

That chart doesn't really put things in the proper perspective, but this one does…

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.83 percent from 4.80 percent, with points decreasing to 1.05 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The effective rate also increased slightly from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.24 percent from 4.25 percent, with points increasing to 1.11 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week due to the increase in points.

The average contract interest rate for one-year ARMs increased to 6.96 percent from 6.83 percent, with points decreasing to 0.27 (including the origination fee) for 80 percent LTV loans. The adjustable-rate mortgage (ARM) share of activity decreased to 5.2 percent from 6.0 percent of total applications from the previous week.

Ugh. This morning I talked about how all the optimistic data we've been hearing on housing is just "fine and dandy"…but was nothing unexpected. Homebuyer demand spiked at the end of the original tax credit in early November and it did the same thing at the expiration of the extended version of the homebuyer tax credit this April. No surprises!

The true barometer of the health of housing rests in May housing data..not April. If the recent downtrend in purchase apps holds any clue as to what sort of results we'll see in May, it won't be pretty. Anecdotal evidence is highly supportive of this theory. Heck, besides the drastic decline in purchase demand we've seen, pull-through on refi apps is poor thanks to the vast variety of hoops that must be jumped through before a loan can be cleared to close.

Working in this industry is no fun right now. Borrowers don't trust loan officers. Originators are losing deals for a measly $250 processing fee. Underwriters and appraisers are annoying each other to protect their own behinds. Meanwhile, secondary is fronting the bill and processors (a generally "testy" group to begin with) are stuck in the middle of it all. To make matters worse…Realtors are pointing the finger at mortgage professionals for the slowdown. I feel like my world is unraveling in front of me. Can't we all just get along?

When interest rates are at historic lows, it would be logical to assume mortgage activity would be at an all-time high, particularly refinances. The fact that this activity is near historic lows is very revealing. Basically, everyone who could refinance already has, and the buyer pool is seriously depleted because so many are unemployed, underwater, or recently foreclosed.

This isn't just a disaster for mortgage and real estate professionals, this is part of the ongoing disaster for banks. Who are they going to sell all their distressed property to? The reason we have such a backlog of delinquencies and foreclosures is because lenders know they don't have any buyers to sell to. Lenders are not allowing long-term squatting because they want to; they allow squatting because they have to.

Another typical Irvine home owner HELOC abusing squatter

• The previous owners of today's featured property paid $475,000 on 5/29/2003. The owners used a $322,700 first mortgage, a $100,000 second mortgage and a $52,300 down payment.
• On 3/31/2004 they refinanced with a $450,000 first mortgage.
• On 2/3/2005 they refinanced with a $623,000 first mortgage.
• On 3/16/2006 they obtained a HELOC for $100,000.
• Total property debt is $723,000.
• Total mortgage equity withdrawal is $300,300
• The squatted off an on for about 2 years.

Foreclosure Record

Recording Date: 03/03/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 11/30/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 02/19/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 11/14/2008

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 08/06/2008

Document Type: Notice of Default

Lemons into lemonade

Someone is making a profit from this property. It was picked up at trustee sale in March. The new owners is looking to flip it for a quick $93K. They will probably get $70K out of the deal.

Irvine Home Address … 14541 GUAMA Ave Irvine, CA 92606

Resale Home Price … $749,000

Home Purchase Price … $610,500

Home Purchase Date …. 3/23/2010

Net Gain (Loss) ………. $93,560

Percent Change ………. 22.7%

Annual Appreciation … 84.6%

Cost of Ownership

————————————————-

$749,000 ………. Asking Price

$149,800 ………. 20% Down Conventional

4.87% …………… Mortgage Interest Rate

$599,200 ………. 30-Year Mortgage

$152,801 ………. Income Requirement

$3,169 ………. Monthly Mortgage Payment

$649 ………. Property Tax

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

$62 ………. Homeowners Insurance

$43 ………. Homeowners Association Fees

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

$3,924 ………. Monthly Cash Outlays

-$770 ………. Tax Savings (% of Interest and Property Tax)

-$737 ………. Equity Hidden in Payment

$280 ………. Lost Income to Down Payment (net of taxes)

$94 ………. Maintenance and Replacement Reserves

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

$2,790 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$7,490 ………. Furnishing and Move In @1%

$7,490 ………. Closing Costs @1%

$5,992 ………… Interest Points @1% of Loan

$149,800 ………. Down Payment

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

$170,772 ………. Total Cash Costs

$42,700 ………… Emergency Cash Reserves

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

$213,472 ………. Total Savings Needed

Property Details for 14541 GUAMA Ave Irvine, CA 92606

——————————————————————————

Beds: 4

Baths: 1 full 2 part baths

Home size: 2,327 sq ft

($322 / sq ft)

Lot Size: 5,000 sq ft

Year Built: 1971

Days on Market: 21

Listing Updated: 40305

MLS Number: S616253

Property Type: Single Family, Residential

Community: Walnut

Tract: Cp

——————————————————————————

Gorgeous remodeled home in College Park. Four bedrooms & one spacious bonus room. Recessed lights throughout. Crown moldings & ceiling fans. Granite countertop & stainless steel appliance. Pre-wired surround sound speakers in family room. Newly-built fireplace with BBQ in the backyard. Within walking distance of school & park.

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

Have a great weekend,

Irvine Renter

Strategic default provides a major stimulus to the California economy. Nearly $2,000,000,000 per month flows into the local economy that used to flow out to debt holders in other places.

Irvine Home Address … 31 TRAILING VINE Irvine, CA 92602

Resale Home Price …… $499,900

{book1}

let the stories be told

let them say what they want

let the photos be BOLD

let them show what they want

let them leave you up in the air

let them brush your rock and roll hair

let the good times roll

The Cars — Let the Good Times Roll

The HELOC abusers stimulated the economy when they borrowed all that money and spent it. Now that these same people are walking away from their mortgages, they no longer have housing payments, and their spending amounts to about $10,000,000,000 each month. Perhaps we should thank them for all their spending? I think not.

As long as lenders allow this to go on, and as long as the US taxpayer is paying the bills, these squatters are stealing from each of us. Lenders need to process their foreclosures, and borrowers need to experience the consequences of their actions.

Owners Stop Paying Mortgages, and Stop Fretting

ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of. …

A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.

This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.

“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”

This is what I was writing about in The Latest Lie about Strategic Default: Borrowers Are Emotional Fools. People get pissed off at lenders and stop paying the mortgages. The couple above are the poster children for this effect.

Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.

The same LPS report shows more than a third of all delinquent borrowers have been delinquent more than one year. The squatting time is getting steadily worse.

While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.

There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

Once we finally push these squatters out, in two years, they will be back at it again.

… Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.

“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”

That is the cold, hard truth of the matter; people strategically default for many reasons, but preservation of their lifestyles is chief among them. Everyone tries to delay The Unceremonious Fall from Entitlement.

They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.

So how big is this economic stimulus?

$10 Billion a Month Freed up Each Month from People not paying their Mortgage. $1.9 Billion of That is in California so People can continue Leasing their SUV Mercedes and Getting Tans. Thanks Bailouts!

The latest data tells us that over 14 percent of all U.S. mortgages are either 30+ days late or in some stage of foreclosure. In other words, 7.2 million people are not paying their mortgages. Yet banks are turning out record profits even though they are bleeding in their real estate cash-flow. Now let us run a hypothetical here. The median mortgage payment of those 51 million mortgages is $1,514. This is actual stimulus for people if you don’t pay that each month. If you aren’t paying your mortgage you just relieved yourself of your biggest monthly commitment. So let us run a rough number:

$1,514 x 7.2 million = $ 10,931,916,697

So this frees up some $10 billion each month (this is a rough number).

How much of this economic graft is benefiting California?

So today you have roughly 798,000 California mortgage holders not paying their mortgage for a variety of reasons. Clearly the main reason is the economy is horrible. But a large number are taking advantage of the situation. The median home payment in the state is $2,384. Let us do the math:

$2,384 x 798,832 = $1,904,414,716

So of the $10 billion in non-payer stimulus, California receives roughly 20 percent of the cut.

Well I’m glad some people have their priorities straight. The fact of the matter is the bulk of Americans, the middle class, are being screwed by the banks, Wall Street, and also the current bailout structure. The median home price in the U.S. hovers around $170,000. Why not cap any bailout help to mortgages at that level or less? Do you feel good that the folks I talked about (who make over $100,000 a year by the way) in California who have a Mercedes and BMW and continue to live in a nice home rent free are able to do so because of your taxpayer money? This is exactly what is happening. No wonder why many Americans must feel like fools.

The name of the game is simple. Get into massive debt, so much so that when you fail, you will then be able to negotiate lower terms because the government enjoys rewarding horrible behavior. Things like this won’t last long because eventually, the public that is being ramrod into bailouts wakes up and revolts. Yet this could be a few years or much longer before any of it happens.

In case you had any doubt, The California Economy Is Dependent Upon Ponzi Borrowers. What is going to happen when these people have a house payment again?

Back to Owners Stop Paying Mortgages, and Stop Fretting:

The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.

“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.

These borrowers are really planning to cram down their lender. After a year or more of squatting, they will tell the bank to reduce their principal in half or take the house back. That takes a lot of courage.

The lenders I have spoken with are unified in their policies; they would rather lose more money with a foreclosure than accept cram downs from existing borrowers. They are willing to pay that price to prevent moral hazard from encouraging all their borrowers to cram them down, which they would if given the chance.

From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.

These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”

But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future. …

“I need another year,” he said, “and I’m going to be pretty comfortable.”

Look at the impact squatting has already had on borrowers. These people think they can cram down their lenders or squat their way through the recession. I don't care how much economic stimulus this creates or whether or not this keeps our banks solvent; this is wrong. If lenders don't want to see a a great deal more strategic default, they shouldn't make it so rewarding. Or is it that our government shouldn't let them because the US taxpayer is paying all the bills.

Strategic default is a lesser evil for the borrower than continuing with a lifetime of debt servitude, but borrowers who do this are supposed to have consequences. Foreclosure is a superior form of principal reduction because it has consequences for the borrower. So far, the consequences of strategic default have been more positive than negative, so we will continue to see more strategic default and the squatting the goes along with it. Until lenders foreclose and push these people out, strategic default will become an even greater problem. In fact, if anything can bring down the banking cartel withholding our inventory it is strategic default. If everyone does it, banks will have to foreclose or give away millions of houses.

Another Trustee sale flip

Lenders are clearly releasing inventory at an intentionally slow pace to shore up pricing. When they do let one go, it provides opportunities like today's. I doubt this flipper will get the full markup they seek, but it will still be a profitable trade.

Irvine Home Address … 31 TRAILING VINE Irvine, CA 92602

Resale Home Price … $499,900

Home Purchase Price … $385,000

Home Purchase Date …. 3/17/2010

Net Gain (Loss) ………. $84,906

Percent Change ………. 29.8%

Annual Appreciation … 109.1%

Cost of Ownership

————————————————-

$499,900 ………. Asking Price

$17,497 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$482,404 ………. 30-Year Mortgage

$101,983 ………. Income Requirement

$2,551 ………. Monthly Mortgage Payment

$433 ………. Property Tax

$133 ………. Special Taxes and Levies (Mello Roos)

$42 ………. Homeowners Insurance

$262 ………. Homeowners Association Fees

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

$3,422 ………. Monthly Cash Outlays

-$418 ………. Tax Savings (% of Interest and Property Tax)

-$594 ………. Equity Hidden in Payment

$33 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves

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

$2,505 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,999 ………. Furnishing and Move In @1%

$4,999 ………. Closing Costs @1%

$4,824 ………… Interest Points @1% of Loan

$17,497 ………. Down Payment

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

$32,319 ………. Total Cash Costs

$38,300 ………… Emergency Cash Reserves

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

$70,619 ………. Total Savings Needed

Property Details for 31 TRAILING VINE Irvine, CA 92602

——————————————————————————

Beds: 3

Baths: 2 full 1 part baths

Home size: 1,500 sq ft

($333 / sq ft)

Lot Size: n/a

Year Built: 2005

Days on Market: 64

Listing Updated: 40323

MLS Number: S610662

Property Type: Condominium, Residential

Community: Northwood

Tract: Tamr

——————————————————————————

RESORT-LIKE COMMUNITY WITH GORGEOUS AMENITIES. NEWER CONSTRUCTION. GREAT FLOORPLAN. LIGHT AND BRIGHT. HIGHLY UPGRADED: BEAUTIFUL HARDWOOD FLOORS IN LIVING/DINING ROOM;NEW CARPET UPSTAIRS; TILE FLOORING IN ALL THREE BATHROOMS, GOURMET KITCHEN WITH LIGHT WOOD CABINETS AND GRANITE COUNTERTOPS, RECESSED LIGHTING; UPSTAIRS LAUNDRY ROOM WITH CABINETS; VAULTED CEILING IN MASTER BEDROOM, MEDIA NICHE AND WALK-IN CLOSET. FRONT PATIO. READY TO MOVE IN.

Public attitude toward commercial borrowers who strategically default is much different than it is toward commercial borrowers. Today, we explore this difference.

Irvine Home Address … 29 BURLINGAME Irvine, CA 92602

Resale Home Price …… $579,000

{book1}

Do you live, do you die, do you bleed

For the fantasy

In your mind, through your eyes, do you see

It's the fantasy

30 Seconds to Mars — The Fantasy

Home debtor fantasies

The endless parade of Bailouts and False Hopes serve to give hope to the hopeless and keep them paying their mortgages rather than strategically default. Those who are underwater and making payments in excess of rent have two real alternatives and two fantasy alternatives. The real alternatives are (1) continuing to pay until they implode or (2) strategic default. Neither option is very satisfying as both generally lead to bankruptcy later on.

The fantasy alternatives are (1) the re-inflation of the housing bubble giving debtors equity again and (2) government mandated principal reduction to give debtors equity again. Neither one is going to happen. The overhead supply of distressed housing units will eventually need to be sold, and in the process, the best case is for prices to hold steady with super-low interest rates. Principal reduction is the ultimate debtor fantasy, and it will not happen because it would require massive theft by the government with a direct transfer of money from the State to individual debtors with the commensurate moral hazard. That's the kind of thing that sends rioters into the streets besides costing trillions of dollars.

Since the real options are bad, most will cling to the fantasy, and in the process, they will continue paying their mortgages until they implode or get pissed off enough to default.

Strategic Default

Some have expressed a concern that I have gone soft on HELOC abusers and those who strategically default. I have made it clear that I believe Foreclosure Is a Superior Form of Principal Reduction because it has consequences for the borrower. I have no desire to see those who over-borrowed be given a free pass. My endorsement of strategic default is a recognition of the lesser of two evils. Strategic default is the better of two bad alternatives; when faced between a life of servitude and a walking away from a huge debt, walking away is the better choice. Both alternatives have negative consequences — as they should.

It irritates me the lengths lenders are willing to go to manipulate people to keep paying for the lender's mistake. Lenders Are More Culpable than Borrowers, and their consequences should be more severe. The fact that lenders would sentence families to a lifetime of servitude to pad their bottom line is wrong, and I will continue to speak out against it.

Why aren't commercial defaulters labeled as evil?

Borrowers who strategically default on commercial real estate aren't immoral thieves or hysterical fools as their residential counterparts are made out to be. When commercial borrowers strategically default, they are "extinguishing debt" to produce "positive results." The contrast between the attitude between commercial borrowers and residential borrowers is remarkable.

MPG Office Trust Eliminates Debt Obligation on 17885 Von Karman in Irvine, California

LOS ANGELES, May 26, 2010 (BUSINESS WIRE) — MPG Office Trust, Inc., a Southern California-focused real estate investment trust, today announced that the company has extinguished the $26.4 million construction loan obligation secured by 17885 Von Karman in Irvine, California. The Company contributed approximately $2.0 million in reduction of the loan, turned the property over to the lender pursuant to a deed-in-lieu transaction, and was relieved of the $26.4 million obligation and a $6.7 million repayment guaranty. The loan was scheduled to mature on June 30, 2010.

They strategically defaulted. They took a look at the numbers and determined it was not in their best interest to keep paying, so they didn't. When residential borrowers make the same calculation, they are decried as immoral or stupid and they are blamed for the collapse of the US banking system; however, when commercial borrowers do it, they are lionized as great financial thinkers who are looking out for the best interests of their companies.

MPG Office Trust President and Chief Executive Officer Nelson C. Rising commented, "Our efforts that started two years ago to reduce debt, eliminate repayment and debt service guarantees and extend debt maturities continue to produce positive results. In addition to the transaction announced today, earlier this month, we made a principal payment of $9.7 million on the 207 Goode construction loan and in exchange, the lender agreed to substantially reduce our repayment guaranty on this loan. We are currently marketing the property for sale. As a result of meeting the prescribed debt service coverage ratio for five consecutive quarters, the Company eliminated a debt service guaranty on a $109.0 million mortgage secured by Brea Corporate Place and Brea Financial Commons in Orange County, California. The Company also extended the maturity of this loan to May 1, 2011."

These guys are cramming down lenders on every deal. Lenders are going to lose a fortune on the actions of commercial borrowers just like these guys, yet when they do it, the strategic default is considered positive.

Maguire Properties swings to profit

May 11, 2010: By Roger Vincent, Los Angeles Times

The Los Angeles real estate investment trust reports first-quarter net income of $18.6 million, largely on the forgiveness of a $49.1-million debt.

Long-suffering office landlord Maguire Properties Inc. on Monday reported a first-quarter profit linked largely to the forgiveness of a $49.1-million debt it was unable to pay.

The Los Angeles real estate investment trust, which owns some of the region's best-known skyscrapers including the US Bank Tower in downtown Los Angeles, finished the quarter with $18.6 million in net income attributable to common shareholders, a dramatic contrast from the $53.9-million loss reported a year earlier.

Finances in both quarters were influenced by significant one-time events, however.

This year, Maguire was forgiven $49.1 million in debt on Griffin Towers, a Santa Ana office complex it sold in March as part of a long campaign to reduce its liabilities. It also recorded a $16.6-million deferred gain on the 2006 sale of a parking garage in downtown Los Angeles. The first quarter in 2009 was affected by a $23.5-million write-down of the value of an Irvine office building and other charges.

Maguire reported a profit of 38 cents a share in the quarter, compared with a loss of $1.13 in the same quarter of 2009. Revenue was down 2% to $111.5 million.

"Revenues are flattening and their leasing seems to be going at a stable pace," said analyst Craig Silvers, president of Bricks & Mortar Capital. "They seem to have stabilized their operations."

Just like any debtor, when they quit paying their debts, their cashflow situation improves. Not exactly a news flash.

She couldn't afford it

• The previous owner purchased this property on 6/13/2005 for $665,000. She used a $498,750 first mortgage and a $166,250 down payment.
• When she purchased, she got a HELOC for $99,750, but it doesn't appear she used it.
• On 12/29/2005 she obtained a $200,000 HELOC which I don't think she used.
• On 12/13/2007 Bank of America refinanced her first mortgage for $417,000 and gave her a second mortgage for $168,000.
• Total property debt is $585,000.
• Total mortgage equity withdrawal is $86,250 which doesn't recover her down payment.
• Total squatting was only about 9 months. B of A did not waste much time in foreclosure.

Foreclosure Record

Recording Date: 12/23/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/22/2009

Document Type: Notice of Default

Trustee Flip

This house was purchased for $463,000 at auction on 2/16/2010. Most trustee sales go off about 15%-20% under comps. This seller is hoping to get an extra 5%. It is not a bad pricing strategy as it gives them some room to negotiate back down to comps. This is typical of what happens when the lenders finally let one go through the system. Our current backlog is enormous.

Irvine Home Address … 29 BURLINGAME Irvine, CA 92602

Resale Home Price … $579,000

Home Purchase Price … $463,000

Home Purchase Date …. 2/16/2010

Net Gain (Loss) ………. $81,260

Percent Change ………. 25.1%

Annual Appreciation … 69.0%

Cost of Ownership

————————————————-

$579,000 ………. Asking Price

$115,800 ………. 20% Down Conventional

4.87% …………… Mortgage Interest Rate

$463,200 ………. 30-Year Mortgage

$118,120 ………. Income Requirement

$2,450 ………. Monthly Mortgage Payment

$502 ………. Property Tax

$125 ………. Special Taxes and Levies (Mello Roos)

$48 ………. Homeowners Insurance

$348 ………. Homeowners Association Fees

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

$3,473 ………. Monthly Cash Outlays

-$417 ………. Tax Savings (% of Interest and Property Tax)

-$570 ………. Equity Hidden in Payment

$217 ………. Lost Income to Down Payment (net of taxes)

$72 ………. Maintenance and Replacement Reserves

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$2,775 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$5,790 ………. Furnishing and Move In @1%

$5,790 ………. Closing Costs @1%

$4,632 ………… Interest Points @1% of Loan

$115,800 ………. Down Payment

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$132,012 ………. Total Cash Costs

$42,500 ………… Emergency Cash Reserves

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$174,512 ………. Total Savings Needed

Property Details for 29 BURLINGAME Irvine, CA 92602

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Beds: 3

Baths: 2 full 1 part baths

Home size: 1,782 sq ft

($325 / sq ft)

Lot Size: n/a

Year Built: 2000

Days on Market: 63

Listing Updated: 40276

MLS Number: S610651

Property Type: Condominium, Residential

Community: Northpark

Tract: Brib

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This property is in backup or contingent offer status.

ABSOLUTELY STUNNING!!! This highly sought after floor plan is located in the exclusive gated community of Northpark. This charming home is very bright and open, featuring upgrades such as granite countertops, custom tile flooring, high-end appliances, fresh paint, brand new Berber carpet, and much more. This home is completely turnkey and ready for you. There is an attached 2 car garage with plenty of guest parking. There are resort style amenities with a nice clubhouse, pool, spa, greenbelts, and other great design features in the community. This is HIGH END living at a very affordable price. It is in a great school district, and close to plenty of shopping with easy freeway access. This is a MUST SEE!