Category Archives: Price Rollback

Should You Fear You Won't Get Clean Title to Real Estate?

The general population and even some market pundits are telling potential buyers they should worry about getting clean title to a foreclosure.

Irvine Home Address … 183 GROVELAND Irvine, CA 92620

Resale Home Price …… $499,000

well baby, listen baby, don't ya treat me this-a way

Cause I'll be back on my feet some day.

(Don't care if you do 'cause it's understood)

(you ain't got no money you just ain't no good.)

Well, I guess if you say so

I'd have to pack my things and go. (That's right)

(Hit the road Jack and don't you come back no more, no more, no more, no more.)

(Hit the road Jack and don't you come back no more.)

Ray Charles — Hit the Road Jack!

This ain't your house. Hit the road, Jack!

Last week we looked at Evicted HELOC Abusers who Break In and Squat in Foreclosed Homes. The fear embodied in those deranged fools is that anyone who buys a foreclosure may come face-to-face with the evicted family who claims they still own the property. Is this a rational fear? The author of today's featured article thinks buyers should be afraid. I think he is a fool.

After Foreclosure, a Focus on Title Insurance

By RON LIEBER — Published: October 8, 2010

When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gauntlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.

Besides, does anyone actually know people who have had to collect on title insurance? It ultimately feels like a tax — an extortionate one at that — and not a protective measure.

The nature of all insurance is that you overpay for it until the day you need it, then you don't have enough.

But all of a sudden, the importance of title insurance is becoming crystal-clear. In recent weeks, big lenders like GMAC Mortgage, JPMorgan Chase and Bank of America have halted many or all of their foreclosure proceedings in the wake of allegations of sloppiness, shortcuts or worse. And a potential nightmare situation has emerged that has spooked not only homeowners but lawyers, title insurance companies and their investors.

The only people who are spooked are those that do not understand foreclosure and clean title. The whole point of a foreclosure is to clean the encumbrances from title. Very few claims against real estate survive the foreclosure process. A trustee's deed is the cleanest title possible.

When this story broke out, I talked with several title insurance reps about getting title insurance for the properties I purchase at trustee sale. Dumbfounded by my request, one of them asked, "What do you want to be insured against?" As far as the title industry is concerned, title insurance on a trustee's deed is unnecessary as their is no protection they could give you that you don't already have.

What would happen if scores of people who had lost their homes to foreclosure somehow persuaded a judge to overturn the proceedings? Could they somehow win back the rights to their homes, free and clear of any mortgage?

If that were permitted to occur, we would see the complete collapse of mortgage lending in this country. Title insurers would stop offering insurance on purchases of trustee deeds. Basically, every bank and third-party investor that bought at foreclosure would be unable to sell to a buyer that needs financing. The REO held by banks would plummet in value, and third parties would stop buying all auction properties. The resulting losses would cause our banks to collapse, and TARP II would be required to save the banking industry.

But they may not be able to simply move back into their home at that point. Banks, after all, have turned around and sold some of those foreclosed homes to nice young families reaching out for a bit of the American dream. Would they simply be put out on the street? And then what?

The answer to that last question may depend on whether those new homeowners have title insurance, because people who buy a home without a mortgage can choose to go without a policy.

This whole idea is crazy. If title insurers thought this risk was real, can you imagine what would happen to the cost of title insurance?

Title insurance covers you in case people turn up months or years after you buy your home saying that they, in fact, are the rightful owners of the house or the land, or at least had a stake in the transaction. (The insurance may cover you in other instances as well, relating to easements and other matters, but we’ll leave those aside for now.)

The insurance companies or their agents begin any transaction by running a title search, sifting through government filings related to the property. They do this before you buy a home or refinance your mortgage to help sort out any problems ahead of time and to reduce the risk of your filing a claim later.

But sometimes they miss things, and new issues can arise later.

That is the whole point of title insurance. Everyone after the auction purchaser needs to get title insurance for the reasons described above. Everyone other than auction purchasers needs title insurance because anyone on title after the auction and re-encumber the property.

For instance, the person doing the title search may not notice that a home equity loan is still outstanding or that a contracting firm filed a lien against the owner years ago. That could create problems for you later, when you try to sell the home.

Then there are the psychodramas that can ensue. The previous owner’s long-lost heirs or a previously unknown love child could show up, saying that they never agreed to the sale of the property. Or perhaps there was fraud against a seller who was elderly or had a mental disability, or forgery of an estranged spouse’s signature. It’s rare, but it happens, and when it does, your title insurance company is supposed to provide legal counsel or settle with whomever is making a claim.

Title insurance companies would like you believe that they are the good guys standing behind you. After all, you are the customer who owns the policy.

Title companies are the insurers backing your claim to title. They are the good guys.

… While the banks were pressing the pause button on many foreclosures, some title insurers were growing concerned as well.

On Oct. 1, Old Republic National Title Insurance Company released a notice forbidding any agents or employees to issue new policies on homes that had been recently foreclosed by GMAC Mortgage or Chase.

Clearly, the title insurer was also worried about a situation in which untold numbers of former homeowners have their foreclosures overturned. At that point, those individuals might claim the right to take back their old homes, but they’d also be responsible for, say, a $400,000 loan on a home that is worth half that.

If more mortgage insurers stop offering title insurance on foreclosed properties, the edge of the market abyss is very near.

So what would happen next? The banks that foreclosed might start the process over again. At that point, lawyers for the people who had been foreclosed upon might take the next logical step and try to show that the banks never had the documents to prove ownership of the mortgage in the first place. The banks might settle at that point, writing checks to everyone who had gone through a disputed foreclosure in exchange for each of them giving up the title.

But if banks did not settle, or the evicted homeowners refused to settle and fought on and won, they might end up owning their homes once again and not owing the bank either.

He must be joking. How does the delinquent borrower end up owning the home and not having any debt? Does this guy really think a judge is going to dismiss the debt as well as all claims against title that debt had? I imagine that idea is very appealing to loan owners who are facing foreclosure, but it isn't going to happen.

Or banks might agree to slice a big chunk off the remaining balance in exchange for a release from any liability for the errors it made.

At that point — and again, this is what Old Republic and investors in other title insurers fear — those homeowners might actually want to move back in. But some foreclosed homes were sold by the banks to others who now live there. And those new residents would have big, fat title insurance claims if their predecessors ever turned up at their doorsteps, proclaimed them trespassers and told them to leave.

If you bought a foreclosure, and someone showed up at your door and told you they owned your house and you needed to leave, what would you do? Unless they were accompanied by armed Sheriff's deputies, i know what I would do….

“All of these Joe Schmos who did everything legally would then be in the middle of it, too,” said Mr. Kovalick, who manages an auto repair shop and is now hoping not to be one of those Schmos.

“Now, you’d have two total disasters,” he said. “How would you like to be the judge to get that first case?”

It shouldn't be a difficult case to solve. The foreclosure removes any previous claims against title. Unless their was a procedural error in the foreclosure proceedings, the foreclosure cannot be reversed. Arguing the foreclosure should not have gone forward will not stand up. it's too late for that argument once the foreclosure has happened. Arguing wrongful foreclosure must occur before the auction.

While homeowners like Mr. Kovalick may have title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. “If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,” said Matthew Weidner, a lawyer in St. Petersburg, Fla.

Indeed, this possibility has occurred to Mr. Kovalick, who has plans to put an addition on his home and is asking how he could extract that investment if someone ever turned up on his doorstep and asked him to leave. “What do I do, take the paint off the walls and the custom blinds off the windows?”

Chances are, it will not come to that. After all, title insurers could settle with the previous residents, allowing them to walk away with a big check to restart their lives elsewhere.

More fantasies for the foreclosed. I wonder if this author is trying to solicit work for attorneys. If people who have gone through foreclosure thought there was a chance they could recover their houses or get an enormous cash claim against a title insurance company, the foreclosed previous owners will flock to attorneys to process these claims. A new cottage industry would be born.

Still, for anyone considering buying a bargain home out of foreclosure anytime soon, consider asking your title insurer if any special riders are available that can cover appreciation on your home in the event of a total loss.

That said, if you can possibly help it, stay away from foreclosed homes until the scene shakes out a little bit.

This guy is suggesting buyers stay away for ignorance of the foreclosure process and the nature of title insurance. There are many legitimate reasons not to buy property right now, but this isn't one of them. Prices are too high and beginning to fall again; that is a good reason not to buy. The worry that your title might not be valid is not a good reason.

Some people will undoubtedly make a fortune investing in these properties in the next few months. But if your down payment represents most of what you have in the world, it’s hard to justify betting it all on a situation like this one.

Betting it? What is the buyer's risk of loss? Even if the impossible happened, the buyer would be made whole by the title insurance company. This author has taken ignorance to the workings of title and created a number of fanciful scenarios that simply won't come to pass. I expect better from the New York Times.

She lost a fortune

Gains and losses are all relative. For most middle-class working Americans, losing $130,000 is a big deal. The owner of today's featured property can't be too happy about losing all that money and seeing her credit get trashed.

The property was purchased on 11/10/2005 for $629,000. The owner used a $503,000 first mortgage and a $126,000 down payment. She did manage to open a HELOC on 2/22/2006, but there is no way to know if she extracted half of her equity. For her sake, let's hope she did.

Since our real estate market is a giant Ponzi Scheme, for every winner there is a loser. Mostly it is the banks and ABS investors who are losers, but sometimes it is the homeowner-specuvestor who gets crushed.

Irvine Home Address … 183 GROVELAND Irvine, CA 92620

Resale Home Price … $499,000

Home Purchase Price … $629,000

Home Purchase Date …. 10/10/2005

Net Gain (Loss) ………. $(159,940)

Percent Change ………. -25.4%

Annual Appreciation … -4.4%

Cost of Ownership


$499,000 ………. Asking Price

$17,465 ………. 3.5% Down FHA Financing

4.25% …………… Mortgage Interest Rate

$481,535 ………. 30-Year Mortgage

$94,684 ………. Income Requirement

$2,369 ………. Monthly Mortgage Payment

$432 ………. Property Tax

$267 ………. Special Taxes and Levies (Mello Roos)

$42 ………. Homeowners Insurance

$265 ………. Homeowners Association Fees


$3,375 ………. Monthly Cash Outlays

-$374 ………. Tax Savings (% of Interest and Property Tax)

-$663 ………. Equity Hidden in Payment

$27 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves


$2,426 ………. 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

$37,100 ………… Emergency Cash Reserves


$69,360 ………. Total Savings Needed

Property Details for 183 GROVELAND Irvine, CA 92620


Beds: 3

Baths: 2 full 1 part baths

Home size: 1,875 sq ft

($266 / sq ft)

Lot Size: n/a

Year Built: 2006

Days on Market: 145

Listing Updated: 40455

MLS Number: P736567

Property Type: Condominium, Residential

Community: Woodbury

Tract: Wdgp


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

Beautiful, upgraded Irvine home in exclusive Woodbury community. This home features a kitchen with gourmet appliances, granite counters custom window covers and a sliding door to the private and enclosed patio. One of only a few units that has it's own patio with no shared wall to neighbors patio. Carpet is brand new, paint is perfect throughout with designer colors. Crown molding in two rooms, sleek dark wood cabinets throughout entire house, wrought iron stair case railing. Home is perfect and move-in ready! And enjoy all the community amenities too! WE NEED A NEW OFFER TODAY – ALMOST APPROVED!

We need a new offer — almost approved? In other words, this sat on the market forever as a short sale, and when the bank finally got around to approving the old offer price, the buyer had long since moved on. This administrative delay is caused by a combination of administrative incompetence and the desire to avoid taking losses. If prices go up, banks are rewarded for this behavior; however, when prices start going down, these delays cost them a great deal of money.

How to Lose $1,100,000 in Irvine Real Estate

A recent trustee sale in the North Korea towers sets a new standard for housing bubble losses in Irvine: $1,099,400. Perhaps Irvine isn't such a safe haven after all.

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr #1702 Irvine, CA 92612

Trustee Sale Price …… $653,100

He Wants To Dream Like A Young Man

With The Wisdom Of An Old Man.

He Wants His Home And Security,

He wants to live lke a sailor at sea.

Beautiful Loser, Where You Goona Fall?

You Realize You Just Can't Have It All.

Bob Seager — Beautiful Loser

The Marquee at Park Place: The North Korea Towers: The Beautiful Loser. Every original owner has lost a fortune. Some have realized their losses and given up, and some are still holding on waiting for 20 years when prices come back. Today's featured property transacted for 63% off the peak. That is quite a fall.

Was the housing bubble foreseeable? Did buyers like those profiled below simply get caught up in an unusual event, or was their foolishness obvious to anyone willing to examine the costs and benefits to make a rational decision?

I take you back to the prime of the housing bubble. In June of 2004 the kool aid was free flowing, people believed prices could only go up, and everyone who bought real estate was going to make a fortune. How wrong they were….

Penthouse Living at Marquee Park Place Offers Luxury, Panoramic Views

Publication: Orange County Business Journal

Date: Monday, June 7 2004

The luxurious penthouse condominiums atop the 17th and 18th floors of the Marquee Park Place residential towers in Irvine offer distinctive floorplans with up to 2,088 square feet of living space and panoramic views of city lights, distant mountains and the coastal horizon.

Orange County's first high-rise residential community, Marquee Park Place is being built by Bosa Development in ' the Park Place commercial and residential district. Nearly 95 percent of Marquee's 232 luxury condominiums are sold or reserved to date.

Marquee Park Place is Orange County's first high-rise residential community.

With the first move-ins scheduled for late 2005, Marquee Park Place consists of two gleaming concrete and glass 18-story towers. Each of Marquee's distinctive towers will house two-bedroom, two-bath luxury homes, as well as two-bedroom plans with den, ranging from approximately 1,275 to 2,088 square feet. Complementing the towers are four unique two-story townhomes that will be built as part of the Marquee community.

"The Marquee penthouses are elegantly designed and luxuriously appointed," said Ingrid Siikov, sales executive for Marquee Park Place. "The views from every penthouse are spectacular. When you're on the penthouse floors of Marquee Park Place, you're in your own world."

The marketing copy sounds very exciting, doesn't it? Living there seems like the American dream. And the prices will go sky high after the rich Asians come over to buy them later on.

Spectacular views

The Penthouse Plan F encompasses approximately 2,088 square feet and features a master bedroom suite with master bath and large walk-in closet. The bedroom suite has direct access to the home's expansive view deck with up to 700 square feet that commands a spectacular view of the surrounding city lights, mountains and coastal horizon.

The stylish home also has a large second bedroom with walk-in closet, spacious living room with an exterior view balcony, formal dining room and contemporary kitchen.

The Penthouse Plan H floorplan features 1,908 square feet with a view deck off the dining room and covered deck off the master bedroom.

When Pat Burkhart read about Marquee Park Place last year, she knew immediately that she wanted Marquee to be her new home. Currently living in Newport Beach's Big Canyon golf course community, Burkhart was the first person to buy a Marquee penthouse, and she says she can't wait to move in. "I'm very excited about living at the Marquee," she exclaims.

I wonder how excited she is now?

Stylish, safe living

Burkhart is not new to living in a high-rise community. When she lived in Singapore in the late 1990s, she lived in a high-rise and she says, "I loved it. I could walk to stores, movie theaters, just about everyplace I wanted to go. I think living in the Marquee will be the same."

That is part of the problem with these towers: it isn't the same as living in an urban area. It has all the inconveniences of suburban, car-dependant living and all the inconveniences of urban living — no yard, plenty of noise, and so on.

A world traveler, Burkhart says she also likes the idea of being able to lock her door and leave on a trip without concern for maintenance or security. And when she's home, she can savor the view from her penthouse vantage point. "I've wanted to live in a high-rise community ever since Singapore, and the Marquee will be perfect for me and my lifestyle."

Another penthouse buyer who can't wait to move into the Marquee is Jenny Szell, who is planning to sell her larger single-family detached home in Irvine to downsize and simplify her life. An interior designer, Szell says she lived in a high-rise apartment in Marina del Rey and was enamored with the lifestyle and the view.

"I really look forward to moving into Marquee Park Place," she says. "The convenience of high-rise living is very attractive to me. It's all very exciting."

Szell points out that she was first introduced to Bosa Development and its high-rise communities when she visited Vancouver, where Bosa is headquartered, and immediately decided that she wanted to live in a high-rise. "I was pleasantly surprised when I discovered that Bosa was building the Marquee in Irvine. It took only 15 minutes for me to complete the sale."

It took this woman only15 minutes to complete a sale on a nearly $2M condo? Brilliant!

New trend in condo sales

Burkhart and Szell are among several single professional women who've purchased Marquee homes, and they also represent a national trend in condominium sales, according to the National Association of Home Builders. About a third of condo buyers today are single women, compared to those who purchase single-family homes, where single women makeup 20 percent of buyers.

Given how bad the condo markets have already been crushed nationwide, single professional women must not be too happy about the housing bubble.

In addition to the Marquee penthouses, Siikov says buyers can still choose from a selection of the Marquee Plan E signature residences, 2,063 square-foot homes on the 13th through 16th floors. Along with panoramic views, the Plan E encompasses special amenities such as a breakfast nook, a den, powder room, and spacious living and dining room areas contiguous to the contemporary kitchen.

Beautiful amenities

All of the striking Marquee homes are appointed with the finest materials and fixtures, including quality wood cabinetry of cherry, walnut or zebrawood, and professional quality stainless steel appliances, and a state-of-the-art home-office communications/ Internet panel. Other amenities include rich carpeting and flooring selections in hardwood, limestone and marble, granite countertops, high ceilings, seven-foot interior doors, and a convenient storage locker.

Reflective of a five-star resort, the Marquee community will be served by a gated circular driveway with classic porte codiere and secured entrance leading to the elegant lobby with 24-hour concierge. Additionally, a 24-hour entry attendant will monitor access to the complex and closed-circuit cameras are stationed throughout the high-rise community. Residents and guests will park in a fourlevel, gated garage; each residence will have two reserved parking spaces in the garage.

The landscaped Marquee complex also features a business center, social room, billiards room, and an inviting outdoor plaza with a pool, barbecue area, lush gardens, and fitness facility with changing and locker rooms.

For $998 a month in HOA dues, the amenities need to be outstanding. The cashflow drain on these properties is enormous, particularly for those still paying on the ridiculous mortgages.

The Marquee Park Place sales gallery and model homes are open 11 a.m. to 5 p.m. Saturday through Thursday, and are closed Fridays.

To visit the Marquee sales gallery, from Jamboree Road take Michelson Drive east and turn left at Carlson Drive into Park Place. Drive through two stop signs going past the Edwards Cinemas, and take the first right after the second stop sign, at the six-story office building (3121 Michelson Drive) where the sales gallery is in Suite 150. Park in the parking structure adjacent to the office building (tickets will be validated). From Culver, take Michelson Drive west to Carlson Drive, turn right into Park Place.

For more information on Marquee Park Place contact the Marquee sales gallery, at 949-474-7703 or visit For more information about Bosa Development, visit

For more happy owners, please see Jan. 22, 2006: Orange County's high-rise era is under way.

The biggest loser

It is a policy of the IHB not to reveal the names of owners of properties. I am not out to embarrass any particular kool aid intoxicated fool but rather the mindset and thought process that produced their bad decision. Unfortunately, the name of the owner is in today's post because it is listed in the article above. I won't tell you which one because it doesn't really matter. Everyone who bought here was been wiped out.

The owner of this property paid $1,752,500 on 2/17/2006. She may have put down a deposit in 2004, but the sale is listed as occurring in 2006. She used a $1,226,600 one-year ARM and a $525,900 down payment. Ouch!

The property went up for auction on 7/2/2010 with an opening bid of $630,000: the bank was ready to lose half its stake on the courthouse steps. The bidders drove the price up to $653,100 leaving a total property loss of $1,099,400.

Let me repeat that: closed sale to closed sale, the loss was $1,099,400. The price of speculating in real estate can be quite high or those who have no idea what they are doing. Do you think the flipper will fare any better?

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr #1702 Irvine, CA 92612

Trustee Sale Price … $653,100

Home Purchase Price … $1,752,500

Home Purchase Date …. 2/17/2006

Net Gain (Loss) ………. $(1,099,400)

Percent Change ………. -62.7%

Annual Appreciation … -17.9%

Cost of Ownership


$653,100 ………. Asking Price

$130,620 ………. 20% Down Conventional

4.61% …………… Mortgage Interest Rate

$522,480 ………. 30-Year Mortgage

$129,291 ………. Income Requirement

$2,682 ………. Monthly Mortgage Payment

$566 ………. Property Tax

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

$54 ………. Homeowners Insurance

$998 ………. Homeowners Association Fees


$4,300 ………. Monthly Cash Outlays

-$450 ………. Tax Savings (% of Interest and Property Tax)

-$674 ………. Equity Hidden in Payment

$226 ………. Lost Income to Down Payment (net of taxes)

$82 ………. Maintenance and Replacement Reserves


$3,483 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$6,531 ………. Furnishing and Move In @1%

$6,531 ………. Closing Costs @1%

$5,225 ………… Interest Points @1% of Loan

$130,620 ………. Down Payment


$148,907 ………. Total Cash Costs

$53,300 ………… Emergency Cash Reserves


$202,207 ………. Total Savings Needed

Property Details for 3131 MICHELSON Dr #1702 Irvine, CA 92612


Beds: 2

Baths: 2 baths

Home Size: 2,062 sq ft

($436 / sq ft)

Lot Size: n/a

Year Built: 2006

Days on Market: 3

Listing Updated: 40219

MLS Number: U10000651

Property Type: Condominium, Residential

Community: Airport Area

Tract: Marq


Penthouse Suite. .. 2 bedroom plus den. Highly upgraded. .. ultra luxury with 24 hour concierge. HOA dues were just lowered below $1,000. Unit comes with 2 parking spots next to elevator. .. Floor Plans can be obtained at www. bosadev. com H Model on 17th floor

The Swiss Central Bank Openly Discourages Mortgage Lending Due to Housing Bubble Fears

Other governments around the world take steps to curb lending and warn citizens of the perils of excessive mortgage debt. Why don't we?

Someone should have warned the owner of today's featured property that smaller mortgages and lower prices were going to make resale challenging… and painful.

Irvine Home Address … 28 WILLOWHURST Irvine, CA 92602

Resale Home Price …… $825,000


My friends feel it's their appointed duty

They keep trying to tell me all you want to do is use me

But my answer yeah to all that use me stuff

Is I wanna spread the news that if it feels this good getting used

Oh you just keep on using me until you use me up

Bill Withers — Use Me

Lenders with encouragement from the US Government want to use you to pay for their mistakes; they want to use you, and they want you to feel good about it. Buy now, it doesn't matter if you go underwater; lenders don't care as long as you make your rent payments on the money.

Recently, I wrote about Canadian finance minister Jim Flaherty preventing further inflation of Canadian housing bubble.

Allow me to recap and interpret:

(1) He is forcing qualification at a higher payment rate. If he had stated 30-year fixed rather than a 5-year fixed, It would be better, but it is a step toward stable financing. I wish the statement clarified whether or not interest-only ARMs are permitted there. I believe the qualification standard he is imposing is based on a 30-year amortizing mortgage with only a 5 year fixed rate.

(2) Twenty percent down payments? I would like to see this on all property, but common sense says investment properties and second homes should require a significant down payment — people don't hesitate to walk away from investment properties.

(3) And limiting cash-out refinancing to 90% LTV is identical to the proposal I made. I like this requirement because it provides an equity cushion that stabilizes markets and prevents walkaways.

"We do want to discourage the tendency by some to use their home as an ATM machine, the tendency by some to buy three or four condominiums by way of speculation," Flaherty said. "This will discourage the kind of mortgage refinancing that can create unsustainable debt levels as interest rates go up."

Our government actively encouraged us to borrow, spend and be happy while Canadians are being warned about excessive debt and spending their equity foolishly. The contrast is conspicuous.

It isn't just the Canadians who exercise better control over lending and warn their citizens of the perils of buying and borrowing today. The Swiss, long known for their banking prowess, do not cave in to banking interests.

The Swiss Central Bank sends warning on excessive mortgage borrowing

ZURICH, March 11 (Reuters) –

The Swiss National Bank warned banks and borrowers on Thursday about taking on too much debt while interest rates were still very low, indicating it is concerned about a possible housing bubble.

…"The SNB is warning banks and borrowers to be extremely cautious," the central bank said in its quarterly policy statement. "The fact that interest rates are exceptionally low by historical standards must be taken into account."

…"What they wanted to avoid is house prices going up too much in response to a slightly brighter economic outlook. That would mean another bubble," said Henrik Gullberg of Deutsche Bank. "One way of doing that is to keep sending these verbal warning shots while policy is still very expansive."

The Swiss government is openly concerned about its citizens financial well being, and they post warnings about mortgage borrowing to help people. Why is it only bloggers like me who issue these warnings here in the US?

The US Government wants its citizens to borrow as much as possible to help out ailing banks even if that destroys the borrower. Shameful.

Some analysts have argued that the central bank may raise borrowing costs earlier than the market currently predicts, and despite the strong Swiss franc, due to the housing concerns.

The SNB said it was conducting an in-depth investigation into banks' mortgage-granting practices and that it would work with regulators to see if any corrective steps were needed.

SNB statistics show that prices for single family homes in Switzerland rose by some 4 percent last year.

SNB vice-chairman Thomas Jordan warned as early as autumn last year of a possible bubble in the private housing market.

Why is the US Government out to screw us?

Hasn't it become obvious that our government does not care about the people? As a citizen of this country, you should be outraged by the way your government puts your interests last. Our government openly advocates destructive policies that transfer wealth from you to the lenders. The US Government as ruled today is completely captured by money interests; they feed us a steady stream of bullshit bailouts and false hopes to convince us to take on more debt and keep the Ponzi Scheme alive.

It wasn't always that way.

Andrew Jackson and the Second Bank of the United States

AIG was not the first institution that was too big to fail. Andrew Jackson waged a personal war against the banking behemoth of his era, and as a former general, he knew how to win a battle. From Wikipedia:

The Second Bank of the United States was authorized for a twenty year period during James Madison's tenure in 1816. As President, Jackson worked to rescind the bank's federal charter. In Jackson's veto message (written by George Bancroft), the bank needed to be abolished because:

  • It concentrated the nation's financial strength in a single institution.
  • It exposed the government to control by foreign interests.
  • It served mainly to make the rich richer.
  • It exercised too much control over members of Congress.
  • It favored northeastern states over southern and western states.

Following Jefferson, Jackson supported an "agricultural republic" and felt the Bank improved the fortunes of an "elite circle" of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833.

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” — Andrew Jackson

Does Jackson's reasoning sound familiar to you? Isn't most of what he identified as problems exactly what we have with too-big-to-fail institutions? Who will be our modern Andrew Jackson who will crush our banking cartel? Our current crop of politicians are hopeless or worthless completely captured by banking interests and too fearful to do anything to help the people. We are lost, and we need a real leader like Andrew Jackson to help us find our way.

Irvine Home Address … 28 WILLOWHURST Irvine, CA 92602

Resale Home Price … $825,000

Home Purchase Price … $888,000

Home Purchase Date …. 7/20/2007

Net Gain (Loss) ………. $(112,500)

Percent Change ………. -7.1%

Annual Appreciation … -2.7%

Cost of Ownership


$825,000 ………. Asking Price

$165,000 ………. 20% Down Conventional

5.01% …………… Mortgage Interest Rate

$660,000 ………. 30-Year Mortgage

$171,019 ………. Income Requirement

$3,547 ………. Monthly Mortgage Payment

$715 ………. Property Tax

$150 ………. Special Taxes and Levies (Mello Roos)

$69 ………. Homeowners Insurance

$55 ………. Homeowners Association Fees


$4,536 ………. Monthly Cash Outlays

-$868 ………. Tax Savings (% of Interest and Property Tax)

-$792 ………. Equity Hidden in Payment

$322 ………. Lost Income to Down Payment (net of taxes)

$103 ………. Maintenance and Replacement Reserves


$3,302 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$8,250 ………. Furnishing and Move In @1%

$8,250 ………. Closing Costs @1%

$6,600 ………… Interest Points @1% of Loan

$165,000 ………. Down Payment


$188,100 ………. Total Cash Costs

$50,600 ………… Emergency Cash Reserves


$238,700 ………. Total Savings Needed

Property Details for 28 WILLOWHURST Irvine, CA 92602


5 Beds

2 full 1 part baths Baths

2,558 sq ft Home size

($323 / sq ft)

3,429 sq ft Lot Size

Year Built 2000

2 Days on Market

MLS Number P724538

Single Family, Residential Property Type

West Irvine Community

Tract Ivyw


Spectacular cul de sac 5 bedroom, 3 story dream home. Gleaming granite kitchen center island, distressed hardwood flooring, and tons of extra space. Wonderful family room with gorgeous fireplace. Breakfast area leads to large, fully-fenced rear yard and calming retreat. Open, bright floorplan with formal dining room, large secondary bedrooms and walk-in closets. Third-floor space and views are breathtaking. Don't forget the nationally recognized schools – Myford, Pioneer, and Beckman. Act now!

The slow grind of lower prices

When the current owners bought back in 2007, they probably never considered the possibility that prices might be lower when they sold. They put $200,000 of their own money into the deal, and they will be lucky to escape with any of it.

Everyone thinks they are either buying into an appreciating market, or that they are buying at the bottom. If a buyer steps up to pay this ridiculous price, they will be the ones selling for a $100K+ loss in 2013.

The scenario this owner faces is what I keep warning people about. Nobody wants to be in the same circumstances as this seller, but all who buy today risk it.

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

High-End Owners Compete for Buyers and Dance with Asking Prices

Lenders work to inflate our flagging housing bubble to limit their losses. The lender of today's featured property is hoping for $275,000 extra in its loss recovery efforts. Are you willing to step forward and help them out?

Irvine Home Address … 101 LATTICE Irvine, CA 92603

Resale Home Price …… $1,100,000


Oh dancing with myself

Oh dancing with myself

Well there's nothing to lose

And there's nothing to prove

I'll be dancing with myself

Dancing with Myself — Billy Idol

High-end market pricing is a symbolic, mutually-shared illusion with sellers and lenders — a group increasingly becoming sellers — pretending that current pricing is stable and praying preying they find a patsy to pay the huge note. Some gyrate their asking prices in a do-si-do dancing up and down and ending where they started. Today's featured property shuffled two steps back and six steps forward:

Property History for 101 LATTICE

Date Event Price
Mar 01, 2010 Price Changed $1,100,000
Mar 01, 2010 Price Changed $985,000
Mar 01, 2010 Relisted
Feb 08, 2010 Price Changed $875,000
Jan 18, 2010 Price Changed $925,000
Jan 12, 2010 Price Changed $895,000
Nov 18, 2009 Delisted
Nov 16, 2009 Price Changed $825,000
Oct 23, 2009 Delisted
Oct 21, 2009 Listed $875,000
Feb 28, 2006 Sold (Public Records) $1,380,000

What would possess whoever is in control of this asking price to raise it $275,000 over the last five months? Is this a short sale where the lender keeps raising their approved short-sale price? Did the realtor have influence? I don't think the sellers care any more:

Foreclosure Record

Recording Date: 02/16/2010

Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record

Recording Date: 11/13/2009

Document Type: Notice of Default

Their $1,104,000 Option ARM blew up.

High-end inventory

According to recent reports, high-end house sellers lower their sights, and anyone selling mansion can expect to wait 3 years. I found these quotes from the first article interesting:

"The market moved, and so with it did the price," Eisenberg said. "The seller is a smart businessman and a reasonable guy — he gets it — and the best part is that he is under no real pressure to sell as the property is owned free and clear of any debt."

Therein lies one reason for more overpricing in the luxury home market, said Gary Painter, director of research at the USC Lusk Center for Real Estate.

"What's different about the high end, compared to the general population, is that people who have substantial resources are able to wait longer" to sell, Painter said. "In the bottom of the market you see negative-equity situations, loans going up, people must sell. Outside forces force them to price to sell. Those sorts of outside forces aren't as present [at the upper end]."

We all know this is not true for most properties between $1,000,000 and $3,000,000, and as I demonstrated in $3,367,500 HELOC Abuse from Hollywood, $5,000,000 HELOC abuse from Laguna Beach, $7,000,000 HELOC abuse in Newport Coast and 18 different properties in Huntington Beach, high end markets are inflated beyond belief, not by cash buyers, but by highly leveraged pretenders who are dancing with their lenders in amend-extend-pretend.

More so perhaps than in other parts of the nation, Southland sellers have another reason for overpricing at the onset: the magical belief that a star will happen upon their place and be willing to pay any price.

That statement — complete with its ironic truth about wishful thinking — is a setup for an even bigger delusion:

"The story of celebrities knocking on doors and overpaying for a house they 'have to have' still floats around," Malibu agent Gardner said.

Reinforcing the popular myth, Cotton said, is that "every once in a while the real estate god looks down and someone will buy a place that's overpriced."

In other words, stupid knife catchers are everywhere.

Quoting Steve Thomas?

From the Altera website:

President – Steven Thomas

Steven is a 3rd Generation real estate and it is truly in his blood. He is an Orange County native and has served as the dynamic leader through many of the changes in Orange County over the years and is THE expert on OC market dynamics.

Occasionally, even industry shills have a valid observation (from the OC Register story):

At the current pace, the overall market is a seller’s market without much appreciation at all. The number of distressed homes within the Orange County housing market is keeping a lid on appreciation. On the other hand, the higher end price ranges are experiencing a deep buyer’s market, the higher the price range, the deeper the buyer’s market. The hottest price range is homes priced between $250,000 and $500,000, with an expected market time of 1.75 months. Contrast that with homes priced above $4 million with an expected market time of 33.89 months.

Remember O.C. has 13 months of unlisted foreclosures, so the market-time is quickly approaching infinity. Lenders are very concerned about the massive losses they will take as the high end deflates, and they are doing everything possible to prevent it, but moving back to sustainable lending standards means that people really must have the incomes to support the loans.

This is a nice house, but is it the property fitting to someone making $230,000 a year with over $220,000 in the bank? That is who will buy this. Are there enough of these high wage earners to support the number of homes that must wash through the system? That is really the question we are exploring. According to sales volumes, the number of listings and the total shadow inventory, the answer appears to be a resounding "no" — unless you believe the cartel will hold together. I don't.

Irvine Home Address … 101 LATTICE Irvine, CA 92603

Resale Home Price … $1,100,000

Home Purchase Price … $1,380,000

Home Purchase Date …. 2/28/2006

Net Gain (Loss) ………. $(346,000)

Percent Change ………. -20.3%

Annual Appreciation … -5.3%

Cost of Ownership


$1,100,000 ………. Asking Price

$220,000 ………. 20% Down Conventional

5.06% …………… Mortgage Interest Rate

$880,000 ………. 30-Year Mortgage

$229,324 ………. Income Requirement

$4,756 ………. Monthly Mortgage Payment

$953 ………. Property Tax

$242 ………. Special Taxes and Levies (Mello Roos)

$92 ………. Homeowners Insurance

$252 ………. Homeowners Association Fees


$6,295 ………. Monthly Cash Outlays

-$1306 ………. Tax Savings (% of Interest and Property Tax)

-$1046 ………. Equity Hidden in Payment

$435 ………. Lost Income to Down Payment (net of taxes)

$138 ………. Maintenance and Replacement Reserves


$4,516 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$11,000 ………. Furnishing and Move In @1%

$11,000 ………. Closing Costs @1%

$8,800 ………… Interest Points

$220,000 ………. Down Payment


$250,800 ………. Total Cash Costs

$69,200 ………… Emergency Cash Reserves


$320,000 ………. Total Savings Needed

Property Details for 101 LATTICE Irvine, CA 92603


3 Beds

2 full 1 part baths Baths

2,460 sq ft Home Size

($447 / sq ft)

6,154 sq ft Lot Size

Year Built 2004

141 Days on Market

MLS Number S593530

Single Family, Residential Property Type

Quail Hill Community

Tract Othr


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

Nice home in Quail hill overlooking hospital, city area and local highways…Somewhat open spacious floor plan with vaulted ceilings, plantation shutters, canned lighting, newer carpet, hardwood flooring in some areas, partly travertine flooring, stainless steel appliances, granite countertop in kitchen, wood banister leading upstairs to smaller bedrooms and master has a small view balcony off the room….backyard has built in island bbq with room for entertaining with slight local freeway noise.

Did you read the honesty in that description? Somewhat open… slight local freeway noise… This description provides a balanced account of the property and mentions negatives, something quite rare. There is no puffing or realtorese in the description. I want to thank rkp for sharing this property in the astute observations.

Alan Greenspan Embarrasses Self with Feeble Defense of His Failed Philosophy and Policy

Alan Greenspan refuses to go to pasture quietly; therefore, bloggers like me need to remind everyone that Alan Greenspan is a dangerous fool who plunged the world economy into a near catastrophic depression and caused properties like today's to become elevated in price far beyond any rational measure.

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr 1702 Irvine, CA 92612

Resale Home Price …… $899,999


When you're a disgrace to the human race?

No committment, you're an embarrassment,

Yes, an embarrassment, a living endorsement,

The intention that you have booked,

Was an intention that was overlooked.

This is a serious matter,

Too late to reconsider,

No one's gonna wanna know ya !

Madness — Embarrassment

Alan Greenspan is an embarrassment–an embarrassment to himself and to everyone who believed in him and his policies. If there is any one individual that deserves the most blame for the Great Housing Bubble, it is Alan Greenspan.

In the post, I Pity Alan Greenspan, I recapped the status quo:

When Alan Greenspan stepped down as Federal Reserve Chairman in 2006, he was highly regarded by most experts and the wider general public as the man responsible for over 20 years of economic prosperity. Guided by his core beliefs in limited regulation and the wisdom of market participants to limit their own risk, he pursued policies during his tenure that have since proven to be disastrous.

If Alan Greenspan had died shortly after leaving office, he would have perished in ignorance of the problems he created. He would never have known the beating his professional reputation would take when the economic system he helped promote came crashing down. Ken Lay died before he could face justice, and his wife got to keep all the money. If Ken Lay had lived on, he would have faced nothing but suffering in his later years. Like Richard Nixon before him, Alan Greenspan will live on to wrestle with his failures, and also like Nixon, Greenspan will likely spend the rest of his life trying to convince a dubious public that his actions were justified and what he did was not wrong.

Alan Greenspan has publicly admitted to making some mistakes. His feeble defense of his actions usually center on the idea that the problems that brought down our financial system were too big for the FED chairman or anyone else to prevent. This is bullshit, and he knows it. The root of the problem is in the deeply held philosophical beliefs that he acted upon his entire career.

Alan Greenspan strongly believes the participants in the economy are aware of the risks they are taking on, and they are carefully managing those risks. In his world, government regulation to curb the excesses is an unnecessary hindrance to economic growth. Like Ronald Regan and the entire Conservative movement that he inspired, Alan Greenspan believed that government is not the solution, it is the problem.

The failures of Alan Greenspan and those who failed to regulate our financial markets have lead to the economic catastrophe we are facing. Everything Alan Greenspan believed his entire career was wrong. He knows that now; although, he will likely spend the rest of his life trying to deny it. He will live out his life in disgrace partly responsible for the suffering of millions of people around the globe.

I don't feel sad for him. I chose the word "pity" carefully. To feel sadness for someone's actions, you must feel compassion for their plight. Pity masquerades as compassion, but there is a lack of empathy in the emotion of pity–A lack of empathy often caused by the fact that certain tragedies are self-inflicted. The attitudes, beliefs and actions of Alan Greenspan caused his own downfall. I do not feel sad for him; I pity him.

For more information, please read Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve

In case anyone forgot, Alan Greenspan denied the existence of a housing bubble as evidenced by articles like this one from 2004: Fed's Greenspan Doubts 'Housing Bubble' Thesis.

"A number of analysts have conjectured that the extended period of low interest rates is spawning a bubble in housing prices in the United States that will, at some point, implode," Greenspan said. "Their concern is that, if this were to occur, highly leveraged homeowners will be forced to sharply curtail their spending.

"To be sure, indexes of house prices based on repeat sales of existing homes have outstripped increases in rents, suggesting at least the possibility of price misalignment in some housing markets. A softening in housing markets would likely be one of many adjustments that would occur in the wake of an increase in interest rates.

"But a destabilizing contraction in nationwide house prices does not seem the most probable outcome. Indeed, nominal house prices in the aggregate have rarely fallen and certainly not by very much," Greenspan said.

Often public officials have to make statements they don't really believe in order to prevent panic in financial markets, but the discourse above is outside what would be required as a vague Greenspan-speak; The comments display a deeply held and woefully wrong Weltanschauung; in short, he really believed it.

In an astonishing turn (not really), Alan Greenspan is defending his actions, Rich People Things: Alan Greenspan's Window Is Always Open. The author takes him to task:

Well, this is awkward. Alan Greenspan, hailed for most of his nearly two-decade run as chairman of the Federal Reserve as a market savant of the first order, is now assailed from all sides for the Fed’s apparent role in overinflating the country’s garish housing bubble. The charge is a fraught one, reports Fortune magazine’s Geoff Colvin, since should it stick, it will fundamentally reshape perceptions of Greenspan’s legacy at the central bank. Already the sweep of the emerging indictment is such, Colvin writes, that “four years after leaving the Fed as the Greatest Central Banker Ever, the longest-serving chairman, the Maestro, Alan Greenspan is the designated goat."

But Greenspan is not a goat who will go quietly into the good night. He takes vigorous issue with the criticism of Fed policy that is now fueling all the anti-Greenspan rancor: that from the pivotal years of 2002 to 2005, when mortgages remained artificially low and housing prices continued to drift ever higher above the realm of consensual reality, the Fed failed to put the brakes on the downward drift of interest rates. This critical oversight, Greenspan’s critics charge, meant that the Fed kept pumping the derivatives-fed fiction that no serious risks were accruing in the market long past the point of any empirical support.

Greenspan’s rejoinder is that the true causes of the 2008 housing crash were global—that prices kept spiraling upward because of a global savings glut, which channeled capital’s insatiable quest for exotic new forms of market expression into the opaque wonderland of securitized debt. Emerging market economies such as China kept unleashing new investments that, Colvin writes, “naturally pushed interest rates down globally—thus the decoupling of mortgage rates from the Fed funds rate, and the global nature of the housing boom.”

To detractors who point out that this upsurge of global capital didn’t really so much, you know, exist, Greenspan has an elegant rejoinder. As Colvin summarizes, it goes as follows: “You have to look at intended saving and intended capital investment, not actual saving and investment. After all, saving and investment by definition will always balance.” The mere existence of an overabundance of capital was enough, in other words, to prompt markets across the globe to keep their mortgage rates artificially low—thereby permitting housing prices across the globe to ratchet up ever higher.

Do I need to point out that Greenspan's look-at-intent-rather-than-reality defense is bullshit–Embarrassing bullshit? The kind of bullshit that makes you cringe and feel so sorry for the man that you want to run away and hide for him. An embarrassing bullshit that doesn't even pass the giggle test. Perhaps there is a special island where we can put David Lereah and Alan Greenspan to save themselves from further embarrassment. They should get Lost.

If it were only embarrassing, it could be easily forgotten and dismissed, but this fool still has the ability to influence public policy, and if our legislature or bureaucrats believe him, we may repeat Greenspan's grievous gaffes. Hopefully, wiser men (like Paul Volcker) will prevail and Greenspan's debt disease will be cured. I have my doubts.

Who should lose?

Alan Greenspan believed in the ability of financial markets to properly disperse and discount risk. Who do you think he saw as absorbing $900,000 losses on units like today's featured property?

Marquee at Park Place at Night

Irvine Home Address … 3131 MICHELSON Dr 1702 Irvine, CA 92612

Resale Home Price … $899,999

Income Requirement ……. $187,416

Down Payment Needed … $180,000

20% Down Conventional

Home Purchase Price … $1,752,500

Home Purchase Date …. 2/17/2006

Net Gain (Loss) ………. $(906,501)

Percent Change ………. -48.6%

Annual Appreciation … -16.3%

Mortgage Interest Rate ………. 5.05%

Monthly Mortgage Payment … $3,887

Monthly Cash Outlays …..….… $5,740

Monthly Cost of Ownership … $4,400

Property Details for 3131 MICHELSON Dr 1702 Irvine, CA 92612

Beds 2

Baths 2 baths

Home Size 2,062 sq ft

($436 / sq ft)

Lot Size n/a

Year Built 2006

Days on Market 3

Listing Updated 2/10/2010

MLS Number U10000651

Property Type Condominium, Residential

Community Airport Area

Tract Marq

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

Penthouse Suite…2 bedroom plus den. Highly upgraded…ultra luxury with 24 hour concierge. HOA dues were just lowered below $1,000. Unit comes with 2 parking spots next to elevator…

ultra luxury? Where do we go from there? Mega luxury? Super-duper luxury?

For your ultra mega super-duper luxury home, you get two assigned parking stalls? For $1,000 a month HOA dues, I should be unconcerned where the staff parks my car… Oh, wait. You mean I have to park it? What are residents getting for $1,000 a month? Hosed.