The Irvine Company has invested heavily to promote the Irvine school system to raise the value of local housing. Is it effective?

Irvine Home Address … 57 ASHBROOK #64 Irvine, CA 92604

Resale Home Price …… $419,900

Won't you believe it?

It's just my luck

No recess!

Nirvana — School

My parents both retired from school system work last year. I grew up in a household where education was a focus, and public school issues were a common topic of discussion.

Many people believe certain schools have good test scores because they have better teachers. That usually isn't the case. While it's true that good teachers prefer to teach in highly rated schools, the quality of teaching isn't what makes test scores better. Good schools are largely a product of involved parents and motivated students. It's rare to find a school where the parents are heavily involved and the test scores are poor. It's equally rare to find a school where the test scores are good and the parents have other priorities.

Good test scores are like gravity. A good school attracts the most involved parents who place an emphasis on education and get involved in the school and with their children. In other words, good test scores beget good test scores. This is one of the reasons poor school test performance problems are so intractable. The worst performing schools are populated by students whose parents don't value education, don't get involved with the school, and don't motivate their children to succeed.

Everyone is searching for an answer to bring the quality of education up. Unfortunately, the real problems with education cannot be addressed in the classroom. The problems start at home and resonate through the community.

Donald Bren On The Best Fix For K-12 Education

Kerry A. Dolan — 9/22/2011

Donald Bren built a $12 billion fortune as a Southern California real estate developer and has been focused on philanthropic giving to support education. That includes gifts at the university level to UC Irvine and UC Santa Barbara as well as to K-12 schools in the city of Irvine (in Orange County), which his Irvine Co. master-planned and developed, and after school program Think Together.

Bren shared his thoughts with Forbes via email.

Donald Bren, real estate developer and philanthropist

FORBES: What is your best single idea for reforming K-12 education?

BREN: In my opinion, education is the finest gift an individual can give a young person. And many of our public schools are falling short in successfully educating the youth of our country today.

Gone are the days when state governments are fully able to fund our public schools. Future public education will require involvement and collaboration among various local, civic, private and nonprofit entities, a concept I like to refer to as “community entrepreneurship. ”

Irvine schools have been successful because of the community involvement. Once these schools gained a reputation, they became a magnet for people who value education — which is exactly what Donald Bren had in mind.

Over the past 30 years, I have sought to implement community entrepreneurship to benefit our local kindergarten through twelfth grade schools, working in partnership with community leaders, local school districts and well-run nonprofit organizations.

For example, in master planning and master building the new City of Irvine, we have gone to great lengths to ensure our elementary schools and neighborhood parks are contiguous and a focal element creating the important activity center for each residential community.

When state funding for Irvine public schools began to diminish some time ago, my Irvine Company colleagues helped me to provide private funding support for continuation of basic science, art and music programs that had been eliminated by lack of state funding. Additionally, we have developed annual teacher recognition and reward programs that provide financial awards for teachers who demonstrate outstanding results in educating our students.

By making capital available for unfunded programs and providing a balanced curriculum and financial incentives to teachers based on results, Irvine Unified School District continues to rank among the finest educational systems in the nation.

Yes, they are.

My additional observations for K-12 schools are:

1) Return full governance and financial control to the local school district board and the parents – they know best.

2) Eliminate the large bureaucratic administrative overhead expenses that prevent necessary funding from reaching classrooms.

My school teacher parents used to complain about the huge bureaucracy that seemed to exist only to consume resources.

3) Maximize the existing investment in school buildings and equipment by operating the school campus on a four-quarter or year-round basis.

4) Compensate professional teachers on a year-round basis, similar to most businesses and government. By the way, education is big business and should be approached in a similar disciplined manner.

5) Making a difference requires focus. Academic administrators will tell you that the most important school years are kindergarten through sixth grade, when students develop confidence in their ability to learn and foundational study skills. Focus efforts on the early years before trying to fix high school programs that often provide too little too late.

6) Consider a higher level European-style baccalaureate program for certain schools, and as an example, reducing the need for rudimentary freshman English classes at our prestigious University of California.

7) And don’t forget, students are living in a digital world where computers and information technology are used at home, at school and in everyday life. They must learn the new methods of our “plugged-in” society.

The classrooms at my son's school are full of computers.

FORBES: Is there any person or any school who you think is doing a good job of improving/reforming k-12 education now?

BREN: In my opinion, the person doing the best job improving education in California is Randy Barth, President and CEO of THINK TOGETHER in Santa Ana, Calif. He is the most dedicated and innovative professional in K-12 tutoring and mentoring education in California.

THINK TOGETHER provides academic learning through specially designed after-school and summer programs throughout Southern California to more than 100,000 students. With special attention given to areas such as the Santa Ana Unified School District, with more than 50,000 underprivileged K-6 students, the majority of whom have little chance to get ahead without this unique program. Thus the results are encouraging – academic improvement scores have been off the charts, so to speak.

Fixing our K-12 education system requires a new solution to a growing national problem. Community entrepreneurship is my recommendation, as it will bring together the necessary resources to make a difference. Our children are worth the extra human effort and investment.

I’m proud to be among a group of dedicated community entrepreneurs focused on improving our community education programs.

I live in Irvine for the schools

For those of you who have attended my Las Vegas cashflow presentations, you have heard about my son. I am the parent of a special needs child.

My son is a slow learner, and he has limited language and social skills. He is labeled as autistic, for whatever that means. All my wife and I know is that we love him, and he is an endless source of joy and happiness.

I get to spend a great deal of time with him, particularly now that I work from home. I see him for each morning as he and I make breakfast together. Most evenings we get some time to play video games or just hang out. He likes when I read books to him, and his skills at Mario Kart or Super Mario Brothers are remarkable. On Sunday morning, you can most often find us at Disneyland. I can't count how many times I have been on Splash Mountain, Space Mountain, Indiana Jones, Pirates of the Caribbean, Big Thunder Mountain, and the Matterhorn Bobsleds. It's the most precious time of my week. I will never look back and feel I missed out on enjoying my son as he grew up.

My wife and I have thought about leaving Irvine on many occasions. We have considered San Clemente, Ladera Ranch, Las Vegas, and other areas, but when we really think about moving out of Irvine, we think about the education program we would leave behind, and we change our minds. The Irvine special needs programs are truly outstanding. When I factor in the cost of providing this education privately, the cost of renting in Irvine seems reasonable. It would be much more expensive to rent or own somewhere else and have to provide a comparable private education.

The Irvine Schools do add value to Irvine Homes

The bottom line is that people willingly pay the Irvine rental and ownership premium to be in the Irvine school system. We know several parents who moved here from other school districts and even from out of state to have their special needs child educated in Irvine. Parents of typical children come here for the same reason. The high test scores are a big draw. Parents will do whatever they must to give their child every advantage. If that means paying extra to live in the best school district, that's what parents will do.

The responsible bagholder

HELOC dependency and abuse is deeply embedded into the California psyche. The property records on today's featured property show a HELOC abuser who sold it to a responsible bagholder who simply couldn't afford the property. Perhaps unemployment or a loss of income was a factor, but the later buyer didn't add to their mortgage, and they still lost the home. It's now an REO.

The story begins on 11/10/1998 when the property was purchased for $260,000. The buyers used a $234,450 first mortgage and a $25,050 down payment. The refied twice for $290,000 and $322,700 respectively taking out a little less than $90,000 in the process. Based on the frequency and amount of these withdrawals, those owners were clearly using their HELOC money to supplement their incomes.

Despite the bad habits those owners formed, they were amply rewarded when the sold the property to the bagholder on 5/7/2004 for $542,500. The subsequent owner used a $406,875 first mortgage and a $135,625 down payment. They never refinanced or took out any HELOC money.

The bagholder was unable to sustain the payments on their first mortgage, and the property went to auction on 4/5/2011 for $414,265. If the bank gets their asking price, they are out the amount of commissions buy little more. The 2004 buyer is out their entire $135,625 down payment, and their credit is shot. If they knew they were going to suffer those consequences, they probably would have refinanced and maxed out some HELOCs.

Chase has the property now, and they are hoping to sell it and get most of their loan balance back. At this price, they probably will.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 57 ASHBROOK #64 Irvine, CA 92604

Resale House Price …… $419,900

Beds: 3

Baths: 2

Sq. Ft.: 1601

$262/SF

Property Type: Residential, Condominium

Style: Two Level, Contemporary

Year Built: 1978

Community: Woodbridge

County: Orange

MLS#: S675677

Source: SoCalMLS

Status: Active

On Redfin: 3 days

——————————————————————————

This Chase Bank Owned property has been freshly painted and new carpet installed. This is the largest model in the Parkside Tract. Lots of room for a 3 bedroom, 2.5 bath home. Only one common wall for this townhouse style condo. Fireplace in the living room with 2 skylights. Formal dining, family room, new stove just installed in kitchen. Garage has direct access. Rare long driveway for Irvine. High vaulted ceilings. Secondary bedrooms are on opposite side of hall of Master Bedroom for more privacy. No neighbors behind property for increased privacy. Property is located in the Village of Woodbridge – one of the best communities to live in. Many pools, parks, Lakes with boating and Lagoons for Beachcombers, volleyball, basket ball courts, tennis clubs, too many HOA activities to list for adults, children, and families. Close to shopping, banks, houses of worship, schools, movie theaters – all in the heart of Irvine. Look at MLS MEDIA for disclosures.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Resale Home Price …… $419,900

House Purchase Price … $542,500

House Purchase Date …. 5/7/2004

Net Gain (Loss) ………. ($147,794)

Percent Change ………. -27.2%

Annual Appreciation … -3.4%

Cost of Home Ownership

————————————————-

$419,900 ………. Asking Price

$14,697 ………. 3.5% Down FHA Financing

4.03% …………… Mortgage Interest Rate

$405,204 ………. 30-Year Mortgage

$122,783 ………. Income Requirement

$1,942 ………. Monthly Mortgage Payment

$364 ………. Property Tax (@1.04%)

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

$87 ………. Homeowners Insurance (@ 0.25%)

$466 ………. Private Mortgage Insurance

$313 ………. Homeowners Association Fees

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

$3,172 ………. Monthly Cash Outlays

-$302 ………. Tax Savings (% of Interest and Property Tax)

-$581 ………. Equity Hidden in Payment (Amortization)

$21 ………. Lost Income to Down Payment (net of taxes)

$72 ………. Maintenance and Replacement Reserves

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

$2,383 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,199 ………. Furnishing and Move In @1%

$4,199 ………. Closing Costs @1%

$4,052 ………… Interest Points @1% of Loan

$14,697 ………. Down Payment

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

$27,147 ………. Total Cash Costs

$36,500 ………… Emergency Cash Reserves

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

$63,647 ………. Total Savings Needed

——————————————————————————————————————————————————-

In many circumstances debts from foreclosure survive. Lenders and zombie debt collectors are waiting for better days to start collection efforts.

Irvine Home Address … 68 DANBURY Ln Irvine, CA 92618

Resale Home Price …… $484,900

If you, if you could return,

don't let it burn,

don't let it fade.

It's tearing me apart,

It's ruining everything.

Do you have to let it linger?

Do you have to,

do you have to,

Do you have to let it linger?

Cranberries — Linger

Most people who leave their houses behind under duress believe they have no liability. Even the ones who suspect they might will generally duck their lender's calls and letters and hope the problem goes away on its own. It won't.

California recently passed legislation barring lenders from seeking collection on deficiencies after a short sale. Of course, this has merely contributed to the already slow pace of short sale approvals. California borrowers already had non-recourse protections on purchase-money mortgages, and there are statutory limits on collecting debts severed from the property in foreclosure.

I think these are good policies in California. Perhaps lenders will be more cautious next time when they want to extend stupid loans to California Ponzis. Although, as long as the government will bail stupid lenders out, they don't have much incentive to be wise with their lending.

The rest of the country is more of an issue with debt overhang, and zombie debt collection will be a thriving industry.

House Is Gone but Debt Lives On

By JESSICA SILVER-GREENBERG — October 1, 2011

LEHIGH ACRES, Fla.—Joseph Reilly lost his vacation home here last year when he was out of work and stopped paying his mortgage. The bank took the house and sold it. Mr. Reilly thought that was the end of it.

In June, he learned otherwise. A phone call informed him of a court judgment against him for $192,576.71.

It turned out that at a foreclosure sale, his former house fetched less than a quarter of what Mr. Reilly owed on it. His bank sued him for the rest.

The result was a foreclosure hangover that homeowners rarely anticipate but increasingly face: a “deficiency judgment.“

It's human nature to avoid responsibility, particularly when the consequences are devastating. Who wouldn't rather bury their face in the sand than deal with a six-figure debt?

Forty-one states and the District of Columbia permit lenders to sue borrowers for mortgage debt still left after a foreclosure sale. The economics of today's battered housing market mean that lenders are doing so more and more.

Foreclosed homes seldom fetch enough to cover the outstanding loan amount, both because buyers financed so much of the purchase price—up to 100% of it during the housing boom—and because today's foreclosures take place following a four-year decline in values.

“Now there are foreclosures that leave banks holding the bag on more than $100,000 in debt,” says Michael Cramer, president and chief executive of Dyck O'Neal Inc., an Arlington, Texas, firm that invests in debt. “Before, it didn't make sense [for banks] to expend the resources to go after borrowers; now it doesn't make sense not to.”

Banks won't staff up to try to collect bad debt. They will sell this debt to some firm who operates under that business model. It didn't make sense for banks to try to collect this debt before because they still showed it on their balance sheets at full value. As they abandon their fantasies and adjust their accounting to reflect reality, they have to deal with the bad debt. The rise of the zombie debt collector should have happened years ago, but with mark-to-fantasy accounting, banks were able to delay the inevitable.

Indeed, $100,000 was roughly the average amount by which foreclosure sales fell short of loan balances in hundreds of foreclosures in seven states reviewed by The Wall Street Journal. And 64% of the 4.5 million foreclosures since the start of 2007 have taken place in states that allow deficiency judgments.

Lenders still sue for loan shortfalls in only a small minority of cases where they legally could. Public relations is a limiting factor, some debt-buyers believe. Banks are reluctant to discuss their strategies, but some lenders say they are more likely to seek a deficiency judgment if they perceive the borrower to be a “strategic defaulter” who chose to stop paying because the property lost so much value.

Lenders will certainly say they are more likely to go after strategic defaulters because they are frightened about how common and accepted the practice has become. The reality is that very few defaulters, strategic or otherwise, are currently being pursued.

In Lee County, Fla., where Mr. Reilly's vacation home was, court records show that 172 deficiency judgments were entered in the first seven months of 2011. That was up 34% from a year earlier. The increase was especially striking because total foreclosures were down sharply in the county, as banks continued to wrestle with paperwork problems that slowed the process.

One Florida lawyer who defends troubled homeowners, Matt Englett of Orlando, says his clients have faced 20 deficiency-judgment suits this year, up from seven during all of last year.

Until recently, “there was a false sense of calm” among borrowers who went through foreclosure, Mr. Englett says. “That's changing,” he adds, as borrowers learn they may be financially on the hook even after the house is gone.

In Mr. Reilly's case, “there's not a snowball's chance in hell that we can pay” the deficiency judgment, says the 39-year-old man, who remains unemployed. He says he is going to speak to a lawyer about declaring bankruptcy next week, in an effort to escape the debt. The lender that obtained the judgment against him, Great Western Bank Corp. of Sioux Falls, S.D., declined to comment.

First, bankruptcy doesn't “escape” debt, it extinguishes it. Banktruptcy is the likely river card most borrowers will have to play. Bankruptcy is a fresh start, and each borrower who goes through it gains the peace of mind of knowing the debts are eliminated for good.

It is surprising a bank would seek a judgement against an unemployed borrower with no assets — I assume he has no assets from the comments in the story. It's a waste of bank resources to attempt collection.

Some close observers of the housing scene are convinced this is just the beginning of a surge in deficiency judgments.

In states other than Califronia, this is likely true. Why wouldn't banks try to recoup their money? No lender has forgotten about a debt. If they haven't issued a 1099, they still have this debt on their books. At some point, either they will try to collect, or they will sell this debt to someone who will.

Sharon Bock, clerk and comptroller of Palm Beach County, Fla., expects “a massive wave of these cases as banks start selling the judgments to debt collectors.”

In a paradox of the battered housing industry, trying to squeeze more money out of distressed borrowers contrasts with other initiatives that aim instead to help struggling homeowners, including by reducing what they owe.

There are no initiatives from banks trying to reduce what anyone owes. There are political pandering noises being made to this end, but the people who control the debt are uniform in their desire to colllect the full amount due.

The increase in deficiency judgments has sparked a growing secondary market. Sophisticated investors are “ravenous for this debt and ramping up their purchases,” says Jeffrey Shachat, a managing director at Arca Capital Partners LLC, a Palo Alto, Calif., firm that finances distressed-debt deals. He says deficiency judgments will eventually be bundled into packages that resemble mortgage-backed securities.

Because most targets have scant savings, the judgments sell for only about two cents on the dollar, versus seven cents for credit-card debt, according to debt-industry brokers.

If buyers are only paying two cents on a dollar, they don't have to recover much from many people to recoup their investment. Most debt collectors can obtain that much through harrassing phone calls.

Silverleaf Advisors LLC, a Miami private-equity firm, is one investor in battered mortgage debt. Instead of buying ready-made deficiency judgments, it buys banks' soured mortgages and goes to court itself to get judgments for debt that remains after foreclosure sales.

Silverleaf says its collection efforts are limited. “We are waiting for the economy to somewhat heal so that it's a better time to go after people,” says Douglas Hannah, managing director of Silverleaf.

These debt collectors are biding their time until people are back on their feet before they knock them down again. This is why bankruptcy immediately following a foreclosure is a better course of action. Many borrowers who think they dodged taking responsibility for their bubble era debts will be rudely surprised by the collection efforts of these zombie debt collectors.

Investors know that most states allow up to 20 years to try to collect the debts, ample time for the borrowers to get back on their feet. Meanwhile, the debts grow at about an 8% interest rate, depending on the state.

That will push many people into bankruptcy years down the road. Those people will regret their failure to deal with the debt problem right after their foreclosure. Bankruptcy hurts less when they're already broke.

Mr. Hannah expects the market to expand as banks “aggressively unload” their distressed mortgages in the next year, driving up the number of deficiency judgments being sought.

They are pretty easy to get. “If the house sold for less than you owe, the lender wins, plain and simple,” says Roy Foxall, a real-estate lawyer in Fort Myers on Florida's west coast.

Mr. Foxall says five deficiency suits were filed against his clients this year, and he couldn't poke any holes in any of them. Lenders typically have five years following a foreclosure sale to sue for remaining mortgage debt.

Nevada recently passed a law reducing this time period to 9 months. In California, lenders can still try to collect after a foreclosure, but a first mortgage lien cannot file another lawsuit to compel repayment as the foreclosure itself was their one remedy.

Mr. Englett, the Orlando lawyer who has handled 27 such suits for homeowners in the past 21 months, says he didn't get the bank to waive the deficiency in any of the cases, but did reach six settlements in which the plaintiff accepted less.

Florida is among the biggest deficiency-judgment states. Since the start of 2007, it has had more foreclosures than any other state that allows deficiency judgments—more than 9% of the U.S. total, according to research firm Lender Processing Services Inc.

A loan-deficiency suit can yank borrowers back to a nightmare they thought was over.

Ray Falero, a truck driver whose Orlando home was foreclosed on and sold in August 2010, says he thought he was hallucinating when, months later, he opened the door and saw a sheriff's deputy. The visitor handed him a notice saying he was being sued for $78,500 by the lender on the home purchase, EverBank Financial Corp., of Jacksonville, Fla.

“I thought I was done with this whole mess,” he says.

Most borrowers make this mistake.

Mr. Falero, 37, says he was about nine months behind on his loan when the bank foreclosed. Before it did, he bought another home in Minneola, Fla., where he now lives and where he says he is up to date on mortgage payments. Like Mr. Reilly, Mr. Falero says he didn't swell the foreclosed-on loan through refinancing or home-equity borrowing.

EverBank won a deficiency judgment on Mr. Falero's Orlando loan. Mr. Falero and his lawyer are fighting to reduce the amount owed. EverBank declined to comment on his case.

Credit unions and smaller banks are the most aggressive pursuers of deficiency judgments, a review of court records in several states shows.

At Suncoast Schools Federal Credit Union in Tampa, Jim Simon, manager of loss and risk mitigation, says the institution has a responsibility to its members, and that means trying to recoup losses by going after loan deficiencies. He calls such legal action the credit union's “last arrow in the quiver.”

If the bank is not too big to fail, it must go after every penny just to survive.

The biggest banks appear to have stayed largely on the sidelines as they deal with the foreclosure-paperwork mess. One big bank, J.P. Morgan Chase & Co., “may obtain a deficiency” judgment in foreclosure cases but will “often waive” the leftover debt when a homeowner agrees to a so-called short sale of a house for less than is owed on it, a bank spokesman says. …

The hard-hit area reveals a sharp contrast in homeowners' attitudes toward deficiency judgments.

Julia Ingham invested in four Lehigh Acres properties in June 2005, hoping to “drum up some real money for retirement.”

All have since been foreclosed on by lenders, says the 62-year-old retired programmer for International Business Machines Corp.

A credit union, after selling one of the foreclosed houses for less than the debt on it, obtained a deficiency judgment against Ms. Ingham for $181,059.54. She worries she could face such judgments on the other properties, too.

Ms. Ingham says when she bought them, she misunderstood how much her investments put her on the hook for. Her builder, she says, promised she could invest $10,000 in four properties and then flip them for a profit. Ms. Ingham says deficiency judgments punish borrowers who were taken advantage of by lenders and builders.

Taken advantage of? Does she bear no responsibility for her own stupidity?

Catherine Ortega, who owns a Lehigh Acres home around the corner from one of Ms. Ingham's foreclosed homes, says banks should leave people like her former neighbor alone. “Those people have suffered enough,” she says.

If they have suffered enough, they should declaure bankruptcy. Borrowers shouldn't rely on the compassion of banks because the banks won't have any.

In July 2005, Mr. Reilly took out a $223,000 mortgage to build a vacation home here, about 160 miles from his primary home in Odessa, Fla. He was laid off just as construction was being completed.

Mr. Reilly says he is current on the loan on his primary residence but couldn't afford the vacation home's $1,200-a-month loan payment. Great Western Bank, which is owned by National Australia Bank Ltd., foreclosed on his house in Lehigh Acres in July 2010.

Mr. Reilly, who was a mortgage broker before his layoff, says he knew that deficiency judgments were possible after a foreclosure but didn't expect to face one because he doesn't have any financial assets, and you can't get “blood from a stone.”

I am surprised he is facing a deficiency judgment considering he has no income or assets.

Alfredo Callado, who lives next door to Mr. Reilly's former house, is unsympathetic. Like Ms. Ortega, Mr. Callado is troubled by the crime that a neighborhood full of empty houses attracts. He started watching over Mr. Reilly's former house to ward off thieves who steal air conditioners from vacant properties.

Mr. Callado, sitting on a lawn chair in his driveway, says lenders should use deficiency suits to punish defaulting homeowners for the damage they do to neighborhoods, including driving down property values.

“You have to make them pay for what they do to those of us left behind,” he says.

WTF? This guy is upset because people couldn't afford the debt used to drive up neighborhood property values, and now he has to accept the reality that his house was never worth what he thought it was. Too bad. Vindication will not soothe his soul. What circle of hell would he want defaulting homeowners to end up in?

They didn't get enough

The former owners of today's featured properties did lose this home due to excessive borrowing, but the clearly left money in the walls they could have extracted during the bubble. The bank might not lose money on this one.

• The property was purchased on 11/24/1999 for $258,000. The owners used a $206,350 first mortgage and a $51,650 down payment.
• On 4/4/2003 they refinanced with a $230,000 first mortgage, but they took out very little extra money.
• On 2/1/2007 they refinanced again with a $428,000 first mortgage which was likely only 80% of the value at the time. They could have obtained a second for over $100,000 and didn't. I wonder if they wished they had.
• The details aren't in my records, but they defaulted on the loan, and Wells Fargo took the property back on 4/1/2011 for $481,337.

Lenders are very selective in who they foreclose on. They selected these borrowers because they were near breakeven. Wells could foreclose on them without losing much money. It makes sense for banks to foreclose on non-performing loans when the losses are small to clean up their books. It's the severely underwater loans where they allow the owners to squat endlessly because they don't want to recognize the losses.

If these borrowers had been more irresponsible, they would likely still be living in this house making no payments. That doesn't create a good set of borrower incentives, does it?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 68 DANBURY Ln Irvine, CA 92618

Resale House Price …… $484,900

Beds: 3

Baths: 2

Sq. Ft.: 1350

$359/SF

Property Type: Residential, Condominium

Style: Two Level, Traditional

Year Built: 1999

Community: Oak Creek

County: Orange

MLS#: P798732

Source: SoCalMLS

Status: Active

On Redfin: 2 days

——————————————————————————

FANTASTIC BUY ON THIS IMMACULATE 3 BD 2.5 BA DETACHED HOME VALUE PRICED FOR QUICK SALE! FRESH INTERIOR TWO-TONE PAINT AND NEW CARPET. FORMAL LIVING ROOM WITH FIREPLACE, BEAUTIFUL WOOD FLOORS, BRIGHT KITCHEN WITH TILED COUNTERTOPS, PRIVATE PATIO FOR ENTERTAINING, SPACIOUS MASTER SUITE WITH WALK-IN CLOSET, MASTER BATHROOM WITH DUAL SINK VANITY, BEDROOMS 2 & 3 (JACK-N-JILL) WITH SHARED BATHROOM AND DUAL SINK VANITY, FORCED AIR HEATING AND CENTRAL AIR CONDITIONING, 2 CAR ATTACHED GARAGE PLUS FULL DRIVEWAY FOR ADDITIONAL PARKING. SUPER MOTIVATED SELLER. SUBMIT!!!

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Proprietary IHB commentary and analysis

Resale Home Price …… $484,900

House Purchase Price … $258,000

House Purchase Date …. 11/24/1999

Net Gain (Loss) ………. $197,806

Percent Change ………. 76.7%

Annual Appreciation … 5.3%

Cost of Home Ownership

————————————————-

$484,900 ………. Asking Price

$16,972 ………. 3.5% Down FHA Financing

4.03% …………… Mortgage Interest Rate

$467,928 ………. 30-Year Mortgage

$133,179 ………. Income Requirement

$2,242 ………. Monthly Mortgage Payment

$420 ………. Property Tax (@1.04%)

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

$101 ………. Homeowners Insurance (@ 0.25%)

$538 ………. Private Mortgage Insurance

$139 ………. Homeowners Association Fees

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

$3,440 ………. Monthly Cash Outlays

-$349 ………. Tax Savings (% of Interest and Property Tax)

-$671 ………. Equity Hidden in Payment (Amortization)

$24 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves

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

$2,526 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,849 ………. Furnishing and Move In @1%

$4,849 ………. Closing Costs @1%

$4,679 ………… Interest Points @1% of Loan

$16,972 ………. Down Payment

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

$31,349 ………. Total Cash Costs

$38,700 ………… Emergency Cash Reserves

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

$70,049 ………. Total Savings Needed

——————————————————————————————————————————————————-

Lenders are beginning to clear out the high end inventory lurking in the shadows.

Irvine Home Address … 29 ANTIQUE ROSE Irvine, CA 92620

Resale Home Price …… $1,014,000

I thought things had changed

I thought things looked plain

I thought I could see the light

But now, now I know

I saw the distant glow

I heard a distant whistle blow

Whitey — The Light at the End of the Tunnel Is a Train

Back in 2009 and 2010 when the combination of tax credits and federal reserve supports engineered a false rally, and many people believed the housing crash was over. They thought they could see the light at the end of the tunnel.

Of course, the housing crash was not over, and the crisis in the housing market still has not been resolved. The problem everyone wanted to ignore (besides valuation) was the huge inventory of delinquent borrowers squatting in shadow inventory. Without this overhanging supply, perhaps the market would have bottomed in 2009, but with an abundance of homes waiting for a spark of demand, prices are more likely to go down than go up, particularly at the high end.

High end shadow inventory coming to light

Observers of the high end market often see what they want to see. Most homeowners in these price ranges truly believe the reason their prices haven't decayed to date is because everyone is rich and there is little mortgage distress. Nothing could be further from the truth.

High end home prices have benefitted from a lack of inventory. Lenders have been unwilling to foreclose on high-end homes because the losses are too large for them to absorb. It's easier for lenders to go after the low hanging fruit and clear their files by foreclosing at the low end first.

The hopelessly overextended pretenders who often borrowed more than $1,000,000 to buy high end homes have been allowed to squat. Rather than being the safe haven of the rich, high end homes have higher delinquency rates than their more modest bretheren.

Banks have been extending the mortgage limbo for high end squatters to delay taking write downs and to manage MLS inventory. Banks can't let the squatting go on forever. Eventually, they will need to foreclose on these properties, throw the squatters out, and resell them to recoup what they can of their capital.

Think about it from a bank investors point of view. People invest in banks so banks can loan money and make a profit from the interest. If banks stop doing this and instead simply give away the investor's money, won't the investors revolt? Do you think the poor performance of banking stocks may reflect that fact? Imagine if I were to tell my fund investors I was simply going to allow squatters to stay in the properties I purchased at auction. Would they be happy? I don't think so.

Banks are also getting more desperate for capital. Bank of America is cutting costs and ramping up its foreclosure activities because it needs the money. They can no longer afford to subsidize the squatters living in the bank's houses.

Today's featured property is an example of the bank's desperation. They bought this house last October, and they held it off the MLS through the prime selling season, and they are only now listing it for sale — at the worst time of the year to find a buyer.

The sordid past

The orginal buyers were hopelessly overextended. They paid $1,434,000 on 11/3/2005 using a $1,145,000 first mortgage, and $145,000 HELOC, and a $144,000 down payment. Since you can't deduct the interest on a loan over $1,000,000, the only people who borrowed more than $1,000,000 did so because they had to.

They refinanced again on 1/4/2007 with a $1,293,750 Option ARM, a $86,250 stand-alone second, and a $250,000 HELOC. They quit paying sometime in mid 2009.

Foreclosure Record

Recording Date: 12/04/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/02/2009

Document Type: Notice of Default

The got to squat in luxury for about a year and a half before the servicer, Wells Fargo, foreclosed on them on 10/12/2010. I can't be certain why Wells Fargo didn't immediate sell the house, but the most likely reason is MLS managment. They didn't feel there was a market for this property then. Of course, the market has continued to slide, and now the recovery on this bad loan is going to be even less. Perhaps the prospect of continuing declines is prompting them to sell now before things get even worse.

For whatever reason, this property is now for sale at the worst time of the year, and the loss is going to be enormous.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 29 ANTIQUE ROSE Irvine, CA 92620

Resale House Price …… $1,014,000

Beds: 5

Baths: 6

Sq. Ft.: 3900

$260/SF

Property Type: Residential, Single Family

Style: 3+ Levels, Tuscan

View: Mountain

Year Built: 2005

Community: Northwood

County: Orange

MLS#: S675997

Source: SoCalMLS

On Redfin: 1 day

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Must see with a great value. Upgraded home in desirable Northwood Arbors tract. Gated with incredible HOA amenities. 5 bedrooms – bonus room upstairs and 1 bedroom/bath plus powder room is downstairs, Gourmet Kitchen with Marble Countertops and center island. Very desirable floor plan. Upstairs balcony overlooking large front yard. Large backyard with professional landscape – firepit, custom water feature, outdoor kitchen/barbeque area, and gazebo type patio cover. There is a two car garage plus a one car garage (total of 3).

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Proprietary IHB commentary and analysis

Resale Home Price …… $1,014,000

House Purchase Price … $1,651,495

House Purchase Date …. 10/12/2010

Net Gain (Loss) ………. ($698,335)

Percent Change ………. -42.3%

Annual Appreciation … -47.8%

Cost of Home Ownership

————————————————-

$1,014,000 ………. Asking Price

$202,800 ………. 20% Down Conventional

4.03% …………… Mortgage Interest Rate

$811,200 ………. 30-Year Mortgage

$210,847 ………. Income Requirement

$3,887 ………. Monthly Mortgage Payment

$879 ………. Property Tax (@1.04%)

$325 ………. Special Taxes and Levies (Mello Roos)

$211 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$145 ………. Homeowners Association Fees

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

$5,447 ………. Monthly Cash Outlays

-$1009 ………. Tax Savings (% of Interest and Property Tax)

-$1163 ………. Equity Hidden in Payment (Amortization)

$285 ………. Lost Income to Down Payment (net of taxes)

$147 ………. Maintenance and Replacement Reserves

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

$3,707 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$10,140 ………. Furnishing and Move In @1%

$10,140 ………. Closing Costs @1%

$8,112 ………… Interest Points @1% of Loan

$202,800 ………. Down Payment

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

$231,192 ………. Total Cash Costs

$56,800 ………… Emergency Cash Reserves

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

$287,992 ………. Total Savings Needed

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I hope to see you tinight at JT Schmid's Restaurant & Brewery, 2415 Park Avenue, Tustin, CA 92782, (714) 258-0333.IHB Presentation Night

Irvine Home Address … 4 FORT SUMTER Irvine, CA 92620

Resale Home Price …… $800,000

There's no need to say shit you already know

The question is just how far will this go

How far will he take it?

And when will he stop?

Shady man I done told you once homie to easy up

But you just won't listen will ya, nah I guess not

You just can't can ya, man I can't stand ya

You're rotten, what you plottin' for us?

Man when are you gonna let up

I guess things are gonna get much worse 'fore they get better

Eminem — Things Get Worse

The mainstream media hasn't put much effort into covering one of the biggest problems in banking today: the huge hidden losses in second mortgages festering on lender's balance sheets. I reported back in April of 2010 that banks refuse to recognize second mortgage losses. At the time, lenders were still under the delusion that prices were going to rebound and these second mortgages would again be secured by the value of the underlying property. That was never going to happen.

The sad truth is borrowers could never afford these loan payments without appreciation and continued Ponzi borrowing. The underlying value was never there, only the illusion of value created by the housing bubble. The reality is, most of these mortgages are worthless. With the first mortgages of many underwater, the second mortgages have no value whatsoever. However, that isn't what banks are showing on their balance sheets. They are still pretending these loans are going to be repaid.

Second Mortgages May Cost Banks $23 Billion, Nomura Says

October 07, 2011, 4:52 PM EDT — By James Sterngold

Oct. 7 (Bloomberg) — Losses on home-equity and other second mortgages may cost the four biggest U.S. banks $22.6 billion more than budgeted, with Wells Fargo & Co. most at risk, according to Glenn Schorr, an analyst with Nomura Holdings Inc.

In case you forgot how we got here:

Irresponsible lending caused this problem. Lenders deserve the losses they will endure.

The tally for Wells Fargo, the largest U.S. home lender, may reach $8.79 billion after accounting for taxes and existing provisions, followed by Bank of America Corp. at $6.2 billion, JPMorgan Chase & Co. at $5.51 billion and Citigroup Inc. at $2.12 billion, Schorr told clients in a report today. Before taxes and reserves, losses could total $73 billion, he wrote.

While the losses may be large, “we don’t see this as a ticking time bomb” for banks because of reserves and the damage will be spread over a long period, Schorr wrote. “They will be given time to address any shortfalls.”

Yes, they have been given time due to mark-to-fantasy accounting. Lenders have not been forced to recognize the obvious: these loans are going to be losers.

Regulators are examining whether banks accurately valued home-equity and other second-lien mortgages and if they’ve put enough aside to cover losses, seven people with knowledge of the matter have said. Investors are skeptical about the true worth of assets held by U.S. lenders, pushing the KBW Bank Index down about 32 percent this year to 65 percent of stated book value for the 24 companies represented.

Apparently investors do not accept the bogus accounting being reported.

Measured by gross losses, the tally for Charlotte, North Carolina-based Bank of America could exceed $24 billion, while Wells Fargo, based in San Francisco, may lose as much as $20 billion, Schorr estimated. New York-based JPMorgan’s liability could be $19.5 billion, while New York-based Citigroup could see as much as $8.96 billion, he said.

Thomas Kelly, a spokesman for JPMorgan, Natalie Brown at Wells Fargo, Dan Frahm at Bank of America and Citigroup’s Shannon Bell declined to comment.

Underwater Loans

The loss estimates depend on how much equity is left in the house. For Citigroup, 44 percent of its second mortgages show the homeowner’s overall debt including first mortgages is greater than the price of the home, “which would suggest little to no recovery of value if a default occurs,” according to Nomura.

Pay careful attention to that statistic. Forty-four percent of the first mortgages are underwater. When the first mortgage is underwater, the second mortgage has no value. The lender may be lucky to salvage 5 cents on a dollar from a zombie debt collector. If nearly half of the loans have no value, the other half likely have very little.

Without a dramatic increase in home prices, strategic default will eventually expose these loans as worthless. And since home prices will not be going up any time soon, its only a matter of time before banks must recognize these losses.

Debt exceeds the home’s value in 40 percent of Wells Fargo’s second mortgages, 36 percent at Bank of America and 27 percent for JPMorgan, Nomura said.

Holders of second liens can see their investment wiped out when a homeowner defaults because a lender with a primary mortgage gets first claim on the house in a foreclosure sale. If the value drops too far, nothing is left to pay the second lien.

Schorr said losses may not be as severe as they appear at first glance because some home-equity lines of credit are first mortgages.

Very few HELOCs with any balances are first mortgages. While it's true many who own properties free-and-clear open HELOCs as first mortgages, most of these people don't use them.

Bankers have said borrowers tend to keep making payments as long as they’re able, even if the home’s value is “underwater,” because they want to keep access to their line of credit.

–Editors: Rick Green, William Ahearn

To contact the reporter on this story: James Sterngold in New York at jsterngold2@bloomberg.net.

To contact the editor responsible for this story: Rick Green in New York at rgreen18@bloomberg.net

I documented last year that borrowers default on first mortgage and keep second mortgage current. That doesn't mean these loans will be repaid in full. In fact, once these borrowers decide to strategically default, they stop paying the second mortgage too.

The losses on second mortgage and HELOCs are staggering. Only the mark-to-fantasy accounting and rosy assumptions are preventing lenders from recognizing this truth. Eventually, most of these debts will need to be written down, but first, banks are being given a chance to earn their way out of a hole. Some will make it, but some will not.

MOTIVATED TO SELL, EQUITY SELLER NEEDS AN OFFER NOW!!

It's very possible (if not likely) that the statement above made by the listing agent is complete bullshit. However, assuming it is not, this is the time of year when the most motivated sellers are the ones with their properties still on the market. October through March is the best time of year for buyers to be active.

Often the sellers who held to their WTF asking prices during the prime selling season get desperate — or realistic depending on your point of view — and become anxious to sell. Sometimes sellers this time of year panic and capitulate. When they do, they may sell a property for far less than asking price — sometimes even less than offers they had during the summer.

There is no telling whether or not these sellers are desperate and willing to accept a low-ball offer, but if any motivated sellers are out there, now is the time of year to find them. Based on the mortgage history and the fact he is in default suggests this seller wants out badly.

• This property was purchased 6/25/1998 for $300,000. The owners used a $270,000 first mortgage and a $30,000 down payment.
• On 6/27/2001 they refinanced with a $356,000 first mortgage. They got back their down payment plus an additional $56,000 in HELOC booty.
• On 6/4/2004 they refinanced again with a $333,700 first mortgage and a $100,000 second mortgage.
• On 3/26/2008 they refinanced with a $652,000 first mortgage — WTF was Wachovia thinking making this loan in 2008?
• A notice of default was issued a few weeks ago.

Foreclosure Record

Recording Date: 09/21/2011

These owners needs to net about $675,000 after commissions and closing costs to pay off their mortgage. Basically, anything they gets over $715,000 is remaining equity at closing. They're hoping for $85,000, but since they're in default on their mortgage, they needs to sell now rather than wait until spring because they may be foreclosed on during the winter.

Are these owners motivated enough to make a deal? They look like a good candidate.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 4 FORT SUMTER Irvine, CA 92620

Resale House Price …… $800,000

Beds: 4

Baths: 2

Sq. Ft.: 2795

$286/SF

Property Type: Residential, Single Family

Style: Two Level, Other

Year Built: 1981

Community: Northwood

County: Orange

MLS#: S675706

Source: SoCalMLS

Status: Active

On Redfin: 2 days

——————————————————————————

A GORGEOUS HOME IN AN IDEAL LOCATION!!! Downstair bedroom & bath room. It even has an office/library downstairs. 4 Bedroom+Bonus Room or 5th Bedroom with full 3 Baths. Highly UPGRADED with SHOWS GREAT with remodeled kitchen featuring granite counters, maple cabinets, crown & base moulding , recessed lightings, , CUSTOM PAINT, UPGRADED hardwood floor. SPACIOUS LR offers high ceilings with hardwood floor, skylight, fireplace. Newer A/C unit & salt purified water system for your faimily. A VERY unique home in a great association and only steps to the association pool and 2 night lighted tennis courts. Northwood High School District too!!! NICE CURB APPLEAL, BE THE ONE TO DO YOUR OWN UPGRADES IN THIS VERY DESIERABLE AND OPEN FLOORPLAN. LOW ASSOCIATION AND NO MELLOOROOS. WHAT A DEAL !! HURRY MOTIVATED TO SELL , EQUITY SELLER NEEDS AN OFFER NOW!! CAN CLOSE FAST

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Downstair? faimily? APPLEAL? DESIERABLE? MELLOOROOS?

Proprietary IHB commentary and analysis

Resale Home Price …… $800,000

House Purchase Price … $300,000

House Purchase Date …. 6/25/1998

Net Gain (Loss) ………. $452,000

Percent Change ………. 150.7%

Annual Appreciation … 7.3%

Cost of Home Ownership

————————————————-

$800,000 ………. Asking Price

$160,000 ………. 20% Down Conventional

4.03% …………… Mortgage Interest Rate

$640,000 ………. 30-Year Mortgage

$154,511 ………. Income Requirement

$3,067 ………. Monthly Mortgage Payment

$693 ………. Property Tax (@1.04%)

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

$167 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$65 ………. Homeowners Association Fees

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

$3,992 ………. Monthly Cash Outlays

-$711 ………. Tax Savings (% of Interest and Property Tax)

-$917 ………. Equity Hidden in Payment (Amortization)

$225 ………. Lost Income to Down Payment (net of taxes)

$120 ………. Maintenance and Replacement Reserves

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

$2,709 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$8,000 ………. Furnishing and Move In @1%

$8,000 ………. Closing Costs @1%

$6,400 ………… Interest Points @1% of Loan

$160,000 ………. Down Payment

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

$182,400 ………. Total Cash Costs

$41,500 ………… Emergency Cash Reserves

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

$223,900 ………. Total Savings Needed

——————————————————————————————————————————————————-

The California Attorney General has pulled out of foreclosure settlement talks from a desire to pander to loan owners.

Irvine Home Address … 14 BOWIE Pl Irvine, CA 92602

Resale Home Price …… $649,000

1,2,3,4

Right now, right now, right now

Someone get me outta this place

Get me outta here

Esmée Denters — Outta Here

I have mixed emotions about the settlement talks with banks. First, I think the entire issue of foreclosure improprieties is political theater and an effort to extort money from the banks for doing what was completely within their rights. On the other hand, I want to see the banks endure more pain for the problems they created. They should have been nationalized back in 2008. It's a bit like football when the refs blow a call then make up for it with a bogus call against the other team. Two wrongs don't make a right.

Since this issue is political, the attorneys general who are involved are responding to different political constituencies in their home states. Periodically, one or another will pull out of the talks to appease their political base. It's just like the drama we just witnessed with the debt ceiling. The latest political grandstander is our own Attorney General, Kamala D. Harris.

California Pulls Out of Foreclosure Talks

Move Is Serious Blow to Federal and State Effort to Reach $25 Billion Deal With Banks Over Questionable Practices

October 1, 2011 — By RUTH SIMON And NICK TIMIRAOS

California Attorney General Kamala D. Harris pulled out of settlement negotiations with the nation's biggest banks over alleged foreclosure abuses, calling the proposed deal “inadequate for California homeowners.”

At the Attorney General for the State of California, isn't her duty to protect California residents and taxpayers? Protecting loan owners should not be her highest priority.

The decision by Ms. Harris delivers a serious blow to efforts by the Obama administration and 50 state attorneys general to forge a $25 billion settlement with the nation's largest banks over “robo-signing” and other questionable foreclosure practices.

Her actions follow the withdrawal of New York from the talks. Without the participation of California and New York in the negotiations, banks will be far less likely to agree to the multibillion dollar settlement that federal and state officials have spent months pursuing.

Without California and New York, there is no agreement. California has the largest mortgage market and the greatest number of underwater borrowers. New York has a large market filled with squatters in shadow inventory. The bulk of the problems with mortgages are in these two states and perhaps Florida.

California remained a critical constituent for any deal because it has more borrowers who are underwater, or owe more than their homes are worth, than any other state. California also has more borrowers that are behind on their mortgages or in foreclosure than any other state but Florida.

The move by Ms. Harris, who took office in January, comes after 11 months of often-frustrating negotiations between big banks such as Bank of America Corp., J.P. Morgan Chase & Co. and Citigroup Inc. Representatives for the three banks declined to comment.

A spokeswoman for Ally Financial Inc., the fifth-largest mortgage servicer and parent of GMAC Mortgage, called the decision “disappointing for borrowers in California” who are in financial distress.

LOL! Ally Financial is concerned about borrowers? Give me a break. California pulling out of the deal is disappointing to lenders and mortgage insurers who are looking to limit their liability.

One key point of contention has been the extent to which banks should be released from additional legal claims involving the mortgage crisis in exchange for signing onto the foreclosure settlement.

In recent months, other states, including Delaware, Massachusetts, Nevada, Minnesota and Kentucky, have also expressed concerns over the scope of any settlement. Some states and critics of the banks argue that officials haven't done a thorough investigation of other potential improprieties.

In a letter sent Friday to Associate U.S. Attorney General Thomas Perrelli and Iowa Attorney General Tom Miller, who have been leading the negotiations, Ms. Harris said her decision to break off from the group was driven in part by those two key concerns. “It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated,” she said.

This is really about the release of liability. If the conduct of banks in California has not been investigated by now, that is the Attorney General's fault.

She added that “the relief contemplated would allow too few California homeowners to stay in their homes.” Ms. Harris also cited a recent “troubling surge in foreclosures,” which had plummeted in the wake of the robo-signing scandal.

This is where it becomes obvious she is pandering. Why should loan owners be granted relief to stay in homes they cannot afford? This directly places the interests of loan owners in conflict with the interests of prudent future buyers who could afford those properties. She is choosing sides and placing the interests of imprudent and overextended California loan owners over the interests of buyers who can sustain ownership.

Further, there is nothing troubling about the recent surge in foreclosures. Foreclosures are essential to the economic recovery. Our attorney general is a pandering politician meddling in a financial market in a way that will encourage moral hazard and slow the economic recovery. This woman is either well meaning and clueless, or shrewdly self serving.

In a statement, Mr. Miller called California “an important part of our team” but said that the states “fully expect to reach a settlement with the banks.”

A Justice Department spokeswoman said that discussions would continue “to ensure that the banks are held fully accountable for their actions.”

That's bullshit. If the banks were held fully accountable, they would have been nationalized in 2008, equity investors would have lost everything, bondholders would have taken a big haircut, and the idiots responsible for this mess would have been fired.

The split highlights a broader disagreement between some government officials involved in the negotiations. The Obama administration has argued that a settlement could help provide immediate benefits to borrowers, while creating certainty for the housing market. “We are 100% focused on providing relief to homeowners while it can still make a difference and save homes from foreclosure,” said Mr. Miller. “Providing relief after the foreclosure crisis is over would be a hollow victory indeed.”

Nice to know they are 100% focused on the wrong things, and they're hell bent on making this problem worse.

Friday's decision by California wasn't completely unexpected. As the talks have dragged on, political pressures have mounted, with both sides expressing unhappiness with any deal. Conservatives denounced the settlement as a “shakedown” of banks, while labor unions and liberal political groups warned of a bank giveaway.

Yes, it is both of those things. The banks should be shaken down to feel the full consequences for the mess they created. And any deal which limits liability is a giveaway to the banks.

Ms. Harris and other Democratic state attorneys general have faced intense lobbying from different factions, including critics who want the states to hold out for a bigger deal and the Obama administration, which has shepherded the deal. A spokesman for Ms. Harris said the attorney general made her decision based on “the evidence and the merits of the deal, not other considerations.”

Yeah, right.

The loss of California dims the Obama administration's push to force banks to write down loan balances as part of any settlement.

If principal write downs are part of a settlement endorsed by the Obama administration, it would clearly demonstrate that Obama is either clueless or listening to the wrong advisors.

Even if the remaining states and federal agencies reach a deal, it is likely to cover far fewer borrowers as the price tag drops. The settlement talks were prompted by so-called robo-signing, where bank employees signed off on hundreds of loans a day and falsely claimed they had personally reviewed documents to give the bank the right to foreclose.

The mess deepened as judges raised questions about how banks documented their ownership of loans and whether financial firms fabricated other paperwork. Regulators have found what they said are widespread weaknesses in mortgage-servicing operations.

Over the past year, banks have sharply slowed down foreclosures. Foreclosure delays have been most pronounced in “judicial” states where banks must foreclose on borrowers by going before a court. California allows foreclosures through a non-judicial process.

Regulators and banks say they have uncovered very few cases where borrowers entered foreclosure without missing payments.

Robo-signer was a political issued used by the Left to pander to loan owners. If there had been any legitimate problems where people current on their mortgages were being foreclosed on, then we could all rightfully agree there was a problem with the system. But since only people who were not paying their mortgages were facing foreclosure — and this group should face foreclosure — then the entire robo-signer issue is exposed for the political theater it was.

But the crisis has exposed numerous cases where banks couldn't prove they had the right to take back homes or where borrowers believed they were receiving loan modifications, only to lose their home.

Anyone who was not paying their mortgage and the bank foreclosed has no right to complain. Lenders have the right to call to auction any property where the borrower is not making their payments. Banks must adhere to the law regarding timelines and notices, but it is always at their discretion to foreclose if they want to. The real travesty isn't the prompt processing of foreclosures, it is the delayed processing and squatting in shadow inventory.

The unraveling of any settlement also raises the prospect that banks will face separate legal action from a handful of state attorneys general.

Ms. Harris traveled to Washington last week for a meeting with banks and state negotiators in an effort to resolve her concerns. She said that her office will continue to investigate questionable mortgage practices and will push for additional legislative and regulatory reforms. This year, she announced the creation of a “mortgage fraud strike force” to study all stages of mortgage lending, from origination to the servicing of troubled loans to the packaging of loans into securities.

Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com

Mortgage fraud strike force? More symbolic politics. Perhaps she should appoint a foreclosure czar too. I am surprised Obama hasn't done that yet. Whenever politicians want to look like they are doing something about a problem they cannot property address, they appoint a czar.

A flipper cleaning up after a HELOC abuser

The previous owners of this property were irresponsible with their mortgage borrowing. They imploded when the mortgage equity withdrawal income supplementation was shut off. A flipper bought the property at auction with hopes of profiting from the foollishness of the lenders and the borrowers.

• The previous owners bought the house on 6/30/2000 for $349,500. They used a $279,600 first mortgage and a $69,900 down payment.
• On 12/28/2000 they refinanced with a $275,000 first mortgage. They actually paid down their mortgage at that point.
• On 6/24/2002 they obtained an $18,000 HELOC.
• On 6/25/2003 they refinanced with a $295,600 first mortgage. They got their first taste of mortgage equtiy withdrawal. They must have liked it.
• On 6/3/2004 they went back for their yearly cash infusion and obtained a $250,000 HELOC.
• On 5/24/2006 they obtained a $424,750 HELOC. There is no way to be certain how much of this they took out and spent, but since they defaulted and lost the house in foreclosure, it must have been a signifant amount.
• The quit paying in late 2009 and squatted through April 2011.

Foreclosure Record

Recording Date: 05/18/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 05/11/2010

Document Type: Notice of Default

Foreclosure Record

Recording Date: 02/04/2010

Document Type: Notice of Default

The flipper who bought the property is an investment LLC with a $5,000,000 HELOC attached to the property. They probably have a blanket line of credit on multiple properties to use for renovations.

Will they get their asking price and make a tidy profit?

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 14 BOWIE Pl Irvine, CA 92602

Resale House Price …… $649,000

Beds: 4

Baths: 3

Sq. Ft.: 2000

$324/SF

Property Type: Residential, Single Family

Style: Two Level, Contemporary

View: City, Hills

Year Built: 1998

Community: West Irvine

County: Orange

MLS#: S675449

Source: SoCalMLS

On Redfin: 5 days

——————————————————————————

Amazing City View Home! Kitchen remodeled with new granite counters and new appliances. Kitchen opens to family room. Family room with fireplace. New carpet, paint, baseboards and travertine stone flooring. Recessed lighting. Mainfloor bedroom and bath. Large master bedroom with his and hers walk in closets and city and hills views. Granite counters in bathrooms. Indoor laundry room upstairs. STANDARD SALE!

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Resale Home Price …… $649,000

House Purchase Price … $520,500

House Purchase Date …. 5/11/2011

Net Gain (Loss) ………. $89,560

Percent Change ………. 17.2%

Annual Appreciation … 54.1%

Cost of Home Ownership

————————————————-

$649,000 ………. Asking Price

$129,800 ………. 20% Down Conventional

4.03% …………… Mortgage Interest Rate

$519,200 ………. 30-Year Mortgage

$127,177 ………. Income Requirement

$2,488 ………. Monthly Mortgage Payment

$562 ………. Property Tax (@1.04%)

$100 ………. Special Taxes and Levies (Mello Roos)

$135 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$0 ………. Homeowners Association Fees

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

$3,285 ………. Monthly Cash Outlays

-$404 ………. Tax Savings (% of Interest and Property Tax)

-$744 ………. Equity Hidden in Payment (Amortization)

$182 ………. Lost Income to Down Payment (net of taxes)

$182 ………. Maintenance and Replacement Reserves

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

$2,502 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,490 ………. Furnishing and Move In @1%

$6,490 ………. Closing Costs @1%

$5,192 ………… Interest Points @1% of Loan

$129,800 ………. Down Payment

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

$147,972 ………. Total Cash Costs

$38,300 ………… Emergency Cash Reserves

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$186,272 ………. Total Savings Needed

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Remember Micheal T Pines, the attorney who lost his license for encouraging people to break into their foreclosed homes and steal them back? A student working on his PhD in Psychology emailed me and asked if readers would be willing to answer some questions about the story. The link to the questionnaire is here if you are willing to participate.