Sales in the tradtionally strong spring and summer selling season were 33% below historic norms of the last 24 years. Prices were also down 6.7% year-over-year.

Irvine Home Address … 39 REGAL Irvine, CA 92620

Resale Home Price …… $415,000

This desperation

Dislocation

Separation

Condemnation

Revelation

In temptation

Isolation

Desolation

Isolation

Let it go

And so fade away

U2 – Bad

The 2011 selling season was bad. Sales were bad, 33% lower than the average of the last 24 years, and prices were bad, 6.7% lower than a year ago. Of course, whether or not lower prices are good or bad depends on your position in the market. For owners, it's bad. For renters looking to buy, it's good.

Homebuying season 3rd worst on record

September 28th, 2011, 1:52 pm — posted by Jeff Collins

Orange County’s 2011 homebuying season — the traditionally busy March-August period — saw transactions drop to their third-lowest level since DataQuick Information Systems began tracking housing here in 1988.

Only 2007 and 2008 — the bottom of the housing market crash — were slower than this year’s pace.

Sorry, but 2007 and 2008 were not the bottom of the housing market crash. Those were the two steepest years of price declines, but we haven't seen the bottom yet.

The reason 2007 and 2008 had lower transaction volumes is because the financing was abruptly removed from the market. Loan balances on new originations declined precipitously, down payments skyrocketed out of necessity, and the only sales in the market were those few who had large amounts of cash to close the deal.

DataQuick figures show:

• Home sellers and buyers managed to close 15,946 deals from March through August this year.
• That’s 33% lower than the 24-year average of nearly 24,000 housing deals in a typical spring and summer.
• The slowest year on record: 14,145 completed sales in the March-August period of 2008.
• The busiest year: 1988, when 32,176 local homes were sold.
• Five other years saw sales of 30,000 or more homes during the peak months: 2002 (30,193), 1999 (30,508), 1998 (30,528), 2005 (31,147), and 2003 (31,649).
• Things were only slightly better this year for the resale of existing condos and for sales of newly built homes. Both had the fourth worst homebuying seasons on record.

The sales of newly homes was the forth worst on record this year. Bad product, bad pricing, and a bad economy will do that.

• This year saw buyers close on 4,596 existing condos, down 20% from an average of more than 5,700 deals during the peak buying months.
• Sales of newly built homes of all types — houses, townhomes and condos — totaled 1,172 units, down 61% from the average of more than 3,000 homes in the peak months.
• Existing single-family home sales totaled 10,178 units, or 32% below the average of just over 15,000 houses in the six-month period.

Condos being down only 20% were the bright spot in the sales report. Condos are nearing the bottom, and the higher sales volumes are a direct result of more realistic prices for that product.

Nationally, total home sales this spring and summer were the weakest on records dating to 1963, the Associated Press reported. The figures underscore how badly the housing market is faring and suggest that a recovery is years away.

The AP reported:

• Roughly 168,000 newly built homes were sold from March through August, Commerce Department figures show. In a healthy six-month buying season, about 400,000 new homes would sell.
• Among resales, about 2.8 million homes sold from March through August this year. That’s roughly as many as in the same periods in 2009 and 2010. In a healthy market, about 3.3 million would be sold in that six-month stretch.

These super low sales volumes reflect how depleted the buyer pool is. A long recession, high unemployment, bad credit, falling prices, and buyer reluctance contribute to weak sales. Low sales volumes portend lower prices ahead.

O.C. home prices down 6.7% in year

September 30th, 2011, 12:01 am — posted by Jon Lansner

Highlights of DataQuick’s Orange County homebuying report. For the 22 business days ending Sept. 14 – the latest numbers — Orange County’s real estate market saw …

• Median selling price for all residences of $417,000 – that is off 6.7% vs. a year ago.
• Total Orange County sales of 2,622 residences closed in the latest period — that is up 2.1% vs. a year ago.
• Note: 13 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2010:

Slice	Price	Price vs. year ago	Sales	Sales vs. year ago	Sales vs. ’88-’10 avg.
Houses	$469,000	-10.8%	1,746	+4.6%	-22.7%
Condos	$261,000	-12.9%	727	-0.8%	-15.6%
New	$598,500	+3.1%	149	-9.7%	-71.7%
All O.C.	$417,000	-6.7%	2,622	+2.1%	-28.1%

And more analysis ….

• $417,000 median selling price is 35% below June 2007′s peak of $645,000.
• Current price is 7.3% below 2010′s peak (May and July) of $450,000; 2% above end of 2010′s median ($410,000.)
• The most recent median is 13% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 17% of the $275,000 price drop from the peak.

The median in January 2009 was distorted by the abundance of sales at the low end and a lack of sales at the high end. With the mid to high end beginning to capitulate, the current mix is somewhat more balanced. That being said, the January 2009 median may be revisited this January. With an abundance of inventory, banks like BofA getting more desperate for cash, and the normal cyclical nature of the market, this fall and winter could be very ugly.

• Compared to cyclical low, single-family house median is 12% higher ($418,250 in January 2009); condo median is 4% higher ($252,000 in March 2009.) Builder prices for new homes are 41% above June 2009′s $424,000 bottom.

Does anyone who bought new in 2009 believe they are up 41% on their investment? The change in mix creates quite a large distortion.

• The median selling price of a single-family home is 36% less than their peak pricing (June ’07). Condos sell 44% below their peak in March 2006. Builder prices for new homes are 31% below their February ’05 top.

Perhaps I wasn't so far off after all….

• Single-family homes were 80% more expensive than condos in this period vs. 76% a year ago. From 1988-2010, the average house/condo gap was 57%.

Some of the price gap between condos and single-family homes is due to the difference in cost between their methods of financing. Single-family detached homes in Irvine tend to be purchased with conventional financing. The buyer is putting 20% down, and the cost of financing does not include private mortgage insurance. Prices of many SFRs under this scenario are near rental parity.

The condo buyer is often using FHA financing. They are only putting 3.5% down, and they are paying 1.15% in FHA insurance premiums. This enormous additional cost pushes the 4% interest rate up to near 6% for an effective rate.

• Builder’s new homes sales were 6% of all residences sold in the period vs. 6% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.

It's that time of year

During the spring and summer when realtors are busy creating false urgency to create buying interest, most readers of of this blog know to wait for the fall and winter to find motivated sellers. Well, here we are.

Prices are falling and sales volumes are low. Sellers who feel they must sell know this is a difficult market for them. Only motivated sellers are going to close deals over the next six months. The savvy buyers who are active now know they have options, and if a seller won't come to them, they can find a different one. There is still plenty of inventory.

100% financing holdout

Most people who bought with 100% financing have already walked away from their properties, but every once in a while, we still see them appear on the MLS. Since 100% financing was a late bubble phenomenon, nearly everyone who used it is underwater and paying much more than a comparable rental. If they could accurately measure the level of strategic default on 100% financing deals, it would be close to 100%.

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

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 39 REGAL Irvine, CA 92620

Resale House Price …… $415,000

Beds: 2

Baths: 2

Sq. Ft.: 1205

$344/SF

Property Type: Residential, Condominium

Style: 3+ Levels, Mediterranean

Year Built: 2006

Community: Woodbury

County: Orange

MLS#: S672975

Source: SoCalMLS

Status: Active

On Redfin: 22 days

——————————————————————————

Lovely townhome located in fabulous Woodbury! True Southern California living! Entrance to your home is through an open courtyard featuring an outdoor gas fireplace and sitting area. Relax in one of the nearby association pools & spas. This tri-level home brings all the comfort you've been looking for!!

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

Proprietary IHB commentary and analysis

Resale Home Price …… $415,000

House Purchase Price … $490,000

House Purchase Date …. 3/28/2006

Net Gain (Loss) ………. ($99,900)

Percent Change ………. -20.4%

Annual Appreciation … -2.9%

Cost of Home Ownership

————————————————-

$415,000 ………. Asking Price

$14,525 ………. 3.5% Down FHA Financing

4.00% …………… Mortgage Interest Rate

$400,475 ………. 30-Year Mortgage

$129,236 ………. Income Requirement

$1,912 ………. Monthly Mortgage Payment

$360 ………. Property Tax (@1.04%)

$250 ………. Special Taxes and Levies (Mello Roos)

$86 ………. Homeowners Insurance (@ 0.25%)

$461 ………. Private Mortgage Insurance

$270 ………. Homeowners Association Fees

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

$3,339 ………. Monthly Cash Outlays

-$297 ………. Tax Savings (% of Interest and Property Tax)

-$577 ………. Equity Hidden in Payment (Amortization)

$20 ………. Lost Income to Down Payment (net of taxes)

$72 ………. Maintenance and Replacement Reserves

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

$2,557 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

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

$4,150 ………. Closing Costs @1%

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

$14,525 ………. Down Payment

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

$26,830 ………. Total Cash Costs

$39,100 ………… Emergency Cash Reserves

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

$65,930 ………. Total Savings Needed

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

Demand from owner-occupants alone is insufficient to mop up the foreclosure mess. Aided by entreprenuers providing package deals, cashflow investors will stabilize the housing market.

Irvine Home Address … 1305 SOLVAY AISLE Irvine, CA 92606

Resale Home Price …… $275,000

I need more of you,

changin' my rain into sun

More of you,

puttin' my blues on the run

I need more of you,

darling, I need more of you

More, anything less wouldn't do.

Bellamy Brothers — I Need More of You

Shadow inventory can not be absorbed by first-time buyers. There are simply not enough owner-occupants to absorb the inventory due to come to the market over the next several years. Real estate cashflow investors are needed to stabilize the housing market. These investors are the only other source of demand available.

There are investment holdings companies that buy and hold rentals, and they will be part of the solution. I have recently formed Radiant Homes for this purpose. However, due to the practical problems with managing many properties over diverse geographies, it will still fall to individual investors to buy and hold the remaining properties on the market.

I have recently made a change to the business plan of my flipping fund. I will still sell homes to owner occupants in Las Vegas, but while looking for an owner occupant to purchase a property, I am also looking for a renter. Whichever deal I find first will determine the property's fate.

Each home I rent is made available to cashflow investors i reach through this blog and the presentations I do monthly. I decided to make this change to better serve readers who have expressed interest in acquiring these properties, but didn't want to go through all the hassles of obtaining their own, fixing them up, and finding a renter. I do all of that so you don't have to.

If you want to learn more about your options for investing in Las Vegas cashflow properties, please attend the upcoming presentation at JT Schmids on October 12. Though not required, we are asking to please RSVP to sales@idealhomebrokers.com. (click on image below).

As it turns out, the business plan I am switching over to with my flipping fund is gaining popularity as other entrepreneurs are seeing the same opportunity in the wake of the housing bust.

When Investing in Foreclosures, Turn-Key Is Key

Published: Tuesday, 27 Sep 2011 | 11:16 AM ET

By: Diana Olick

CNBC Real Estate Reporter

It was just hitting 105 degrees in Dallas when Phillip Carter herded a group of Australian investors onto a bus and headed out to see some previously foreclosed properties. Cowboy to cowboy, Carter tells them the Dallas market is ripe for profit, as rental demand surges and rents head higher. The difference in his business model is that the cash is ready to flow, immediately.

“We buy foreclosures in bulk from the banks, REO's, and rehab them and sell them with property management,” says Carter, who sells his properties complete with renters. “It's a turn-key package that provides cash flow.”

I recognized the allure of this business plan not long after my parents went out to Las Vegas this spring. I have convinced them to go to Las Vegas specifically to buy cashflow properties. Since they are recently retired, this was a good time for them, and they are closer to my family here in Irvine.

When they arrived, I showed them all the rentals I had in inventory, but they were apprehensive about actually buying one of them. After about a month, I bought an occupied property, and the tenants asked to stay on. When I told my father, he became excited and asked to buy that one. It was at that point I realized what was holding him back was the lack of assurance of rent from buying an empty property. If it caused my father to be cautious, it must certainly be an objection for others.

Unfortunately, this put me in a dilemma as fund manager. Once I put a renter in a property, I can't sell it to a local owner-occupant. I am committed to selling to a caashflow investor once I rent it. It would take a leap of faith on my part to believe strongly enough in my ability to find investors through the blog to make this change.

After considering the risks and rewards, I felt it was in the best interest of my fund investors to go the rental route. Worst case scenario is the fund owns a number of rental properties I cannot sell, but then the fund would earn a nice return on the rental income. Since the worst case was profitable, I didn't feel I had much to lose.

Carter is promising 20 percent cash return on most of his investments, and his “Texas Cash Cow Investments” is just the business model his largely foreign clients want.

Travis Henley is hitting Kansas, Indianapolis, Memphis and Atlanta, ready to put the relative power of his Australian dollar to work against the still-crumbling US housing market. Carter's properties are just what he's looking for.

“We're looking for cash flow and maybe a bit of appreciation as well, but at this stage we're mainly looking at cash flow,” says Henley.

Ordinarily, real estate investors must chose between properties with good current cashflow and those with good appreciation potential. It's rare to find properties with potential for both. One of the main reasons I am excited about the Las Vegas market is because prices have crashed so much, current cashflow is great, and the prices have overshot fundamental valuations so far to the downside, i believe there is great potential for future appreciation.

Fellow Aussie, Damian Nagus, says the exchange rate alone will offer enough capital appreciation, but he's still looking to hold for a long time.

“The money is patient. I've been investing in Australia for 25 years and own a reasonable amount of property, and so we're here with a ten year horizon,” estimates Nagus.

Anyone considering investing in Las Vegas should also have at least a ten-year horizon if they want to see prices appreciate. For the next few years, prices may go down, but it isn't likely they will go up. It won't be until the foreclosure supply is absorbed that prices will appreciate strongly.

“We view that it's going to be a good five years without much happening, as America tries to get it's way out of where it is now, and in ten years time we will look at where we are and see if we need to sell or just continue to hold.”

The ability to be patient is one of the great features to holding cashlfow properties. If you are obtaining a 8% return for holding, your pressure to sell is nil.

Nagus and Henley think there may be better cash flow in the Atlanta market, but Carter claims Dallas is the best bet now.

Dallas was not a boom-to-bust market, like Phoenix or Las Vegas, and home prices are down just 3 percent annually, according to the S&P Case Shiller home price index released today. That's better than the top 10 and top 20-city composites.

“Dallas is the first market to take off because we're having the largest population increase in history here,” notes Carter. “It's increasing the market in that the inventory is going down very quickly and prices are going up. Rents are going up and appreciation is going up.”

Texas and Georgia have historically been good cashflow investment markets. The problem with Texas is the onerous property taxes, and neither Texas or Georgia have strong potential for future appreciation. Good job growth will translate to good sales absorption, but not necessarily to higher prices and rapid appreciation. The high property taxes and state laws against mortgage equity withdrawal cause Texans not to bid up their property values like we do here in California.

Carter would like to see the federal government help investors like himself by loosening up some of the financing guidelines at mortgage giants Fannie Mae and Freddie Mac.

So would I. Actually, I would prefer the government to get completely out of the property finance market, but if they are going to be involved, they should encourage cashflow investors to absorb the inventory owner occupants cannot.

His track record and relationships with the big banks have allowed him to make bulk purchases of 30-40 properties at a time, but he'd clearly like to do more.

“The biggest challenge for us right now, honestly, when investors see this opportunity, they think it's too good to be true,” admits Carter, a self-proclaimed “opportunist.” But he's doing a brisk business, with clients from China, India, Canada and a surprising demand from U.S. baby boomers, wary of the stock market. Carter claims he's the largest company doing this kind of turn-key business.

I run into the same problem here in Orange County. People can't believe they can get double the rent for the same investment in Las Vegas. For example, I recently bought a home for some local investors who also own investment property here in Orange County. If I buy them a second property in Las Vegas with the same financial performance as the first, they will have $200,000 tied up in properties which together rent for $2,400. Their $400,000+ OC property rents for $2,400. Same rental income with half the investment. Las Vegas deals really are that much better.

“I guess it's a cowboy business, kind of like commodities,” Carter says as he leads Outback entrepreneurs around his properties. “Instead of doing cattle, we're doing houses.”

Obviously, I like this guy's business model, although I don't think I will comment on men in the Outback “doing cattle.”

IHB night of presentations

We will be gathering at JT Schmids at 5:00 on Wednesday, October 12, 2011, for a happy hour followed by two presentations: The OC Housing Market monthly update, and Cashflow Investing In Las Vegas. We will be giving these presentations on the second Wednesday of every month.

Our first big night of presentations last month was a tremendous success. We had 68 people sign at the door for the first presentation on the OC housing market, and 80 people signed up for the Las Vegas cashflow investment presentation. Everyone enjoyed drinks and appetizers, and a good time was had by all.

We are committed to a philosophy of constant improvement at the IHB, We read through all the presentation feedback, and we have decided on a few changes and enhancements. The most notable of these changes is to get Shevy more involved in the OC housing market presentation. The presentation on October 12th will not have the city-by-city breakdown I did for the first presentation. Instead Shevy will discuss several properties from surrounding communities. Some of these properties will be IHB deals, and some will be properties currently available in the market. Each property has been selected to illustrate a key feature of the current market.

Based on the feedback, we are also going to be adding a new presentation to our monthly list. On the third Wednesday of each month, we will do an advanced workshop on buying REO and short-sale properties. Shevy will conduct most of the presentation as we take a detailed look at several IHB deals with the focus on the specific techniques Shevy used to identify and obtain great deals for IHB clients. This will be a small group workshop intended for more interaction. It is limited to 30 attendees (unless you don't mind standing in the back). RSVPs are preferred.

On the fourth Wedneday of each month, we will be giving our basic first-time homebuyers presentation, and I will be presenting a small group workshop on Las Vegas cashflow properties.

The ongoing collapse of Brio pricing

Does anyone remember OC Fliptrack? It's a private blog now, and I don't know if the author still updates it. That blogger was an inspiration to me. He opened my eyes to how much fun blogging could be, and he helped me break the chains of conformity which dooms so many bloggers and reporters.

OC Fliptrack lived in Brio for a time, and he liked to write about the insane prices there. The one-bedroom condos apartments peaked at over $400,000. Now, these units are being fire-sold for $275,000.

Properties like this were most often bought with Option ARMs by people who had no hope of affording a fully ammortized payment. In fact, most of these buyers made the minimum payment which was often less expensive than a competing rental. With the promise of ever-increasing prices, serial refinancing, and unlimited HELOC riches, buyers put nothing down and took a free ride. Five years later, and the banks are still cleaning up the mess.

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

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 1305 SOLVAY AISLE Irvine, CA 92606

Resale House Price …… $275,000

Beds: 1

Baths: 1

Sq. Ft.: –

-/SF

Style: One Level

View: Pool

Year Built: 1996

Community: Westpark

County: Orange

MLS#: C11127019

Source: CRMLS

Status: Active

On Redfin: 3 days

——————————————————————————

Spacious 1 bedroom, 1 bathroom condo in great condition located in the beautiful Brio neighborhood. Attached garage. Pool view from the front patio and just steps away from the pool entry gate. Must see!

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

Proprietary IHB commentary and analysis

Resale Home Price …… $275,000

House Purchase Price … $182,000

House Purchase Date …. 5/1/2001

Net Gain (Loss) ………. $76,500

Percent Change ………. 42.0%

Annual Appreciation … 4.0%

Cost of Home Ownership

————————————————-

$275,000 ………. Asking Price

$9,625 ………. 3.5% Down FHA Financing

4.00% …………… Mortgage Interest Rate

$265,375 ………. 30-Year Mortgage

$80,816 ………. Income Requirement

$1,267 ………. Monthly Mortgage Payment

$238 ………. Property Tax (@1.04%)

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

$57 ………. Homeowners Insurance (@ 0.25%)

$305 ………. Private Mortgage Insurance

$220 ………. Homeowners Association Fees

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

$2,088 ………. Monthly Cash Outlays

-$197 ………. Tax Savings (% of Interest and Property Tax)

-$382 ………. Equity Hidden in Payment (Amortization)

$13 ………. Lost Income to Down Payment (net of taxes)

$54 ………. Maintenance and Replacement Reserves

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

$1,577 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,750 ………. Furnishing and Move In @1%

$2,750 ………. Closing Costs @1%

$2,654 ………… Interest Points @1% of Loan

$9,625 ………. Down Payment

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

$17,779 ………. Total Cash Costs

$24,100 ………… Emergency Cash Reserves

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

$41,879 ………. Total Savings Needed

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

Borrowers today feel entitled to a loan modification, and they complain when they don't get the loan modification they believe they deserve.

Irvine Home Address … 11 COLDHARBOR Irvine, CA 92620

Resale Home Price …… $540,000

But be aware,

I always get what I deserve

Keep your focus,

keep your nerve

Ready, set, go

Pick up the pace and step on it

Rip up the place if you want it

Work, work

You know you gotta work, work

The Saturdays — Work

During the housing bubble, loan owners only had to fill out a few forms to get copious amounts of cash. Now getting free handouts from the banks requires a plethora of paperwork, and sometimes the bank says no.

Getting a mortgage workout shouldn't be this exhausting

A Downey couple who had fallen behind on mortgage payments to Wells Fargo subsequently tried to make good on the money owed. But getting their lender to work with them — that's another story.

By David Lazarus — October 4, 2011

Before we get started, I want to ask a simple question. Why should getting a loan modification be easy? Most often, this is a unilateral contract revision being forced on the lender who is under duress. The culture of borrower entitlement has forgotten this fact. If prices were not down so much, lenders would just foreclose and get their money back. The main reason a lender considers a loan modification is because they are in a weakened bargaining position due to the fact they cannot recover their capital in a foreclosure.

Some market watchers have complained strategic default is a threat to contracts, but loan modifications are far more threatening. Strategic default merely triggers a contractual contingency already spelled out in the agreement. Nothing is being changed. Loan modifications are actual changes to the contract being forced upon lenders by borrowers empowered by government programs and the state of the market. Loan modifications are a threat to contracts.

Remember, loan modifications are not entitlements, and lenders don't want it to become one. What shocks me about articles like this one is the sense of entitlement and how oblivious everyone is to it.

Jackie Durra and her husband, Pedro Balladares, have been riding out the economic downturn as best they can.

For a while they were both out of work, making it a challenge to pay the bills and feed their two kids. She eventually found a job, and then he did as well.

But over the course of what turned out to be a very difficult year, the couple fell behind on mortgage payments for their house in Downey. There were months when they simply had to choose between keeping the lights on and meeting their obligations to their lender, Wells Fargo.

“It was hard,” Durra, 49, told me. “We had no money coming in.”

That would be very hard. Having both wage earners lose their jobs really puts a family in a tough spot. It's a good thing they weren't renters…

As loan owners, this couple deserves special dispensation, right?

Make no mistake: She and her husband are at fault here. They missed four mortgage payments between October 2010 and April of this year. They shouldn't have been surprised when Wells stopped taking their payments in June and served them with a notice of default in August.

But Durra and Balladares are also typical of many other homeowners who, because of circumstances beyond their control, found themselves barely able to keep their heads above water. They aren't deadbeats. They aren't trying to cheat the bank out of its money.

Actually they are deadbeats as they were not making their payments. What he is really arguing is that it's okay to be a deadbeat if you have good intentions.

Given a chance, they're eager to make good. They want to keep their home. But getting their bank to work with them — that's another story.

If they're eager to make good, they can agree to the terms offered by the bank. Most lenders will modify the loan to add the missed payments, penalties, fees, and other charges to the balance of the loan. However, the borrower still must have the capacity to make the payment. If the loss of income which prompted the loan modification becomes permanent, then the borrower can no longer afford the property. Banks are not obligated to reduce principal and payments just because the borrower doesn't make as much as they used to. If banks did have such a requirement, I would buy the biggest home possible right before retirement.

“It's a national crisis,” said Jamie Court, president of Consumer Watchdog, a Santa Monica-based advocacy group. “Banks seem more interested in foreclosing on people than on keeping them in their homes.“

That's a stupid and emotional statement. Banks are interested in two things: return on their money, and return of their money. Banks are not interested in whether or not people stay in the home the bank bought for them with the bank's money, nor should they be. Banks exist to make money. They are not a charity.

Adding insult to injury, many of these banks (including Wells) received billions of dollars in taxpayer-funded bailouts to keep them afloat when times were tough.

“If we gave the banks a second chance,” Court said, “the least they can do is help people out who are trying to do the right thing.”

That argument has an emotional appeal, but it is completely specious. If banks bail out every borrower, they will need an even larger government bailout.

Durra bought her three-bedroom house in 2001 for $280,000. After a second mortgage was taken out several years later, the total outstanding loan balance was about $375,000.

These people took out $95,000 in free money. They added about 30% to their mortgage and got to spend the money, but we are supposed to feel sorry for them. Perhaps their mortgage payment wouldn't be quite so onerous if they had been responsible with their borrowing.

The real-estate website Zillow estimates the current value of the property at $348,300.

With the decline in values, they would still have equity if they hadn't refinanced and took out $95,000.

Durra and Balladares received a loan modification from Wells in 2009 that lowered their monthly payments. But by summer 2010, the couple were facing new difficulties.

She had lost her job handling billing for a doctor's office, and his business exporting car parts to Nicaragua fell victim to harsh global economic conditions.

With other bills mounting, they were unable to make their October mortgage payment of $1,470. Then Durra landed a job that month handling billing for USC's Department of Pathology. She immediately contacted Wells Fargo and explained their situation.

The bank, Durra said, seemed placated, especially when the November and December payments came in on time.

This is to be expected. After a financial hardship, lenders will modify a loan to cure it.

But the family was still facing hardship.

“My husband wasn't working and we just didn't have enough income,” Durra said. “We were living paycheck to paycheck.”

In January of this year, they applied for another loan modification to work out more flexible terms. Durra said Wells turned them down because they weren't making enough money.

What exactly is “more flexible terms?” Isn't that code for “they wanted a ridiculously low payment?” Wells Fargo turned them down because with the “flexible terms” the borrowers were offering, the loan would never get repaid. What was Wells Fargo supposed to do, give them a free house?

She and Balladares missed their January and February mortgage payments. They were able to send in a check for March. They missed April. They sent in a check for May.

So what? They couldn't make their payments because they couldn't afford the house. Are we supposed to cheer them on for struggle to pay for a house they cannot afford? Is Wells supposed to reduce their payments to a super low level so they can stay?

I have a better idea. Foreclose on them so a family who can afford the house can buy it.

Then, in June, Balladares finally landed a gig as an X-ray technician for a medical clinic. The couple applied once again for a loan modification. This time, Durra said, Wells turned them down because they were making too much money.

If they make enough money to afford the property, they they don't need a loan modification.

They sent in a check for their June mortgage payment. Wells sent it back and foreclosed on the property.

Durra said she tried to approach Wells to work something out, but each time was rebuffed — even though she and her husband were now setting aside thousands of dollars to cover their missed payments.

Does this story seem reasonable to you? Would a bank really not accept payment from a borrower in arrears? Has any bank ever refused to accept money from someone who owed it to them? Something doesn't smell right here.

At the beginning of September, they tried to find out how much they owed, including late fees and legal charges. Wells said it would get back to the couple in about a week.

It never did. So Durra and Balladares came to me.

I went straight to Wells with a simple question: Would the bank really rather add to the glut of foreclosed homes than work with a committed homeowner who's eager to pay her bills?

It depends on how much money the eager borrower can put toward the mortgage. If it's only a fraction of the payment needed to retire the loan, the bank is better off foreclosing.

I'm glad to report that Wells wasted no time in reaching out to Durra and trying to find some way to fix this mess.

“We're working with them to keep them in their home,” said Jennifer Langan, a Wells spokeswoman.

She said it's likely that a repayment plan will be established, and once that happens, the foreclosure proceedings will end.

“At the end of the day, no bank wants a foreclosed property,” Langan said. “It is not good for homeowners, neighborhoods or communities.”

And with the depressed prices today, foreclosures are bad for the banks as well. Banks don't want to foreclose. They would rather have borrowers make payments. However, if borrowers can't or won't make their payments, banks will foreclose in order to get their money back. They won't stay in business long giving away free houses to people who don't pay them back.

Which is why it's surprising that so few banks seem to step up, especially in times like these, to assist homeowners who are trying to act in good faith.

Consumer Watchdog's Court said many banks have one-size-fits-all policies that make it difficult to address individual problems. It can also be more labor-intensive (read: expensive) to work with homeowners on a case-by-case basis.

Langan said Wells would have probably done something for Durra and Balladares even if I hadn't taken an interest, and maybe that's true.

Yes, that is true. If the borrower can now afford the full payment and doesn't require a reduced payment through a loan modification, the bank will certainly work with them to keep that loan alive. The bank would be stupid not to.

But I hear a lot of hard-luck stories from people who say all they get from the bank is a door slammed in their face.

Most of those stories are probably bullshit.

Not everyone deserves a second chance. But banks should know from personal bailout experience that there are many who do.

And helping them out can be good business over the long run.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

Many people probably don't realize that banks have always done loan modifications for troubled borrowers. It was never a formal or regulated process as it is today, but informally, on a case-by-case basis, lenders have always done this. They are in the business of making loans and collecting payments. If they can find a way to get a borrower to resume making payments, it's all good to them.

The problems with today's loan modification environment are the government tampering with these contracts and the borrower's trying to take advantage. Once the government got involved, borrowers came to believe they were entitled to a break on their mortgage.

Prudent borrowers have already obtained a benefit as they have been able to refinance at today's 4% interest rates. The couple from today's article went to the home ATM for $95,000. Should imprudent borrowers like them be given a break? If it comes from a taxpayer subsidy, I don't think so, but if it's only between the bank and the borrower, then I really don't care. It's none of my business.

Wells Fargo let this couple squat for two years

Far from being in a hurry to foreclose, Wells Fargo let the former owners of today's featured property squat for two years before foreclosing on them.

Foreclosure Record

Recording Date: 06/30/2011

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/21/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/14/2009

Document Type: Notice of Default

This property was a 100% financing deal from the peak. The made payments for about two and half years before giving up. They got to squat for two more.

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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 … 11 COLDHARBOR Irvine, CA 92620

Resale House Price …… $540,000

Beds: 3

Baths: 2

Sq. Ft.: 1703

$317/SF

Property Type: Residential, Single Family

Style: Two Level, Traditional

Year Built: 1985

Community: Northwood

County: Orange

MLS#: S675297

Source: SoCalMLS

Status: Active

On Redfin: 1 day

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Granite and marble countertops. Stainless steel appliances. Travertine flooring w/ insets and travertine showers w/ accents. Glazed cabinetry. Newer moldings, fixtures and hardware. Granite fireplace and mantel. 2-tone paint. Nice location, complete with 2-car garage, large patio and backyard. Association pool and much, much more. Centralized location near freeways, schools, shopping and park.

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Proprietary IHB commentary and analysis

Resale Home Price …… $540,000

House Purchase Price … $182,000

House Purchase Date …. 5/1/2001

Net Gain (Loss) ………. $325,600

Percent Change ………. 178.9%

Annual Appreciation … 10.5%

Cost of Home Ownership

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$540,000 ………. Asking Price

$108,000 ………. 20% Down Conventional

4.00% …………… Mortgage Interest Rate

$432,000 ………. 30-Year Mortgage

$105,017 ………. Income Requirement

$2,062 ………. Monthly Mortgage Payment

$468 ………. Property Tax (@1.04%)

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

$112 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$70 ………. Homeowners Association Fees

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$2,713 ………. Monthly Cash Outlays

-$334 ………. Tax Savings (% of Interest and Property Tax)

-$622 ………. Equity Hidden in Payment (Amortization)

$150 ………. Lost Income to Down Payment (net of taxes)

$88 ………. Maintenance and Replacement Reserves

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$1,994 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$5,400 ………. Furnishing and Move In @1%

$5,400 ………. Closing Costs @1%

$4,320 ………… Interest Points @1% of Loan

$108,000 ………. Down Payment

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$123,120 ………. Total Cash Costs

$30,500 ………… Emergency Cash Reserves

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$153,620 ………. Total Savings Needed

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