Evicted HELOC Abusers Break In and Squat in Foreclosed Home

Former owners are breaking in to houses they were booted out of claiming their foreclosure was fraudulent.

Irvine Home Address … 43 TAROCCO Irvine, CA 92618

Resale Home Price …… $275,000

At the end of the week I get to keep your dinero.

Your fast asleep, when I sneak in your casa.

Your life sucks when your bankrupt and I'm laughing

And can trust me esse cause I'm Latin

I Lie, I Cheat, I Steal

I Lie, I Cheat, I Steal

Eddie Guerrero — Can You Feel The Heat

Last week when I wrote about Private Property Rights: A Casualty of the Housing Bubble, I didn't fully grasp the seriousness of the problem facing our system of property rights.

We live in a nation of laws. Our laws of ownership of property are the basis of our economic system. These laws are being threatened. Barry Ritholtz quoted Hernando de Soto, The Mystery of Capital:

“In the West, this formal property system begins to process assets into capital by describing and organizing the most economically and socially useful aspects about assets, preserving this information in a recording system—as insertions in a written ledger or a blip on a computer disk—and then embodying it in a title. A set of detailed and precise legal rules governs this entire process. Formal property records and titles thus represent our shared concept of what is economically meaningful about any asset. They capture and organize all the relevant information required to conceptualize the potential value of an asset and so allow us to control it . . .

The reason capitalism has triumphed in the West and sputtered in the rest of the world is because most of the assets in Western nations have been integrated into one formal representational system . . . By transforming people with real property interests into accountable individuals, formal property created individuals from masses. People no longer needed to rely on neighborhood relationships or make local arrangements to protect their rights to assets. They were thus freed to explore how to generate surplus value from their own assets.”

Today's featured news story is about a family fighting to keep their home… or not. It is really about a family of HELOC abusers who gamed the system as long as they could, and now they have broken into the home they no longer own, and they are squatting there under advice of their attorney who likely hopes to make a name for himself while encouraging his clients to break the law.

Evicted Family Breaks Into Foreclosed Home

Sheree R Curry — Oct 12th 2010

Just as new owners were about to move in, the previous owners of a foreclosed house in Simi Valley, Calif. reoccupied it with locksmith, attorney and camera crew in tow.

Investors who had purchased the home at a lender's trustee sale had been hoping to have its new owners in it this week. But Jim and Danielle Earl and their nine children returned to the home because, she says, she believes it will be difficult for their family to find another permanent place to live if they comply with a court order to vacate the home.

Difficult to find a permanent place to live? WTF is she talking about? It will be difficult to find a stucco box with a built-in ATM machine, that much is true. It won't be difficult to find a rental. Oh wait, I get it… she is entitled to a permanent residence. It doesn't matter that other people have to work and pay bills, she doesn't have to pay her bills, and she is entitled to live in a permanent residence for which she does not pay.

That order, says their lawyer, was the end result of fraud.

Fraud? Perhaps her lawyer should go through the families previous loan applications and see how truthful they were about their income. This family filled out a bunch of paperwork and obtained a loan. When they didn't repay that loan, the lender exercised their contractual right to force a foreclosure sale of the property. If there are minor paperwork irregularities, it doesn't mean they don't have to repay the loan and keep the property. I can't believe people conceive these ideas.

"They broke in and are proceeding to squat in there," listing agent Chris Garvin of Troop Real Estate, told HousingWatch.

The Earls originally purchased the house for $500,000 in March 2001. Due to some refinances to take out equity, they owed at least $880,000 on a no-interest mortgage loan by the time of foreclosure.

Let's be real about who and what these people are: HELOC abusing squatters.

"When we were evicted we went to the Extended Stay America because they were the only hotel around that would let us have that many children, and a dog and two cats," Danielle Earl, 44, told HousingWatch. "We split up into two hotel rooms for a month." She is the part owner of a medical devices company and her husband is a stay-at-home dad. After their hotel stay they moved to a short-term rental, but their credit issues would keep them from obtaining a property that would permanently suit their needs, she said.

No kidding? I guess not making your house payment for a long time and going into foreclosure will do that. Whocouldanode?

But the bigger issues, says their attorney, Michael Pines, is that the lender fraudulently foreclosed upon their six-bedroom, five-bath home. "When I felt comfortable from a legal standpoint that they had a basis for moving back in, they did so on my recommendation," says Pines.

Garvin was not only the listing agent but also the acquisition and sales partner for his client, Conejo Capital Partners, the investors. He says that he purchased the home in good faith for $697,000 in January on behalf of his client, at an auction on the courthouse steps.

After gaining possession through eviction in July, his clients spent $40,000 rehabbing the home. Carpets were replaced, appliances updated, and granite countertops added. "The living condition was disgusting," he says. But once cleaned up, it went under contract to new buyers for $800,000. All other questions were referred to his attorney, Stan Yates, who had not responded to HousingWatch by publication time.

No wonder these squatters want to move back in. The flipper buys the property at auction, spends a great deal of money fixing the place up, and now the former owners want to move in? I suppose they are entitled to the new improvements for free too, right?

Danielle Earl (pictured) says that she and her husband have been foster parents to 43 children over the years and they currently home-school most of their school-age children (six of whom are adopted). So she admits that the walls were probably a bit scuffed and in need of a paint job, and some of the carpet was worn. But, she says, she and her family only had a day to collect their things and have movers haul it away, so it's not like they were leaving the home in a show-ready state.

I see this family works the bleeding heart angle. They can be proud of their work as foster parents. It's the way they managed their finances that's the problem.

The rehab she describes costs $4,000. The flipper needed to spend $40,000. I can tell you from experience that flippers do not spend $40,000 if they don't have to. It is a for-profit business.

About arriving back home Saturday, she says: "It was such an emotional moment. Everyone started hugging each other and crying."

Arriving back home? You mean after they broke in and started squatting they were overjoyed with all the new stuff the flipper gave them. This family is unbelievable.

Since possession doesn't necessarily mean ownership, the Earls still have a battle on their hands, says Pines, who says they were denied a trial by jury to argue why they never should have been foreclosed upon — and their eviction from the 2000-built home was unwarranted.

"The bank used the usual fabricated and forged documents to foreclose," the Earls wrote in their court petition, in which they describe signatures by bank personnel that do not match, from document to document — an indication to them that documents were not properly reviewed and were fabricated.

"We needed to get back in before the investor and the real estate broker moved in a new family," says Pines. "I didn't want to allow the situation to become worse, and we show up and we have to try to throw them out. Danielle and Jim would not have wanted to throw them out."

They moved in so that they wouldn't have to throw out the rightful owners. How nice of them!

The Earls question who owns the loan, as the foreclosure documents list GRP Financial Services, but there have been several lenders listed in the past few years. The original lender was Washington Mutual Bank, which became JPMorgan Chase after the banks merged. The loan went to Bank of America on the same day that Chase sent the homeowners a notice of default. The Earls argue that Chase never properly assumed the loan and thus did not have the right to sell it off. And in turn, the investors, Conejo Capital Partners, did not properly purchase the property either.

This attorneys argument is specious. Even if we assume Chase didn't properly assume the loan, that doesn't mean the family of squatters owns it. Of all the various parties to this fiasco, the one I am quite certain has no ownership claim is the family currently squatting there.

If the lender did not properly assume the loan, then some previous lender still has the loan. Someone, somewhere owns this loan, and that entity has the right to call an auction for the property. Best case for these people is they get to squat a little longer while the proper note holder is determined and a foreclosure can go forward. in the meantime, the title company that insured the note is going to have to pay the flipper their investment money back as part of a title claim. That title insurer will then sue the bank that improperly transferred the note for damages. The attorneys all get rich.

The courts generally can ignore a foreclosure sale when there has been fraud or the sale was improperly conducted.

The Earls, who admit to having fallen behind on their mortgage at one point due to a loss of income in Danielle's business, say that they were working with the bank to catch up on their payments.

What does it mean to be "working with the bank?" Either these people were making up the missed payments or they weren't. In all likelihood, they were gaming the system with loan modifications and other ploys and the bank finally got fed up.

However, she says, whenever they made a payment it was not being reflected on statements, even a $12,500 catch-up payment was not credited to the balance due. Ultimately, there was a $25,000 discrepancy between what they thought they still owed in arrears and what the bank said they owed.

They were probably charged late fees, collection fees, and any other fee the bank could think of — they weren't paying the mortgage. What did they expect?

Garvin testified at court that he successfully bid against four others for the property, and on Feb. 5 served the Earls with a three-day notice to vacate the property, and they failed to do so at that time. They are charging the Earls approximately $4,000 a month rent, or about $133 per day for their extended stay beyond that date.

In other words, the flipper was exercising his legal rights to clear the squatters from the house.

Pines says that he can't predict if the real estate investor will again evict the Earls, but adds, "I think that is unlikely." His firm, Pines & Associates, will be filing a lawsuit "against everybody," he says.

Did you recoil in fear when you read that? Oh no, the big, bad lawyer is going to sue everybody. What a loser.

Even if Conejo Capital Partners were a purchaser in good faith, the Earls believe that the investor group must still prove that the foreclosure process itself was proper.

The Earls, however, are just happy to be back in their home. "My kids have been begging to go home and we're finally home," said Danielle Earl.

I have expressed my opinion. What do you think? Are these people heroes of villains?

What happens if mortgage insurers lose faith?

The purpose of foreclosure is to clear title. All the financial encumbrances are cleansed from the property, and title clearly vests with the highest bidder at public auction. Without the vesting of clean title in foreclosure, real estate quickly becomes mired and our system of property ownership begins to crumble. If the winning bidder at a public auction cannot be sure of title, why would they bid? How would anyone know they really had title to anything?

What would happen if issuers of title insurance stop issuing new policies because they cannot guarantee title? No title insurance means no loans. No loans means properties fall immediately to cash value. Uncertainty about title in the cash market means those transactions stop as well. All real estate transactions would cease, and we would witness the complete collapse of our real estate market. We would truly become a banana republic.

Once title becomes uncertain, all transactions related to title cease. Would you buy a property if you thought someone could simply break in and take if from you? We would revert back to a feudal state where warlords claimed title by force of arms. Think Afghanistan. Do you think i am exaggerating the implications of this? I don't think so.

Paying up the mortgage

Somehow during the housing bubble, people forgot they are supposed to pay down a mortgage. Instead, everyone decided to pay it up by borrowing heavily and paying back as little as possible. The owner of today's featured property has owned it for 17 years. During that time, she should have made significant progress toward paying it off; however, she decided to spend her new-found wealth with a series of mortgage equity withdrawal refinances and HELOCs.

  • This property was purchased on 6/18/1993 for $134,000. The original loan is not given, but it was likely a $107,200 loan with a $26,800 down payment.

  • On 12/31/1998 she refinanced the first mortgage for $122,120.

  • On 3/31/2003 she refinanced again for $164,500.

  • On 1/30/2004 she opened a HELOC for $25,000.

  • On 2/16/2005 she got a new first mortgage for $225,000.

  • On 1/24/2006 she obtained a $250,000 first mortgage.

  • On 8/17/2006 she refinanced with a $279,400 first mortgage.

  • On 9/21/2007 she opened a stand-alone second for $42,000.

  • Total property debt is $321,400.

  • Total mortgage equity withdrawal is $214,200.

  • She was recently issued a NOD.

Foreclosure Record

Recording Date: 08/09/2010

Document Type: Notice of Default

Irvine Home Address … 43 TAROCCO Irvine, CA 92618

Resale Home Price … $275,000

Home Purchase Price … $134,000

Home Purchase Date …. 6/18/1993

Net Gain (Loss) ………. $124,500

Percent Change ………. 92.9%

Annual Appreciation … 4.1%

Cost of Ownership

————————————————-

$275,000 ………. Asking Price

$9,625 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$265,375 ………. 30-Year Mortgage

$51,933 ………. Income Requirement

$1,299 ………. Monthly Mortgage Payment

$238 ………. Property Tax

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

$23 ………. Homeowners Insurance

$310 ………. Homeowners Association Fees

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

$1,871 ………. Monthly Cash Outlays

-$117 ………. Tax Savings (% of Interest and Property Tax)

-$368 ………. Equity Hidden in Payment

$14 ………. Lost Income to Down Payment (net of taxes)

$34 ………. Maintenance and Replacement Reserves

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

$1,434 ………. 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

$21,900 ………… Emergency Cash Reserves

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

$39,679 ………. Total Savings Needed

Property Details for 43 TAROCCO Irvine, CA 92618

——————————————————————————

Beds: 2

Baths: 1 full 1 part baths

Home size: 995 sq ft

($276 / sq ft)

Lot Size: n/a

Year Built: 1983

Days on Market: 12

Listing Updated: 40455

MLS Number: P754822

Property Type: Condominium, Residential

Community: Orangetree

Tract: Og

——————————————————————————

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

GREAT LOCATION BACKING UP TO CHURCH PROPERTY – GIVES IT A MORE OPEN FEELING. DARLING LOWER END-UNIT IN PROCESS OF BEING PAINTED. LOTS OF NATURAL LIGHT AND OVERSIZED PATIO. KITCHEN & BATH CABINETS HAVE BEEN REFINISHED & COUNTERS REPLACED. ALL APPLIANCES REMAIN. NEW VINYL ENERGY EFFICIENT WINDOWS & SLIDERS TO PATIO OFF LIVING ROOM & MASTER BEDROOM. ADDITIONAL STORAGE ROOM ON PATIO. INSIDE LAUNDRY. COMPLEX IS NEXT TO IRVINE VALLEY COLLEGE. EZ ACCESS TO 5 & 405 FREEWAYS. NEAR IRVINE SPECTRUM AND OAK CREEK GOLF COURSE ACROSS THE STREET FROM THE COMPLEX. ASSIGNED COVERED CARPORT #17 WITH AMPLE GUEST PARKING

Foreign Buyers Rush to Catch Falling Knives

It's a myth that foreign cash buyers are smart money that purchases bargains. FCBs are generally dumb money that overpays for declining assets.

Irvine Home Address … 170 ALMADOR Irvine, CA 92614

Resale Home Price …… $399,000

I've been looking for a reject

And you ain't had nothing like me yet

Don't you think it's time for motion

I can take what you've been pushin'

Soundgarden — Big Dumb Sex

Are foreign cash buyers savvy investors who are taking advantage of low prices to snap up bargains, or are they the fools who purchase overprices assets that natives won't touch? Often its a little of both. I always enjoy reading Rich Toscano's writing, and back in 2006, he wrote a brief post on what generally happens when foreign investment becomes prevalent in a market.

The Dumb Money

RICH TOSCANO — December 20, 2006

One argument I hear a lot is that foreign demand for local real estate has grown substantially in recent years, and that such foreign demand will be supportive of prices in the future.

Unfortunately, this argument puts the cart squarely in front of the horse. Investors from other countries are well known to be the very last participants to arrive at the scene of a financial bubble. They are the last to hear about all the riches to be made, the last to buy in, and the last to realize that the party is over.

The chart to the right provides an example from the history of bubbles past. The blue line represents the price of the Nasdaq Composite Index during its late-1990s flight to the heavens, along with the very beginning of its eventual journey back to earth. The red line denotes the dollar amount of U.S. stock purchases made by foreign investors.

It can easily be seen that foreign buyers chased the U.S. tech stock bubble all the way to the tippy top, and that they lagged prices the entire way. The final onslaught of foreign cash did not even hit our shores until after the Nasdaq had begun to decline from its final peak.

Far from being a positive fundamental, a sudden excess of foreign participation in an asset market is indicative of ill-informed speculative money at work. When the foreigners really start piling on, it's always a good sign that the end of the bubble is nigh.

As a rule, foreign investment comes from those with the least understanding of the market. Most often these investors are merely chasing the latest short-term rally in hopes it will continue. Sometimes they hit big paydays, but most often they end up overpaying for assets that take years to recover in price. Today's featured article is a mixed bag; some investors are getting great deals while some are not.

Foreign buyers see big opportunity in housing bust

By MICHELLE CONLIN (AP) – October 4, 2010

The Viceroy, a swanky condominium complex in downtown Miami, gives the impression that the United States is in another real estate boom. The sales office is strangely exuberant. Buyers gush about the glam condos — designed by hipster tastemaker Kelly Wearstler — and their hotel-like amenities: poolside libations, daily housekeeping and room service food stirred up by a celebrity chef.

Since January, 262 of the Viceroy's 372 units have sold. But there's a twist: Almost 90 percent of the buyers are foreigners. And they all paid cash.

The Viceroy's story is playing out across Miami. Individual investors from as far as Argentina, Canada, Colombia, France, Israel, Italy, Norway and Venezuela are swarming the city's sales offices to get in on what they see as one of the greatest real estate fire sales in the history of the United States.

At one time, these people would have invested in the U.S. stock market.

See Rich Toscono's graph above to see how well that usually turns out.

Now they see the opportunity of a lifetime in the nation's debilitated housing market. The idea is to rent out the properties and then sell them once the economy turns around.

As a general strategy, that idea isn't bad, but it all depends on the cashflow. Anyone who is buying cashflow negative properties and plans to wait for a rally is a fool. Those who buy cashflow positive properties with plans on waiting for a rally are not fools, but they may not be successful either. Those who buy cashflow positive properties purely for the cashflow may have an option to sell later if the price bubbles again, but they don't need that for the investment to be successful. True cashflow investors have a win-win because whether they keep the property for long-term cashflow or sell it for a huge gain, they win either way. Being cashflow positive is everything.

The math is seductive: Prices at the Viceroy are roughly 52 percent off the 2007 peak. Units once sold for as much $670 a square foot. Today the average price is $319.

That isn't seductive, that is stupid. That's like saying the $10 tee shirt you see in a clothing store that is marked down to $50 from $100 is a good bargain. The bubble price was never justified, and just because that price is cut in half doesn't make the price any better. Cashflow value is the only stable measure of value of any investment, but it is particularly useful for real estate.

"I have never seen such a high concentration of foreign nationals acquiring real estate," says Peter Zalewski, who has been in real estate for 15 years and founded Condo Vultures, a consulting and brokerage firm. "Eighty percent of the sales in downtown Miami are foreign-based. This is unprecedented."

If it can happen in Miami, it can happen in Irvine, right? ~~ giggles to self ~~

Miami is hardly the only hot spot for buyers from outside the United States. Real estate brokers say they've seen a surge in Washington, New York, Las Vegas, Los Angeles and San Francisco. In Seattle, Asians are buying property sight unseen, says Joe Brazen of Brazen Sotheby's International. In New York, 25 percent of buyers at the Armani-designed 20 Pine building, near the World Trade Center site, are from overseas.

"It's a positive in a sea of negatives," says Jonathan Miller, chief executive of Miller Samuel, a real estate consulting firm in New York.

This year in Phoenix, for the first time, there have been more buyers from Canada than from California, according to real estate data outfit Information Market. With the Canadian dollar approaching parity with its U.S. counterpart, the opportunity was simply irresistible to Jim Chuong, a 38-year-old Novartis sales manager from Toronto.

Chuong, whose house in Canada is already paid off, used to invest in U.S. stocks. Now he's investing in Phoenix condos, paying $50 a square foot for units that would cost $500 a square foot in Toronto.

"It's ridiculous is what it is," Chuong says.

This part of the story is true. I was recently contacted by a Canadian investment company that is flipping properties in Las Vegas. They are also active in Phoenix and other markets.

For foreigners with cash, the deals can make them money from day one. Chuong buys two-bedroom condos for less than $40,000 in low-crime areas. He only picks up units that already have renters. After paying association fees and taxes, he walks away with $300 a month, pre-tax, on each. The deals are now easy to do, thanks to the cottage industry of companies that has grown up to manage virtually everything for foreign buyers, down to badgering renters for the monthly check.

Investments like these will be the home runs of the housing bubble. With the positive cashflow those properties are giving off relative to their price, the investors can hold them forever.

For the international investor class, the United States' bloated inventory of homes, high unemployment and weak currency make for an unusually attractive buyer's market.

"Never before have all these things come together like this," says Patrick O'Neill, chief executive officer of the Hong Kong-based O'Neill Group, which helps Chinese invest in international real estate. O'Neill says Chinese buying in places like New York is on track to double this year.

"Unless you want to go to Baghdad," O'Neill says, "the United States is the best you can get."

Are there good cashflow properties in Baghdad? I wonder if this guy likes Detroit?

The trend is showing up in the statistics. In a National Association of Realtors report released in July, 28 percent of brokers reported they had worked with at least one international client, up from 23 percent a year earlier. Among those, 18 percent had completed at least one sale, compared with 12 percent in the 2009 report.

"I was going invest in the stock market, but I decided to invest in real estate instead," says Diego Garcia, a Mexico City native on assignment in New York City with Pfizer Inc., where he is a regional finance director. Garcia paid $850,000 for a Manhattan one-bedroom in a gleaming new high-rise that he plans to live in for now. "I'm a conservative guy," Garcia says, "and this was more conservative."

That is an investment that may turn to crap like the North Korea towers. Buying on speculation without regard to the underlying cashflow is a fool's game.

That's not to say there aren't steep risks. An economic jolt could easily throw the whole plan into disarray. The housing market is far from a recovery. In many places, prices continue to fall. What happens if currency values reverse and a foreign owner needs a quick sale? Or a renter bolts in the middle of the night, leaving an empty unit and no cash flow?

It's not as if foreign buying can be counted on for a housing market turnaround. Overseas buyers represent a mere 7 percent or so of today's total.

That that number sink in, folks. This is not an invasion. Foreign buyers represent a small fraction of the buyer pool. In places like Las Vegas that will see a 50% or more turnover of its housing stock, a few additional sales to foreign buyers won't support the market.

Yet in some cities, such as Miami and Washington, the foreign sales are helping to stabilize the markets.

In past downturns, buying a property in the U.S. was the prestigious purview of the wealthy, but today the market is within reach of the swelling ranks of the global upper-middle class.

Colombians, who often call Miami the most beautiful city in their country, have always been drawn to Florida. The difference now is the upside-down economics. It is cheaper to buy in Miami than in Bogota, and you can fly between the two cities for $59 each way.

Interesting that the substitution effect can reach across thousands of miles. I wonder what it means to Irvine prices to be seven times higher than Las Vegas prices. It's a premium on a premium, right?

"Muchos muchos muchos muchos opportunity," says Elsa de Blaschke, who owns a construction company with her husband in Barranquilla, Colombia, and is hunting for an investment property to buy in Miami. De Blaschke chose not to invest the capital at home because she says Florida offers a better chance of a bigger return.

"The international buyer pool is better than we have ever seen it before," says Phillip White, president of Sotheby's International, based in New York.

To match demand, U.S. brokerages are hiring agents who can speak foreign languages and are pouring more resources into marketing overseas.

In October, agents from 11 Sotheby's International branches will descend on Hong Kong's convention center to regale wealthy buyers there with slick visuals on showcase properties. In Toronto, agents from Florida Home Finders play to crowds of 800 every other Sunday at a Holiday Inn banquet hall. Jenny Huertas, Condo Vultures' international sales director, throws seminars for potential clients across South America.

"Their jaws drop. They can't believe it," Huertas says. "They think these deals are too good to be true."

Some of these deals are. I am buying property in Las Vegas for $/SF prices last witnessed in the late 80s early 90s. I am the foreign cash buyer in that marketplace. Perhaps I am the foolish knife catcher, right?

Today's featured knife catcher

We don't need to look to foreign nationals to find knife catchers. Of course, if a buyer uses an FHA loan, who cares? The US taxpayer will eat the losses. Today's featured property was purchased for $499,000 on 5/16/2008. The owner used a $491,290 first mortgage, and a $7,710 down payment. Without much skin in the game, he didn't feel like he needed to stay on long.

Foreclosure Record

Recording Date: 08/05/2010

Document Type: Notice of Default

When you consider that this "owner" hasn't been making a payment since February, he has already recouped his down payment in squatting savings. This property has certainly cost him less to own it than it would have to rent it, and if its value had gone up, he would have made a fortune off his tiny investment.

Irvine Home Address … 170 ALMADOR Irvine, CA 92614

Resale Home Price … $399,000

Home Purchase Price … $499,000

Home Purchase Date …. 5/16/08

Net Gain (Loss) ………. $(123,940)

Percent Change ………. -20.0%

Annual Appreciation … -8.8%

Cost of Ownership

————————————————-

$399,000 ………. Asking Price

$13,965 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$385,035 ………. 30-Year Mortgage

$75,350 ………. Income Requirement

$1,885 ………. Monthly Mortgage Payment

$346 ………. Property Tax

$50 ………. Special Taxes and Levies (Mello Roos)

$33 ………. Homeowners Insurance

$271 ………. Homeowners Association Fees

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

$2,585 ………. Monthly Cash Outlays

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

-$534 ………. Equity Hidden in Payment

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

$50 ………. Maintenance and Replacement Reserves

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

$1,825 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$3,990 ………. Furnishing and Move In @1%

$3,990 ………. Closing Costs @1%

$3,850 ………… Interest Points @1% of Loan

$13,965 ………. Down Payment

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

$25,795 ………. Total Cash Costs

$27,900 ………… Emergency Cash Reserves

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

$53,695 ………. Total Savings Needed

Property Details for 170 ALMADOR Irvine, CA 92614

——————————————————————————

Beds: 2

Baths: 2 full 1 part baths

Home size: 1,307 sq ft

($305 / sq ft)

Lot Size: n/a

Year Built: 1989

Days on Market: 18

MLS Number: S633520

Property Type: Condominium, Townhouse, Residential

Community: Westpark

Tract: Lp

——————————————————————————

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

Private interior location of community. Central location in Irvine. Wonderful High Ceilings, Great Sun Exposure, Plantation Shutters, Wood Flooring Downstairs. Large Kitchen with Lots of Counter Area. Dual Master Bedrooms with Spacious Bathrooms. Nice Sized Patio Area with In Ground Spa.

Alt-A, Prime, and Jumbo Loan Delinquencies and Foreclosures Rise

No matter how you slice and dice the mortgage data, it is a deteriorating picture punctuated by very large numbers of delinquencies and foreclosures.

Irvine Home Address … 15306 NORMANDIE Ave Irvine, CA 92604

Resale Home Price …… $995,000

I should have known better than to give a loan to you

That I would lose everything that you do

And I do, hey, hey, hey, and I do.

So, I should have realized a lot of things before

If this is a loan you've gotta give me more

Give me more, hey hey hey, give me more

Beatles — I Should Have Known Better

The banks should have known better than to underwrite the loans they did. Whenever I think about the greed and stupidity that overtook our lending industry — and the damage they have done to our society by creating a generation of Ponzis — I feel no compassion for their losses. Knowing my tax dollars are bailing them out irks me even more. In the ongoing debacle of lender creation, we are seeing further deterioration in loan performance. What a surprise.

Types of Borrowers

Do you remember the various borrower types: subprime, Alt-A, and prime? The ARM reset chart breaks down the outstanding ARMs by those borrower types and mixes in some types of loans (agency, Option ARM, and unsecuritized ARMs) just to make it a bit confusing.

The three main borrower classes can also be divided based on the size of the loan into conforming (up to $417,000), jumbo conforming ($417,000 to $729,750), and jumbo (over $729,750).

The stories forming the basis for today's featured articles examine the three main types of borrowers and separately the jumbo loan category.

As you may recall, subprime ARMs reset first. In 2007 and 2008, nearly all subprime loans reset, and the resulting wave of delinquencies and foreclosures trashed prices wherever subprime was found. From this the banks learned one important lesson: if you foreclose and dispose of the real estate, prices get crushed. Las Vegas proved that. Upon seeing the carnage, lenders opted for another strategy: amend-extend-pretend. As a result, the Alt-A, prime, and jumbo borrowers have similarly gone delinquent on their mortgage, but they have been allowed to squat so banks can preserve the illusion of value on their balance sheets. Homeowners are not complaining.

The problem for the banks is that failing to foreclose on people is causing distressed borrowers to strategically accelerate their default to take advantage of the bank's inaction. As we are about to see, Alt-A, prime and jumbo are on their way to becoming subprime; in fact, Alt-A is already there.

In worse-off states, Alt-A is becoming the new subprime

by CHRISTINE RICCIARDI — Tuesday, October 5th, 2010

Data released Tuesday by 1010data, in conjunction with the American Securitization Forum, CoreLogic and Equifax, confirmed what CoreLogic economist Mark Fleming mentioned during an interview with HousingWire one month ago — Alt-A loans are the new subprime. However, Alt-A mortgages passing 25% delinquency rates, levels similar to subprime loans, remain localized to only a few states.

The Market Review of Non-Agency MBS is the first in a series to be released by 1010data and the American Securitization Forum, which recently entered into a partnership. This report uses data collected through September and focuses on trends within the Alt-A category between 2004 and 2008, as well as jumbo and option ARMs.

Jonah Green, head of mortgage analytics at 1010data and contributor to the report, said the delinquency trends with Alt-A loans directly reflect a subprime attitude, or perhaps even worse.

"Alt-A is traditionally considered near prime collateral," Green told HousingWire. "But because of the housing crisis, the delinquencies you're seeing are so great that people are considering Alt-A, effectively, subprime."

According Green, 9% of Alt-A loans that were current six months ago are now delinquent.

Nearly 10% of all Alt-A loans that were current only six months ago are now delinquent. You don't have to run a 10% new delinquency rate very long before the entire pool of Alt-A loans goes bad. Those are horrendous numbers.

Approximately 40% of Alt-A loans originated in Nevada between 2004 and 2008 are more than 60-days delinquent or in foreclosure. Nevada is topped only by Florida, which has a reported 46.4% of issued Alt-A loans 60-days or more delinquent or in foreclosure. Twenty states have Alt-A delinquencies exceeding 25% (see map).

It doesn't look like I will be running out of Las Vegas properties to bid on any time soon.

Green said that state delinquencies north of 25% are high, even for a subprime deal. Not only that, but Green said jumbo loans could be next to follow suit. In Nevada, 24.4% of jumbo loans are 60-plus days delinquent or in foreclosure, followed by 20% in Florida.

"Jumbo prime is performing like subprime, Alt-A is performing worse than subprime and subprime simply isn't performing," Green said. "The private label deals weren't structured with types of delinquencies in mind."

Nobody was prepared for the collapse of the housing bubble. Most were in denial, and many still are.

August delinquency inventory falls on highest foreclosure starts since January: LPS

by CHRISTINE RICCIARDI — Friday, September 24th, 2010

More homes moved from delinquency into foreclosure in August, as the inventory of homes 30-plus days and 90-plus days delinquent decreased and foreclosure starts rose to the highest level since January, according to Lender Processing Services.

HousingWire reported the initial results of the report last week. The firm's final monthly mortgage monitor was released today.

The majority of foreclosure inventory included prime loans, which increased 106.4% over an 18-month period in the agency sector, 102.4% in the non-agency sector, and 107% in the non-agency jumbo sector.

Those are shocking numbers. We have doubled the foreclosure inventory of the best performing loans in the portfolio. When the bank's prime loans become toxic waste, what do they do then?

The numbers below paint an even bleaker picture. I don't see the light at the end of the tunnel yet.

According to CoreLogic, there are about 40 million prime loans in the marketplace, 6.2% of which were 60-days delinquent in June and 3% of which were 90-days delinquent.

CoreLogic analyst Mark Fleming said the percentage of delinquent loans in the prime space have been masked because the volume is so huge.

LPS reported 282,528 foreclosure starts last month, up 1% from July and 3.8% higher than the year earlier. The year-to-date foreclosure rate is now 20.4% higher than 2009. Thirty-day delinquent inventory fell to 9.22%, the lowest level in over a year. The percentage was 9.3% in July and 9.7% a year ago. The inventory of 90-day delinquent loans decreased to 8.22%, down from 8.3% in July. The percentage was 8% a year earlier.

Despite the spike in overall foreclosure starts, the number of starts within agency loans decreased in August for the first time in three months, to less than 140,000. Agencies also have accelerated foreclosures in late-stage delinquencies, six-month delinquencies decreasing to 60,000 from 65,000. Six-month delinquency volume is the highest on agency portfolio. Three-month delinquencies account for more than 30,000 loans and two-month delinquent loans have risen for three month to almost 20,000 loans.

If any of you spotted any good news in there, point it out. i didn't see any.

They didn't spend the house!

It's very rare that I find a mortgage history with no proven HELOC abuse. It looks like these people were frugal and paid down their mortgage, so I have given them a "B" for mortgage management. They did get a couple of HELOCs, but there is nothing to suggest they actually took the money and spent it.

  • This house was purchased on 4/3/1990, the peak of the last housing bubble. I don't have their original mortgage data, but they paid $325,000, and they likely put at least 20% down.

  • On 9/8/1998 there is a refinance of the first mortgage for $220,000.

  • On 10/25/2000 they were approved for a $99,000 HELOC, but I don't think they used it.

  • On 3/17/2003 they refinanced their first mortgage again for $212,000. This tells me they didn't use the HELOC and paid down the first mortgage.

  • On 2/9/2005 they were approved for a $275,000 HELOC. Based on their past history, I will give them the benefit of the doubt and suggest that they have consistently reduced their indebtedness on the property.

There is no delinquency, and even if they maxed the HELOC, they are still sitting on a cloud of bubble equity.

Irvine Home Address … 15306 NORMANDIE Ave Irvine, CA 92604

Resale Home Price … $995,000

Home Purchase Price … $325,000

Home Purchase Date …. 4/3/1990

Net Gain (Loss) ………. $610,300

Percent Change ………. 187.8%

Annual Appreciation … 5.5%

Cost of Ownership

————————————————-

$995,000 ………. Asking Price

$199,000 ………. 20% Down Conventional

4.21% …………… Mortgage Interest Rate

$796,000 ………. 30-Year Mortgage

$187,902 ………. Income Requirement

$3,897 ………. Monthly Mortgage Payment

$862 ………. Property Tax

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

$83 ………. Homeowners Insurance

$0 ………. Homeowners Association Fees

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

$4,842 ………. Monthly Cash Outlays

-$914 ………. Tax Savings (% of Interest and Property Tax)

-$1105 ………. Equity Hidden in Payment

$300 ………. Lost Income to Down Payment (net of taxes)

$124 ………. Maintenance and Replacement Reserves

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

$3,248 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,950 ………. Furnishing and Move In @1%

$9,950 ………. Closing Costs @1%

$7,960 ………… Interest Points @1% of Loan

$199,000 ………. Down Payment

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

$226,860 ………. Total Cash Costs

$49,700 ………… Emergency Cash Reserves

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

$276,560 ………. Total Savings Needed

Property Details for 15306 NORMANDIE Ave Irvine, CA 92604

——————————————————————————

Beds: 5

Baths: 5 baths

Home size: 3,700 sq ft

($269 / sq ft)

Lot Size: 6,315 sq ft

Year Built: 1971

Days on Market: 60

Listing Updated: 40459

MLS Number: P747674

Property Type: Single Family, Residential

Community: El Camino Real

Tract: Rc

——————————————————————————

Completely remodeled home with unique skylighted-attrium with surround hall way entry, open lighted plan. Travertine flooring, granite kitchen counter,center island gas cook top, new kitchen cabinetry, dual a/c and ON-Demand Electric Tankless water heater. Well kept home with salt water pool, Gas BBQ ready patio, fruit trees, low water usage landscape. Entire yard and driveway with concrete paint, finished garage with Epoxy coated floor. The house also features ceiling fans, new appliances and fire place. A large upstairs Den/Entertainment room with surround sound wiring. All rooms are cable ready. Features also include a main floor bedroom and bath. Spacious Master bath with jacuzzi tub and shower. The house is priced to sell. There is no association or mello roos on this house. Pride of ownerhship. Priced to Sell.

attrium? ownerhship? And Mello Roos is capitalized; it is the last names of the two legislators who introduced the bill. Why did the realtor say it is priced to sell twice?

Wells Fargo: Full Speed Ahead with Foreclosures

Despite the political pressure, Wells Fargo is pressing ahead with its planned foreclosures.

Irvine Home Address … 14492 GUAMA Ave Irvine, CA 92606

Resale Home Price …… $499,000

If you believe in the power of magic,

I can change your mind

And if you need to believe in someone,

Turn and look behind

When we were living in a dream world,

Clouds got in the way

We gave it up in a moment of madness

And threw it all away

Don't answer me, don't break the silence

Don't let me win

Alan Parsons Project — Don't Answer Me

Borrowers believe in the power of magic. Either the market will save them or the government will. Fortunately, not every bank answered the politicians' call to stop foreclosures. B of A answered this call and in a moment of madness, they threw it all away.

Wells Fargo Foreclosures Proceed After Data Queried

By Dakin Campbell and David Mildenberg – Oct 6, 2010 9:22 AM PT

Wells Fargo & Co. is standing by the accuracy of its foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records.

The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

In a May 20 deposition, a Wells Fargo Home Mortgage employee said he signed 50 to 150 documents a day, including statements describing debts and borrowers used to justify foreclosures, without personally confirming the information was correct. His testimony related to a civil claim against the bank in a Washington state court. A judge dismissed the case in June.

Can you guess why the judge dimissed the claim? Because it was baseless. Who cares if some employee batch signed a few documents. Supervisors do this all the time. These documents were probably already reviewed by an army of staff before the signer ever saw them. The statement above implies that the banks were not reviewing these documents which is crazy.

Mortgage firms have drawn fire from borrowers, lawyers and state officials for letting employees sign affidavits for court- monitored foreclosures without personally checking loan records. JPMorgan Chase & Co. and Bank of America Corp. last week delayed foreclosures to review the accuracy of their filings. Last month, Ally Financial Inc. said its GMAC Mortgage unit would halt evictions for a similar review.

Let's be clear here: mortgage holders do not have the power of eviction. If they did, we wouldn't have so many squatters. They only have the power to foreclose, an act that leads to auction and later an eviction if the former owner doesn't leave on their own.

The Wells Fargo employee said he relied on foreclosure lawyers and personnel in other departments to check files, according to a deposition transcript provided by Melissa Huelsman, the Seattle attorney representing the homeowner. The employee said he confirmed the date on the file before signing without verifying other information.

‘Out of Context’

Those comments “should not be taken out of context,” Wells Fargo said in yesterday’s statement, e-mailed by a spokeswoman, Vickee Adams. The judge “reviewed Wells Fargo’s procedures, documents and declarations and summarily dismissed the borrower’s case, confirming that the foreclosure was valid,” the bank said in the statement.

For once, I agree with a bank. These lawsuits are silly.

Such a dismissal doesn’t necessarily invalidate testimony, said Peter Henning, a professor at Wayne State University Law School in Detroit and a former federal prosecutor.

“It’s not that the judge rejected the deposition, or found that the deposition was incorrect,” he said. “The firm probably went back into court and said ‘Here you go, you can inspect all the documents.’ Maybe that was enough.”

Wells Fargo is the second-largest servicer of U.S. home loans, according to industry newsletter Inside Mortgage Finance. The San Francisco-based bank handles about $1.8 trillion of residential mortgages, according to company filings. Bank of America, JPMorgan, Citigroup Inc. and Ally round out the top five. Through June, 92 percent of Wells Fargo’s mortgages were current, according to the statement.

If 92% of its loans are current, then 8% are delinquent. That is still an astonishingly high number.

‘How Do You Know?’

Andrew Yates, a Seattle-based lawyer representing the employee, didn’t return calls for comment. Adams declined to comment beyond the statement.

During questioning from Huelsman, the bank employee described his efforts before signing filings.

“So you’re simply signing the document that’s presented to you and you’re just making sure the date is correct?” Huelsman asked during the deposition.

“Correct,” the employee said.

“So how do you know when you’re signing this document that it’s true and correct?” Huelsman said.

“There are people that are responsible for” maintaining the paperwork, the employee said.

This is akin to asking the guy on the assembly line who installs doors if he knows anything about the motor mounts. If it isn't his responsibility, how is he supposed to have knowledge of it?

States Take a Stance

The employee said he oversaw 53 full-time staff and 15 contract workers, and that other supervisors within the department signed the same amount of paperwork. That would amount to each supervisor signing 1,000 to 3,000 documents during 20 business days each month.

In a separate case in Florida, an employee at New York- based JPMorgan said in May that her team of managers signed about 18,000 documents a month. In a December deposition, an employee at Detroit-based Ally said he signed about 10,000 documents a month. Attorneys general in at least seven states including Texas, Illinois and Ohio are investigating practices at Ally’s GMAC Mortgage unit.

In Wells Fargo’s home state, California Attorney General Jerry Brown asked JPMorgan to prove its foreclosures are legal or else freeze them, and made a similar request to Ally in September.

“This goes to the internal processes and oversight at these institutions with respect to the conduct of their employees,” said Jacob Frenkel, a partner at Potomac, Maryland- based law firm Shulman Rogers Gandal Pordy & Ecker, which isn’t representing any lenders in foreclosure proceedings. “It’s not in the banks’ interest for the records not to be right. As a lawyer I want to go into court with papers that are solid.”

If the fact that banks are processing large amounts of documents is the best these plaintiffs can do, no wonder the judges are dismissing these cases.

The Politics of Foreclosure

Published: Thursday, 7 Oct 2010 — Diana Olick

I'm not going to tally the number of Attorneys General filing lender lawsuits or lawmakers demanding foreclosure moratoria, because the minute I do the number will change.

Suffice it to say that you're not in political fashion these days if you're not "demanding" a federal investigation into shoddy foreclosure procedures or "ordering" a freeze on foreclosures for the foreseeable future, even though you might not exactly have the jurisdiction to do so.

“Our families deserve to know that an action with such a huge and lasting impact is the absolute last resort, and that every effort has been made to keep them in their homes prior to foreclosure,” wrote Oregon Senator Jeff Merkley. He's a Democrat, by the way, and they appear to be in the majority of those screaming at the wind; gee I wonder why.

No less than the Speaker of the House, Nancy Pelosi, and her cadre of California lawmakers noted that, "Avoidable foreclosures end up being unnecessarily costly for homeowners, lenders and servicers, and our housing market, whose health is essential to our economic recovery," in a letter addressed to the U.S. Attorney General, Fed Chairman and the acting Comptroller of the Currency. "Recent reports that Ally Financial (formerly GMAC), JP Morgan, and Bank of America may have approved thousands of unwarranted foreclosures only amplify our concerns that systemic problems exist," she adds.

And it's not just the Dems posturing on this one. Far be it for Republicans to pass up a chance to use the scandal as a weapon. Alabama Senator Richard Shelby, ranking Republican on the Banking Committee is calling for a hearing: "I am highly troubled that once again our federal regulators appear to be asleep at the switch.”

I'm not going to feign surprise at any of this. It's to be expected, especially given this particular upcoming election. I just wish these folks would stick to the facts. This scandal is largely about bad paperwork, not "unwarranted foreclosures." Right now close to 10 percent of borrowers in this country are delinquent on their loans.

Translation: They're not paying their mortgages.

Another 4 percent have been delinquent for so long that they're now in the foreclosure process.

Yes, the process is flawed because the banks clearly aren't equipped to handle the numbers.

Yes, there may be some loans that could have been saved, but the vast majority can't.

Still lawmakers want to freeze all foreclosures to make sure all of them are fair because, as Speaker Pelosi writes, "People in our districts are hurting."

Boo Hoo.

The question is, how much would a foreclosure freeze hurt the greater housing market?

I asked some mortgage mavens and got the following responses:

Josh Rosner, Graham-Fisher: With REO sales being a large part of supply we would see home prices artificially and unsustainably rise, foreclosure volumes paint a false picture of stability and investors in MBS would be further harmed as their losses grow. Once the moratorium ended prices would fall and foreclosures would skyrocket. But, it would paint a prettier picture than reality heading into mid-term elections.

That is a brilliant synopsis of what would happen if this moratorium continues and becomes more widespread.

Guy Cecala, Inside Mortgage Finance: Instead of having a ton of mortgage borrowers who haven’t made any payments in at least a year, we would have a ton who haven’t made a payment in a year-and-half. Keep in mind we will have new problem loans entering the system throughout any moratorium whether we acknowledge them or not. Do we seriously believe that a foreclosure moratorium can change the outcome of potentially 5 million or more homeowners losing their homes over the next two years? Ultimately, if we don’t do something to handle distressed properties more efficiently (and faster), the housing market is going to remain stuck in limbo with no recovery in sight.

Right again. any widespread moratorium will encourage strategic default.

Janet Tavakoli, Tavakoli Structured Finance: Banks are vulnerable to lawsuits from investors in the [securitization] trusts. This problem could cost the banks significantly more money, which could mean TARP II (Washington Post)

Another very likely outcome. Banks are going to either lose money through foreclosure or lose money through lawsuits due to their failure to foreclose.

Rick Sharga, RealtyTrac: If foreclosure sales are prohibited, home sales would tail off dramatically…foreclosures and REOs accounted for over 30% of all sales during the quarter [Q3] Fewer home sales will put more pressure on home prices, reduce tax receipts for already-strapped municipal and state governments, and put even more pressure on an already-moribund economy. This could cause at least a temporary loss of jobs in a number of sectors. A 90-day moratorium would also extend the housing market downturn, pushing the anticipated recovery from early 2014 into late 2014 – and possibly even longer.

Any foreclosure moratorium would be a disaster. Since B of A is at least temporarily going that route, perhaps Wells Fargo and other banks will take advantage and push a few more foreclosures through the system. If I were in their shoes, I would.

They got their share of the HELOC riches

  • The owners of today's featured property paid $486,000 on 5/29/2003. The used a $388,800 first mortgage, a $48,600 second mortgage, and a $48,600 down payment.

  • On 6/4/2004 they refinanced with a $437,000 first mortgage.

  • On 9/27/2004 they obtained a $75,000 HELOC.

  • On 3/16/2005 they refinanced with a first mortgage for $439,000.

  • On 1/26/2006 they refinanced the first mortgage for $555,000.

  • On 8/28/2006 they refinanced with a $564,000 Option ARM with a 1.25% teaser rate, and they obtained a $100,000 HELOC.

  • Total property debt is $664,000.

  • Total mortgage equity withdrawal is $226,600.

  • Total squatting time is about 18 months.

Foreclosure Record

Recording Date: 10/29/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 07/24/2009

Document Type: Notice of Default

Irvine Home Address … 14492 GUAMA Ave Irvine, CA 92606

Resale Home Price … $499,000

Home Purchase Price … $486,000

Home Purchase Date …. 5/29/2003

Net Gain (Loss) ………. $(16,940)

Percent Change ………. -3.5%

Annual Appreciation … 0.3%

Cost of Ownership

————————————————-

$499,000 ………. Asking Price

$17,465 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$481,535 ………. 30-Year Mortgage

$94,234 ………. Income Requirement

$2,358 ………. Monthly Mortgage Payment

$432 ………. Property Tax

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

$42 ………. Homeowners Insurance

$43 ………. Homeowners Association Fees

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

$2,875 ………. Monthly Cash Outlays

-$371 ………. Tax Savings (% of Interest and Property Tax)

-$668 ………. Equity Hidden in Payment

$26 ………. Lost Income to Down Payment (net of taxes)

$62 ………. Maintenance and Replacement Reserves

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

$1,924 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,990 ………. Furnishing and Move In @1%

$4,990 ………. Closing Costs @1%

$4,815 ………… Interest Points @1% of Loan

$17,465 ………. Down Payment

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

$32,260 ………. Total Cash Costs

$29,400 ………… Emergency Cash Reserves

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

$61,660 ………. Total Savings Needed

Property Details for 14492 GUAMA Ave Irvine, CA 92606

——————————————————————————

Beds: 4

Baths: 1 full 2 part baths

Home size: 1,897 sq ft

($263 / sq ft)

Lot Size: 5,130 sq ft

Year Built: 1971

Days on Market: 9

Listing Updated: 40457

MLS Number: S634529

Property Type: Single Family, Residential

Community: Walnut

Tract: Cp

——————————————————————————

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

Ready to work, Here is great opportunity for you. Located in cul-de-sac. Walking distance to elementary school. Large house for little money.

Politicians Encourage Strategic Default with Foreclosure Moratoria

The announcement by BofA — who was blackmailed by numerous government officials — to suspend all foreclosures strongly encourages strategic default. Why would anyone pay their mortgage when they know they can stop paying and keep their house?

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price …… $415,000

C'mon and hold me

Just like you told me

Then show me

What I want to know

Why don't we steal away

Why don't we steal away

Into the night

I know it ain't right

Robbie Dupree — Steal Away

Steal away. No, i don't mean to move quietly off into the night, I mean brazenly steal the house your living in. Why don't borrowers steal away? Why don't they keep the house and ignore the mortgage. With news like this, I really don't understand Why Struggling Homeowners Keep Paying Their Mortgages; after all Squatting is Becoming a Way of Life for Many Delinquent Borrowers, and now, the bank is stopping all foreclosures. Given these circumstances, isn't strategic default the most prudent course of action?

Not everyone will strategically default. Many borrowers really can afford their payments, and they rightfully figure the foreclosure moratorium will end; however, the struggling masses who are considering accelerating their defaults have just been given the green light to bail because they know the bank isn't going to foreclose on them. This is a dumb policy the banks will later regret.

BofA Halts Foreclosures

Bank Expands Freeze After Pressure From Government-Run Mortgage Firm

By DAN FITZPATRICK, DAMIAN PALETTA And ROBIN SIDEL — OCTOBER 9, 2010

Bank of America Corp. imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after it came under intense pressure from a government-run housing-finance giant worried about documentation problems, people familiar with the situation said.

The bank called the halt as concern mounted from legislators and state prosecutors about procedures used by lenders to foreclose on homes. Many banks use so-called robo signers, employees who sign hundreds of documents a day, without carefully reviewing their contents, when foreclosing on homes. Critics say that could result in improper foreclosures.

Improper foreclosures? Has anyone anywhere documented a case where a borrower who was current on their payments was foreclosed upon? Anyone who is not making their payments who ends up in foreclosure has experienced a "proper foreclosure." The notion of an improper foreclosure is simply a politician's fantasy. It gives those seeking election to public office something emotional to bluster about. The reality is there are no improper foreclosures.

Freddie Mac, the government-run mortgage-finance company that along with Fannie Mae owns many of the mortgages serviced by banks, pressed Bank of America to expand its search for problems with the foreclosure documentation process, said the people familiar with the situation.

On a call Thursday with several banks that included Bank of America, a Freddie official said the mortgage company wanted the institutions to look at foreclosure documentation across all 50 states, and asked them to consider putting a stop to the entire foreclosure process, say people familiar with the call.

Freddie Mac, an entity under government conservatorship and run by the Treasury department, asked major commercial banks to stop foreclosing on delinquent borrowers. This is one of two things: (1) It is a purely political act of desperate Democratic incumbents (Harry Reid and others) to make themselves look good going into next month's elections, or (2) the GSEs want to ramp up their own foreclosures while prices are still elevated and they don't want competition from the major banks (Government Expedites Foreclosures, Threatens Banking Cartel). I lean more toward political causes, but the economic issue cannot be dismissed.

Many in the banking industry fear that the widening paperwork problem could cause further delay on foreclosures and threaten an already weak housing market, which in turn is stalling the broader U.S. economic recovery. On the other hand, it could provide a brief financial respite to people who have defaulted on their mortgages and are still occupying their homes.

Could provide a respite? Do we need to give squatters any more breaks? For those of you waiting for these squatters to move out of your future home, how do you feel about this? You are paying a subsidy to the people living in your future home while you continue to work, pay bills, and rent.

As of August, there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due, according to mortgage research firm LPS Analytics. Since 2006, about 6.4 million homes have been lost through the foreclosure process.

Lost through the foreclosure process? Where did those houses go? Into the black hole of shadow inventory? The idea that these houses have been "lost" is very irritating. Any of those homes "found" on the MLS have been purchased by an owner-occupant or a cashflow investor who rented it out. While the squatter is living in the house, it is a completely non-productive asset; it costs money to maintain, but it produces no income. Foreclosure is the process by which we recycle these homes and obtain value from them. Nothing is lost in the foreclosure process.

Edward DeMarco, who heads the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, said in an interview that officials were working to find a "tailored" response to the foreclosure problem that won't cause broader problems for the fragile housing market. "We are trying to be quick but measured in the approach and the response taken," he said. "We're concerned about the whole housing market, and we're concerned about what this means for taxpayers and other market participants."

Can you find any substance to Mr. DeMarco's comment above? I read only bullshit.

Last week Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. agreed to more closely examine documents used in 23 states where a court's approval is required to foreclose on a home. J.P. Morgan said its review suspended nearly 56,000 foreclosures.

In conversations with Bank of America, Freddie said financial penalties or litigation could result if the bank did not take additional steps, said a person familiar with the conversations. Bank of America told Freddie that an audit of procedures in the 23 states uncovered no errors, this person said.

But Freddie said the work didn't go far enough and asked for a review in all 50 states, as well a stop to any foreclosure sales, said people familiar with the situation. Freddie Mac declined to comment.

Of course Freddie Mac declined to comment, they just threatened B of A with a lawsuit if B of A didn't do what Freddie Mac asked. This is government extortion through an intermediary.

Bank of America Chief Executive Brian Moynihan said Friday that the bank hasn't found problems in its foreclosure process, but opted to temporarily halt all foreclosures to "clear the air." He said the bank wants to "go back and check our work one more time."

Its decision is expected to stop "a couple of thousand" foreclosure sales scheduled for the next week, according to one person familiar with the matter said. The bank declined to specify how many homes it has in the foreclosure pipeline.

All this is only expected to stop a few foreclosures for a single week? Talk about a tempest in a teapot. i hope the politicians get some mileage out of this.

So far, Bank of America is the only lender to expand its foreclosure freeze, but others may be forced to begin or broaden a review, banking executives say. Wells Fargo & Co., one of the nation's largest mortgage lenders, says it hasn't stopped foreclosing on any properties.

Apparently, the government is threatening other major banks, and they fully expect them to capitulate. Unbelievable.

At this point, J.P. Morgan isn't expanding its foreclosure moratorium, but is widening its document review beyond the 23 states where it has frozen foreclosures, according to a person close to the bank.

[BOFA]

Bank of America services 14 million mortgages, or one out of every five in the U.S., and its loan-servicing portfolio exceeds $2.1 trillion in size. Of its mortgages, 10 million came from its 2008 acquisition of troubled California lender Countrywide Financial Corp. More than 80% of its delinquent loans were acquired through Countrywide.

What a great bargain that deal turned out to be, right?

A push over the last week from politicians and law-enforcement officials troubled by reports of foreclosure problems only intensified the pressure on Bank of America, which has been working to improve its relations in Washington. It concluded that reviews in just 23 states wouldn't cut it with elected officials in the other states, a person close to the bank said.

"In this intense political season we are in, it didn't play well to say do it in some states but not your state," this person said.

That confirms this is nothing but a political ploy. Disgusting.

Senate Majority Leader Harry Reid (D., Nev.), whose state has been hit hard by foreclosures, and House Oversight and Government Reform Committee Chairman Edolphus Towns (D., N.Y.), both said Friday they welcomed Bank of America's move and called on other banks to follow.

Cassandra Toroian, chief investment officer at Bell Rock Capital LLC, a money-management firm, says the additional reviews are unlikely to significantly impact the outcome for homeowners who are facing foreclosure. "It's just delaying the inevitable," she says.

Actually, this policy is likely to have impact — it is going to cause more accelerated default.

Momentum builds for full moratorium on foreclosures

By Ariana Eunjung Cha, Steven Mufson and Jia Lynn Yang

Washington Post Staff Writers

Saturday, October 9, 2010

Senior Obama administration officials said Friday that a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation's housing market and economic recovery.

Their remarks were made as pressure for a nationwide moratorium mounted Friday when Bank of America, the nation's largest bank, halted evictions in all 50 states. Senate Majority Leader Harry M. Reid (D-Nev.), who is locked in a tight reelection campaign, called on other major lenders to follow suit.

The White House has so far resisted joining the election-season calls for action but convened two interagency meetings this week to discuss reports that banks filed fraudulent documents to evict borrowers who missed payments as well as fundamental questions about whether banks are seizing properties without having clear ownership of the mortgages.

I know the Democrats are desperate right now, but this kind of pandering is a major turnoff. It's the kind of thing that makes me want to see them lose. It's also clear evidence that the pressure being exerted by Freddie Mac is coming directly from the Obama administration and Harry Reid.

One meeting was made up mostly of groups that regulate the housing industry, including the Department of Housing and Urban Development, the Treasury Department and the White House. The other, which involved the U.S. Securities and Exchange Commission, the Internal Revenue Service and U.S. attorneys from across the country, was focused on the question of whether financial fraud was committed.

With foreclosed properties comprising one in every four homes sold in the United States, the spreading moratorium could disrupt real estate deals in progress, slow down the process of clearing the backlog of troubled home loans and prolong the economic recovery, analysts said.

A freeze would also strike at the financial sector, just two years after it suffered one of the worst crises in its history. One government official who has been in discussions with several big financial firms said the banks are bracing themselves for a wave of lawsuits from homeowners who are fighting to keep their homes and from investors who had bought mortgage loans on Wall Street. On Friday, while the Dow Jones Industrial Average crossed 11,000, most major bank stocks fell.

It looks as if the government is going to delay the recovery by keeping a huge overhang of shadow inventory despite the inevitably lawsuits.

… Also Friday, the Federal Housing Administration said it had asked agency-approved mortgage servicers – which includes the nation's largest banks – to immediately audit their foreclosure operations. The FHA can impose financial penalties on companies that do not follow rules set by housing regulators.

Questions over the legal standing of banks in foreclosure proceedings as well as reports that these firms cut corners as they pushed foreclosures through the legal system fueled calls in Congress for a nationwide freeze and federal investigations.

Another tool of threat the government has is the FHA.

Reid, who had earlier sent a letter to major banks asking them to suspend foreclosures in Nevada, expanded that call Friday after Bank of America's announcement.

"I thank Bank of America for doing the right thing by suspending actions on foreclosures while this investigation runs its course," he said.

The Senate banking committee's chairman, Christopher J. Dodd (D-Conn.), said Friday that his panel will hold hearings Nov. 16 to investigate the morass.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, said the top 10 mortgage lenders should immediately suspend foreclosure proceedings in all states.

"The implications of ignoring the foreclosure problems are far too great to be ignored," he said Friday.

Bullshit. I can't believe these guys have the nerve to say these things. I suppose they are politicians in close elections, so nothing should surprise me. These guys are unbelievable.

… "Calls for a blanket national moratorium on all foreclosures are a bad idea and would cause significant harm to communities at risk, the unstable housing market and the fragile economy," the industry letter said.

Suspending foreclosures could end up forcing banks, which act as service companies for the loans, to spend billions of dollars to compensate investors who own the pools of mortgages they manage. And it could add to the losses at Fannie Mae and Freddie Mac, the two government-owned mortgage financiers.

Pension funds and other investors in the pools of mortgage securities are worried that the big banks will get special treatment from Washington.

"What's happened is a gross mishandling of paperwork and often times a misrepresentation of the transaction," said Chris Katopis, a spokesman for the Association of Mortgage Investors. "The banks have to have some responsibility and accountability for this."

chaa@washpost.com mufsons@washpost.com yangjl@washpost.com

The only people who benefit from a moratorium are politicians and squatters. Everyone else gets screwed.

HELOC abusing squatters will benefit from a moratorium

As you contemplate whether or not this moratorium idea is good or bad, take a hard look at the people who will benefit the most. Today's featured property is a particularly bad case of HELOC abuse and squatting. They went to the housing ATM every year for another withdrawal. The income subsidy was enormous. After you see how these people lived over the last decade, ask yourself if this is the kind of behavior we want to subsidize and see more of.

  • This house was purchased on 7/22/1998 for $132,000. Their original mortgage and down payment does not show up in my records. Let's assume they used an 80% first mortgage ($105,600) and a $26,400 down payment. This may have been a 3% down FHA purchase, but I don't know.

  • On 10/4/2001 they refinanced with a $130,000 first mortgage.

  • On 12/24/2002 they refinanced with a $175,000 first mortgage.

  • On 10/30/2003 they refinanced with a $279,300 first mortgage.

  • On 11/15/2004 they refinanced with a $385,000 first mortgage.

  • On 11/14/2005 they refinanced with a $450,000 first mortgage.

  • On 12/28/2006 they refinanced with a $524,000 Option ARM.

  • Total mortgage equity withdrawal is $418,400.

  • Total squatting time is about 20 months.

Foreclosure Record

Recording Date: 09/11/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/08/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 05/12/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 05/06/2009

Document Type: Notice of Default

This family lived off their housing ATM machine. They were pulling out an average of $83,680 per year. That was roughly the median income in Irvine during that time.

Do you think we should encourage this kind of financial management? If we bail these people out or let them keep their house, we are ensuring we will have many more borrowers who emulate them in the future.

Irvine Home Address … 13 GREENWOOD Irvine, CA 92604

Resale Home Price … $415,000

Home Purchase Price … $132,000

Home Purchase Date …. 7/22/1998

Net Gain (Loss) ………. $258,100

Percent Change ………. 195.5%

Annual Appreciation … 9.2%

Cost of Ownership

————————————————-

$415,000 ………. Asking Price

$14,525 ………. 3.5% Down FHA Financing

4.21% …………… Mortgage Interest Rate

$400,475 ………. 30-Year Mortgage

$78,371 ………. Income Requirement

$1,961 ………. Monthly Mortgage Payment

$360 ………. Property Tax

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

$35 ………. Homeowners Insurance

$320 ………. Homeowners Association Fees

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

$2,675 ………. Monthly Cash Outlays

-$309 ………. Tax Savings (% of Interest and Property Tax)

-$556 ………. Equity Hidden in Payment

$22 ………. Lost Income to Down Payment (net of taxes)

$52 ………. Maintenance and Replacement Reserves

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

$1,884 ………. 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

$28,800 ………… Emergency Cash Reserves

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

$55,630 ………. Total Savings Needed

Property Details for 13 GREENWOOD Irvine, CA 92604

——————————————————————————

Beds: 3

Baths: 1 full 2 part baths

Home size: 1,642 sq ft

($253 / sq ft)

Lot Size: 2,110 sq ft

Year Built: 1976

Days on Market: 128

Listing Updated: 40459

MLS Number: S619881

Property Type: Condominium, Residential

Community: El Camino Real

Tract: St

——————————————————————————

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

Wonderful 3 bedroom 2.5 bath, two car garage with enclosed paito. Close to shoping, fwy, school and parks. Price to sell!

paito? shoping? That description is fewer than 20 words, and the realtor managed to misspell two of them.