We have reached agreement with several listing agents, including our own Shevy Akason, to provide exclusive, private access to for-sale properties before they are listed on the MLS. Many of these properties will be offered at a reduced price.
This is a regular equity sale. It is not a short sale or bank owned property! You can be living in your new home in 30 days or less! Fantastic views from this private end unit perched high on a hill overlooking a fantastic park that includes a playground, barbeque, picnic tables, and a basketball court. This end unit has a private patio and is surrounded by a huge greenbelt. The home has been completely remodeled including a whole new kitchen with new cabinets, granite counter tops, updated lighting, new baseboards, casing, doors, remodeled bathrooms and much more! This is a fantastic opportunity to own a completely remodeled home in a unique location.
You will not find this property on the MLS. For exclusive access contact us a sales@idealhomebrokers.com.
Come by our open house from 11-2 on Sunday 6 June 2010.
Strategic default provides a major stimulus to the California economy. Nearly $2,000,000,000 per month flows into the local economy that used to flow out to debt holders in other places.
The HELOC abusers stimulated the economy when they borrowed all that money and spent it. Now that these same people are walking away from their mortgages, they no longer have housing payments, and their spending amounts to about $10,000,000,000 each month. Perhaps we should thank them for all their spending? I think not.
As long as lenders allow this to go on, and as long as the US taxpayer is paying the bills, these squatters are stealing from each of us. Lenders need to process their foreclosures, and borrowers need to experience the consequences of their actions.
ST. PETERSBURG, Fla. — For Alex Pemberton and Susan Reboyras, foreclosure is becoming a way of life — something they did not want but are in no hurry to get out of. …
A growing number of the people whose homes are in foreclosure are refusing to slink away in shame. They are fashioning a sort of homemade mortgage modification, one that brings their payments all the way down to zero. They use the money they save to get back on their feet or just get by.
This type of modification does not beg for a lender’s permission but is delivered as an ultimatum: Force me out if you can. Any moral qualms are overshadowed by a conviction that the banks created the crisis by snookering homeowners with loans that got them in over their heads.
“I tried to explain my situation to the lender, but they wouldn’t help,” said Mr. Pemberton’s mother, Wendy Pemberton, herself in foreclosure on a small house a few blocks away from her son’s. She stopped paying her mortgage two years ago after a bout with lung cancer. “They’re all crooks.”
Foreclosure procedures have been initiated against 1.7 million of the nation’s households. The pace of resolving these problem loans is slow and getting slower because of legal challenges, foreclosure moratoriums, government pressure to offer modifications and the inability of the lenders to cope with so many souring mortgages.
The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics.
The same LPS report shows more than a third of all delinquent borrowers have been delinquent more than one year. The squatting time is getting steadily worse.
While there are no firm figures on how many households are following the Pemberton-Reboyras path of passive resistance, real estate agents and other experts say the number of overextended borrowers taking the “free rent” approach is on the rise.
There is no question, though, that for some borrowers in default, foreclosure is only a theoretical threat for a long time.
More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.
… Mr. Pemberton and Ms. Reboyras decided to stop paying because their business, which restores attics that have been invaded by pests, was on the verge of failing. Scrambling to get by, their credit already shot, they had little to lose.
“We could pay the mortgage company way more than the house is worth and starve to death,” said Mr. Pemberton, 43. “Or we could pay ourselves so our business could sustain us and people who work for us over a long period of time. It may sound very horrible, but it comes down to a self-preservation thing.”
That is the cold, hard truth of the matter; people strategically default for many reasons, but preservation of their lifestyles is chief among them. Everyone tries to delay The Unceremonious Fall from Entitlement.
They used the $1,837 a month that they were not paying their lender to publicize A Plus Restorations, first with print ads, then local television. Word apparently got around, because the business is recovering.
The latest data tells us that over 14 percent of all U.S. mortgages are either 30+ days late or in some stage of foreclosure. In other words, 7.2 million people are not paying their mortgages. Yet banks are turning out record profits even though they are bleeding in their real estate cash-flow. Now let us run a hypothetical here. The median mortgage payment of those 51 million mortgages is $1,514. This is actual stimulus for people if you don’t pay that each month. If you aren’t paying your mortgage you just relieved yourself of your biggest monthly commitment. So let us run a rough number:
$1,514 x 7.2 million = $ 10,931,916,697
So this frees up some $10 billion each month (this is a rough number).
How much of this economic graft is benefiting California?
So today you have roughly 798,000 California mortgage holders not paying their mortgage for a variety of reasons. Clearly the main reason is the economy is horrible. But a large number are taking advantage of the situation. The median home payment in the state is $2,384. Let us do the math:
$2,384 x 798,832 = $1,904,414,716
So of the $10 billion in non-payer stimulus, California receives roughly 20 percent of the cut.
Well I’m glad some people have their priorities straight. The fact of the matter is the bulk of Americans, the middle class, are being screwed by the banks, Wall Street, and also the current bailout structure. The median home price in the U.S. hovers around $170,000. Why not cap any bailout help to mortgages at that level or less? Do you feel good that the folks I talked about (who make over $100,000 a year by the way) in California who have a Mercedes and BMW and continue to live in a nice home rent free are able to do so because of your taxpayer money? This is exactly what is happening. No wonder why many Americans must feel like fools.
The name of the game is simple. Get into massive debt, so much so that when you fail, you will then be able to negotiate lower terms because the government enjoys rewarding horrible behavior. Things like this won’t last long because eventually, the public that is being ramrod into bailouts wakes up and revolts. Yet this could be a few years or much longer before any of it happens.
The couple owe $280,000 on the house, where they live with Ms. Reboyras’s two daughters, their two dogs and a very round pet raccoon named Roxanne. The house is worth less than half that amount — which they say would be their starting point in future negotiations with their lender.
“If they took the house from us, that’s all they would end up getting for it anyway,” said Ms. Reboyras, 46.
These borrowers are really planning to cram down their lender. After a year or more of squatting, they will tell the bank to reduce their principal in half or take the house back. That takes a lot of courage.
The lenders I have spoken with are unified in their policies; they would rather lose more money with a foreclosure than accept cram downs from existing borrowers. They are willing to pay that price to prevent moral hazard from encouraging all their borrowers to cram them down, which they would if given the chance.
From the lenders’ standpoint, people who stay in their homes without paying the mortgage or actively trying to work out some other solution, like selling it, are “milking the process,” said Kyle Lundstedt, managing director of Lender Processing Service’s analytics group. LPS provides technology, services and data to the mortgage industry.
These “free riders” are “the unintended and unfortunate consequence” of lenders struggling to work out a solution, Mr. Lundstedt said. “These people are playing a dangerous game. There are processes in many states to go after folks who have substantial assets postforeclosure.”
But for borrowers like Jim Tsiogas, the benefits of not paying now outweigh any worries about the future. …
“I need another year,” he said, “and I’m going to be pretty comfortable.”
Look at the impact squatting has already had on borrowers. These people think they can cram down their lenders or squat their way through the recession. I don't care how much economic stimulus this creates or whether or not this keeps our banks solvent; this is wrong. If lenders don't want to see a a great deal more strategic default, they shouldn't make it so rewarding. Or is it that our government shouldn't let them because the US taxpayer is paying all the bills.
Strategic default is a lesser evil for the borrower than continuing with a lifetime of debt servitude, but borrowers who do this are supposed to have consequences. Foreclosure is a superior form of principal reduction because it has consequences for the borrower. So far, the consequences of strategic default have been more positive than negative, so we will continue to see more strategic default and the squatting the goes along with it. Until lenders foreclose and push these people out, strategic default will become an even greater problem. In fact, if anything can bring down the banking cartel withholding our inventory it is strategic default. If everyone does it, banks will have to foreclose or give away millions of houses.
Another Trustee sale flip
Lenders are clearly releasing inventory at an intentionally slow pace to shore up pricing. When they do let one go, it provides opportunities like today's. I doubt this flipper will get the full markup they seek, but it will still be a profitable trade.
RESORT-LIKE COMMUNITY WITH GORGEOUS AMENITIES. NEWER CONSTRUCTION. GREAT FLOORPLAN. LIGHT AND BRIGHT. HIGHLY UPGRADED: BEAUTIFUL HARDWOOD FLOORS IN LIVING/DINING ROOM;NEW CARPET UPSTAIRS; TILE FLOORING IN ALL THREE BATHROOMS, GOURMET KITCHEN WITH LIGHT WOOD CABINETS AND GRANITE COUNTERTOPS, RECESSED LIGHTING; UPSTAIRS LAUNDRY ROOM WITH CABINETS; VAULTED CEILING IN MASTER BEDROOM, MEDIA NICHE AND WALK-IN CLOSET. FRONT PATIO. READY TO MOVE IN.
Public attitude toward commercial borrowers who strategically default is much different than it is toward commercial borrowers. Today, we explore this difference.
The endless parade of Bailouts and False Hopes serve to give hope to the hopeless and keep them paying their mortgages rather than strategically default. Those who are underwater and making payments in excess of rent have two real alternatives and two fantasy alternatives. The real alternatives are (1) continuing to pay until they implode or (2) strategic default. Neither option is very satisfying as both generally lead to bankruptcy later on.
The fantasy alternatives are (1) the re-inflation of the housing bubble giving debtors equity again and (2) government mandated principal reduction to give debtors equity again. Neither one is going to happen. The overhead supply of distressed housing units will eventually need to be sold, and in the process, the best case is for prices to hold steady with super-low interest rates. Principal reduction is the ultimate debtor fantasy, and it will not happen because it would require massive theft by the government with a direct transfer of money from the State to individual debtors with the commensurate moral hazard. That's the kind of thing that sends rioters into the streets besides costing trillions of dollars.
Since the real options are bad, most will cling to the fantasy, and in the process, they will continue paying their mortgages until they implode or get pissed off enough to default.
Strategic Default
Some have expressed a concern that I have gone soft on HELOC abusers and those who strategically default. I have made it clear that I believe Foreclosure Is a Superior Form of Principal Reduction because it has consequences for the borrower. I have no desire to see those who over-borrowed be given a free pass. My endorsement of strategic default is a recognition of the lesser of two evils. Strategic default is the better of two bad alternatives; when faced between a life of servitude and a walking away from a huge debt, walking away is the better choice. Both alternatives have negative consequences — as they should.
It irritates me the lengths lenders are willing to go to manipulate people to keep paying for the lender's mistake. Lenders Are More Culpable than Borrowers, and their consequences should be more severe. The fact that lenders would sentence families to a lifetime of servitude to pad their bottom line is wrong, and I will continue to speak out against it.
Why aren't commercial defaulters labeled as evil?
Borrowers who strategically default on commercial real estate aren't immoral thieves or hysterical fools as their residential counterparts are made out to be. When commercial borrowers strategically default, they are "extinguishing debt" to produce "positive results." The contrast between the attitude between commercial borrowers and residential borrowers is remarkable.
LOS ANGELES, May 26, 2010 (BUSINESS WIRE) — MPG Office Trust, Inc., a Southern California-focused real estate investment trust, today announced that the company has extinguished the $26.4 million construction loan obligation secured by 17885 Von Karman in Irvine, California. The Company contributed approximately $2.0 million in reduction of the loan, turned the property over to the lender pursuant to a deed-in-lieu transaction, and was relieved of the $26.4 million obligation and a $6.7 million repayment guaranty. The loan was scheduled to mature on June 30, 2010.
They strategically defaulted. They took a look at the numbers and determined it was not in their best interest to keep paying, so they didn't. When residential borrowers make the same calculation, they are decried as immoral or stupid and they are blamed for the collapse of the US banking system; however, when commercial borrowers do it, they are lionized as great financial thinkers who are looking out for the best interests of their companies.
MPG Office Trust President and Chief Executive Officer Nelson C. Rising commented, "Our efforts that started two years ago to reduce debt, eliminate repayment and debt service guarantees and extend debt maturities continue to produce positive results. In addition to the transaction announced today, earlier this month, we made a principal payment of $9.7 million on the 207 Goode construction loan and in exchange, the lender agreed to substantially reduce our repayment guaranty on this loan. We are currently marketing the property for sale. As a result of meeting the prescribed debt service coverage ratio for five consecutive quarters, the Company eliminated a debt service guaranty on a $109.0 million mortgage secured by Brea Corporate Place and Brea Financial Commons in Orange County, California. The Company also extended the maturity of this loan to May 1, 2011."
These guys are cramming down lenders on every deal. Lenders are going to lose a fortune on the actions of commercial borrowers just like these guys, yet when they do it, the strategic default is considered positive.
The Los Angeles real estate investment trust reports first-quarter net income of $18.6 million, largely on the forgiveness of a $49.1-million debt.
Long-suffering office landlord Maguire Properties Inc. on Monday reported a first-quarter profit linked largely to the forgiveness of a $49.1-million debt it was unable to pay.
The Los Angeles real estate investment trust, which owns some of the region's best-known skyscrapers including the US Bank Tower in downtown Los Angeles, finished the quarter with $18.6 million in net income attributable to common shareholders, a dramatic contrast from the $53.9-million loss reported a year earlier.
Finances in both quarters were influenced by significant one-time events, however.
This year, Maguire was forgiven $49.1 million in debt on Griffin Towers, a Santa Ana office complex it sold in March as part of a long campaign to reduce its liabilities. It also recorded a $16.6-million deferred gain on the 2006 sale of a parking garage in downtown Los Angeles. The first quarter in 2009 was affected by a $23.5-million write-down of the value of an Irvine office building and other charges.
Maguire reported a profit of 38 cents a share in the quarter, compared with a loss of $1.13 in the same quarter of 2009. Revenue was down 2% to $111.5 million.
"Revenues are flattening and their leasing seems to be going at a stable pace," said analyst Craig Silvers, president of Bricks & Mortar Capital. "They seem to have stabilized their operations."
Just like any debtor, when they quit paying their debts, their cashflow situation improves. Not exactly a news flash.
She couldn't afford it
The previous owner purchased this property on 6/13/2005 for $665,000. She used a $498,750 first mortgage and a $166,250 down payment.
When she purchased, she got a HELOC for $99,750, but it doesn't appear she used it.
On 12/29/2005 she obtained a $200,000 HELOC which I don't think she used.
On 12/13/2007 Bank of America refinanced her first mortgage for $417,000 and gave her a second mortgage for $168,000.
Total property debt is $585,000.
Total mortgage equity withdrawal is $86,250 which doesn't recover her down payment.
Total squatting was only about 9 months. B of A did not waste much time in foreclosure.
Foreclosure Record
Recording Date: 12/23/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 09/22/2009
Document Type: Notice of Default
Trustee Flip
This house was purchased for $463,000 at auction on 2/16/2010. Most trustee sales go off about 15%-20% under comps. This seller is hoping to get an extra 5%. It is not a bad pricing strategy as it gives them some room to negotiate back down to comps. This is typical of what happens when the lenders finally let one go through the system. Our current backlog is enormous.
This property is in backup or contingent offer status.
ABSOLUTELY STUNNING!!! This highly sought after floor plan is located in the exclusive gated community of Northpark. This charming home is very bright and open, featuring upgrades such as granite countertops, custom tile flooring, high-end appliances, fresh paint, brand new Berber carpet, and much more. This home is completely turnkey and ready for you. There is an attached 2 car garage with plenty of guest parking. There are resort style amenities with a nice clubhouse, pool, spa, greenbelts, and other great design features in the community. This is HIGH END living at a very affordable price. It is in a great school district, and close to plenty of shopping with easy freeway access. This is a MUST SEE!
Home debtors can wait, many know it's not too late and they're walking away. The ones that stay watch their souls slide away one payment at a time. Paying on a hopeless mortgage checking Zillow Zestimates and NAr press releases for good news about their home's value. Those are the debtors who will look back in anger — anger at the lies they were fed, the manipulations from realtors, lenders, and now our own government. How would you feel after a decade of being underwater?
Lenders are frightened about strategic default because it threatens to wipe out the remaining illusions about the value of the worthless loans on their balance sheets. If every underwater homeowner did what was in their best financial interest, our banks would be undeniably insolvent; therefore, lenders are coordinating a public relations campaign to appeal to false morality and now lenders are trying to stereotype strategic defaulters as hysterical fools.
There is so much about the manipulation of borrowers by lenders I find offensive. This one I find particularly offensive because lenders are trying to make the correct and rational decision of hopeless debtors look like the incorrect and irrational decision of overemotional lunatics.
If lenders were merely trying to bluff debtors with bullshit or foster fantasies of appreciation, their behavior would be consistent with the clueless shills of the National Association of realtors who lie by ignorance — however, lenders know strategic default benefits many borrowers, and they are intentionally perpetrating a lie for their own advantage. Unintentional lies of bullshit are not as offensive as intentional deception for personal gain, which is what lenders are doing now.
Memo to the bank: Take this money-sucking, underwater house and shove it! Go ahead and wreck my credit for years to come. I'm walking away, no matter what.
Why?
That's the question posed by Brent T. White, a University of Arizona law professor whose academic paper last year on the fast-spreading "strategic default" phenomenon drew sharp criticism from lenders and Wall Street, who viewed him as the Pied Piper of the walk-away movement.
Now White has published a paper based on the personal accounts of 356 strategic defaulters and homeowners on the verge of doing the same. His finding: People who intentionally default on their loans are not as economically rational or calculating in their decision-making as widely thought.
The reporter is setting readers up with a false premise hidden in the language: rational and calculated decision making does not support strategic default. Unfortunately for lenders, the ability to do math clearly demonstrates that strategic default is wiser for those who are deeply underwater and paying far more in interest than they would in rent. It is a wise and rational decision for borrowers in that circumstance. Whether or not people get emotional about that fact is beside the point; strategic default is the best course of action for many home debtors.
In fact, he said, their decisions to pull the plug "may not turn out to be economically rational."
Here is where the lenders plant their insidious lie: it may not turn out in your favor. Fear of the bogeyman is all they have left. Deeply underwater homeowners who continue to pay bloated mortgages will consider their odds and chose the path with a much higher probability of a successful outcome: strategic default. What lenders fear most is that strategic default may turn out to be very economically rational. In fact, it will.
Perhaps if this bear rally goes on a bit longer lenders can appeal to residual kool aid intoxication as well — "Don't default now, prices are coming back!" Yeah, right.
But they walk anyway, in large part because they are at the end of their emotional rope.
Sure, once people are pissed off enough, they get angry and make a decision. Anger is a wonderful motivator for change. Everyone who strategically defaults makes a very difficult decision, and either choice they make is fraught with difficulties.
They have transitioned from feelings of anxiety and hopelessness to outright anger at their lenders, the government and a financial system they consider unfair.
That's because borrowers have been screwed by lenders, the government and our financial system — with a little help from their own greed. It is human nature for people to blame every responsible party other than themselves. Borrowers who strategically default are pissed at the perpetrators just as any victim would be. There might even be a few with the smallest modicum of introspection who realized they participated as well. Not many, but a few….
White published his latest paper in Arizona Legal Studies, the university law school's journal. After a study he did last year, which argued that far larger numbers of underwater borrowers should stick it to their lenders, White says he was inundated with e-mails and calls from homeowners saddled with negative equity. Many provided him with extensive details of their financial situations and difficulties dealing with their lenders.
According to CoreLogic, a real estate analytics firm, negative equity continues to be a massive and corrosive problem. During the first quarter, 11.2 million homeowners across the country owed more on their mortgages than the market value of their properties.
In Las Vegas, 75 percent of mortgaged homes and condos are underwater. In Phoenix, 550,000 homeowners have negative equity — 58 percent of houses with loans. Florida's rate of negative equity is 48 percent, followed by Michigan at 39 percent and California at 34 percent. Nationwide, nearly one out of four mortgaged houses is in a negative equity position, according to CoreLogic.
There are a lot of borrowers who are underwater. Many of them would benefit from strategic default.
White and other academic researchers say that severe negative equity is the essential spark that prompts owners to consider walking away — even those who think it's morally wrong to default.
We have about six more months of mileage out of the morality play. By the end of this year, many people will know someone they know and respect who strategically defaulted. Once that happens, it's over. When the hundreds of thousands of people who are deeply underwater see the benefits others gain by defaulting, they will all do it.
Based on the personal accounts shared by strategic defaulters, White said, they often have high credit scores, sterling payment histories and solid incomes. As one underwater homeowner said in an e-mail to White, "There isn't a lender out there who wouldn't give us a loan," based on credit performance.
Didn't this author argue earlier that these people were irrational and poor decision makers? Aren't people with high credit scores more savvy about debt?
But staring at hundreds of thousands of dollars of negative equity, owners become anxious, then pessimistic, about their financial futures. Older owners with severe negative equity worry about their ability to stay afloat in their retirement years if they keep paying their mortgage.
Why someone late in their career would take on a huge mortgage is beyond me. Other than the desire for a property they could not afford, senior borrowing is purely for the anticipated mortgage equity withdrawal to fuel their retirement spending. Seniors in particular should consider strategic default. What do they have to lose? If seniors get cut off from credit cancer it is the best thing that could happen to them.
Lenders and loan servicers often play crucial — if inadvertent — roles in motivating owners to walk away, White said. Of the 356 homeowners' situations he analyzed, 100 percent reported contacting their lenders to work out a solution before they defaulted.
Many say they were rebuffed by servicers who refused to discuss modifications with anyone current on loan payments. White quoted one deeply underwater homeowner: "So many times I have called my mortgage company to say that I have been a good-paying customer, who despite the difficult economic times, [has] continued to pay on time. I am told over and over again that they cannot do anything for me."
What is the bank's incentive? If people who are deeply underwater keep paying, the bank has no incentive to stop that. Only if borrowers actually default does a lender have any incentive to do anything. Nothing is going to change that.
Other owners told White that they tried to qualify for one of the Obama administration's foreclosure-prevention programs but either got snagged by rigid income-to-payment rules or non-responsive servicers, or were told they were too deeply underwater to obtain assistance of any sort.
Any borrower so far underwater as to fail to qualify for a government program should default. What are they waiting for? The government basically told them to.
In the end, anger pushes even the most reluctant defaulters over the line.
Some of the anger is directed at the federal government. One couple told White: "Frankly we are tired of getting the short end of the stick, while the government seems to rescue everyone but us."
That's because the government is bailing out the banks while letting borrowers flounder. Did borrowers really think it would turn out the other way?
White says there can be no effective answer to the walk-away trend as long as lenders and the government fail to intervene early and address underwater borrowers' needs and emotions.
Do borrowers need therapy to be convinced to keep paying when it is not in their best interest? I suggest a mass hypnosis. Maybe if debtors are hypnotized, they will suddenly believe paying the supersized mortgage is in their best interest.
One possibility: much deeper principal-reduction efforts for owners who have severe negative equity and see no way out. Another option offered by White: Create a "rent-based loan program" that would allow underwater owners the option of refinancing their balances to an interest rate that would bring their monthly payments in line with the rental cost for a comparable house.
Foreclosure is a superior form of principal reduction. If the government and lenders want to reduce balances, foreclose on people and reduce balances that way. I like the idea of rent-based payment cram downs. Underwater loan owners are renting from the bank anyway. If lenders believed their loans could get crammed down to rental equivalence levels, perhaps they wouldn't make so many stupid loans.
Bought at bottom, milked it, and squatted
Today's featured property was purchased for $372,000 on 11/6/1998. The owner used a $297,600 first mortgage and a $74,400 down payment.
On 11/22/1000 he opened a $50,000 stand-alone second.
On 8/22/2001 he opened a $100,000 HELOC.
On 7/29/2004 he opened a $150,000 HELOC.
On 4/13/2005 he refinanced with a $600,000 Option ARM with a 1% teaser rate and obtained a $120,000 stand-alone second.
Total property debt is $720,000.
Total mortgage equity withdrawal is $422,400
Total squatting is at least 20 months.
Foreclosure Record
Recording Date: 06/04/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 01/23/2009
Document Type: Notice of Default
Uncomfortably numb
After writing about this for over three years, when I see someone who stole $422,400 and squatted for almost 2 years, I am rather numb to it all.
If someone robs a bank and gets $20,000, it makes headlines and someone goes to jail, but when someone steals nearly half a million dollars through a mortgage, nobody notices.
If someone breaks into a vacant house and squats for a couple days, the police are called out to remove them. If someone quits paying their mortgage and squats for a couple years, nobody notices.
If someone had told me these would be commonly accepted actions a few years ago, I wouldn't have thought it possible. Yet here we are. I am uncomfortably numb.
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This large home has 5 bedrooms and 3.5 baths. Two of the bedrooms have private baths with showers and tubs. Both of these bedrooms also boast cathedral ceilings. As you enter this home you walk into a large livingroom diningroom combination. Off to the left you have a cozy familyroom with a brick fireplace. As you move to the right of the home you have a comfortable kitchen with a breakfast nook and breakfast counter. All three of these rooms have sliding glass doors that lead to a fantastic backyard that is complete with a pool. This home is very open, making it perfect for entertaining.
Sub 5% interest rates are stabilizing prices
The markets are signaling continued deflation and a double-dip recession. As a result, money is flowing into government backed home mortgages. The historic spreads between the 10-year Treasury and a GSE MBS are now meaningless because a mortgage-backed security from a GSE is now backed by the full faith and credit of the US Government — it is a government security. Between the flight to quality and the government guarantee, interest rates are very low.
As a result of very low interest rates, payment affordability is very high. Today's featured property would likely save an owner money versus a comparable rental, and that is what is driving our market. Of course, the actual price paid is still very high, and the stability of record low interest rates is suspect to say the least, but the affordability of monthly payments is undeniable. If lenders were smart, they would be selling more of their REO into this temporary affordability.
FOR a brief moment last fall, it looked as though the American housing sector might not be the persistent economic drag economists had feared. Home prices and sales leveled off and began climbing. Construction did the same. In the third and fourth quarter of last year, residential investment was a minor but positive contributor to American output growth. Buoyed by a generous homebuyer tax credit and mortgage rates held down by Federal Reserve purchases, housing markets seem poised for stability, if not a new boom in activity.
But the good times haven't lasted. Construction and builder confidence have weakened once again. The latest data on existing home sales show a spike in activity and the best April performance since 2006. But this was almost certainly due to the looming end of the federal tax credit. Sales also rose and spiked before and immediately after the previous deadline, last fall, only to decline again through the winter. More worrying still, the previous spike in sales coincided with a decline in housing inventory. This time, inventories have risen dramatically. Even as the end of government incentive programmes lead buyers to exit the market, the number of homes for sale will have grown significantly.
And so it's not surprising that prices have also been falling again. According to the Federal Housing Finance Agency, home prices declined 1.9% from the fourth quarter of 2009 to the first quarter of 2010. Prices were up 0.3% in March, according to the FHFA data, but the general trend is not encouraging. The latest Case-Shiller home price figures are similarly disappointing. Both of the Case-Shiller national indexes had declined for six consecutive months, through March. Only two of the individual markets, San Diego and San Francisco, saw a rise in home values in the first quarter. Total declines from last fall's price peak haven't been catastrophic. But they are troubling. Nearly a quarter of all mortgage borrowers remain underwater on their home loans. In the first quarter, the share of prime loans that were delinquent or in foreclosure rose sharply. That's bad for housing inventory, bad for home prices, and bad for the residential investment outlook.
These trends are the more worrisome given the end of the homebuyer tax credit and of Fed purchases of mortgage-backed securities. Just this week, the head of the Federal Housing Administration declared that, "This is a market purely on life support, sustained by the federal government…having FHA do this much volume is a sign of a very sick system.” The federal government may come to regret its decision to focus on measures aimed at encouraging sales, rather than on efforts to deal with negative homeowner equity. The latter issue has made for a steady-stream of foreclosed-upon housing inventory, too substantial to be absorbed by new buyers. And so with government measures winding down, the housing bust is free to carry on as before.
It is unlikely (though not impossible) that prices will plummet once more; price declines are likely to be small relative to those experienced in 2008 and 2009. But small declines are enough to do damage. Four years after the housing boom reached its apex and the bust began, and end to the mess remains just out of reach.
Delaying the decline
If justice delayed is justice denied, what is a market bust delayed? For as ominous as the signs are for our market, prices locally will likely continue to rise for the near term. Lenders have constricted inventory by failing to approve short sales and failing to foreclose on delinqent borrowers. With interest rates below 5% again, payment affordability is good. Until more product is released to the market or interest rates go up, prices will hold steady or rise. Unless lenders consider squatting a permanent solution to the problem, this product will come to the market, and it will impact pricing. it is only a matter of time.
Auction with equity
Today's featured property is a rarity in the trustee sale market since the crash: and equity owner who did not sell prior to auction.
The property was purchased on 4/15/2003 for $490,000. The owner used a $392,000 first mortgage and a $98,000 down payment. On 1/13/2005 he opened a $100,000 HELOC, but there is no indication that he used it. Then he defaulted:
Foreclosure Record
Recording Date: 05/26/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 02/18/2009
Document Type: Notice of Default
I looks like they gave him about nine months after the NOT was filed before they actually went to auction. It isn't known why the owner did not sell and obtain his equity during that time.
The opening bid at auction was about $416,833.94. It was quickly bid up to $596,000. It is being flipped for a quick profit.
Gorgeous Home in Westpark. Upgraded Marble in entrance. Walking distance to school & park. Custom Window Covering. Mirrored walk-in closet door. Cathedral-vaulted ceilings. New Paint. Move-in ready.
.
I will not be participating in the comments today. It is my tenth wedding anniversary, and I will be be spending the day out with my family.
Ten years in, and I love my wife more than the day we were married. I am looking forward to the next ten and many more.
Any borrower so far underwater as to fail to qualify for a government program should default. What are they waiting for? The government basically told them to.
