The Aldea tract built was by California Pacific Homes. It is located at the corner of Valley Oak Drive and Barranca Parkway. We have featured this tract on other occasions: Aldea – Oak Creek Detached Condo and Aldea – Oak Creek Detached Condo – UPDATE #1.
There are a number of properties for sale in this neighborhood, and one distressed seller who is going to lose a lot of money.
Asking Price: $600,000
Purchase Price: $605,000
Purchase Date: 7/29/2005
Address: 9 Alevera, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,030
$/Sq. Ft.: $583
Lot Size: –
Year Built: 2003
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S489605
Status: Active
On Redfin: 46 days
From Redfin, “California Pacific Former MODEL Plan 1.Each bedroom is a nice size sui te w/ its own full bath. UPGRADES GALORE * * * Includes 400 Sqft. Enclosed Outdoor Living Structure w/ Integrated Speaker System, Ceiling fan, Cable TV and Outomated Irrig. System. Corian Kitchen Counters, Stainless Steal GE Appliances, Walk-in Pantry, Build-in Audio System, Upgraded Flooring, Euro Style Custom Buld-ins Living Room & Both Bedrooms, Custom Paint & Wall Paper, Custom Brick Wall in Living Room * * * Resort Style Living++”
.
.
I guess we are moving away from exclamation points to asterisks and plus signs?
At $583 SF, this is clearly in WTF price territory, but the real question I have to ask is: “WTF were you thinking when you paid almost $600 SF back in 2005?” This property is never going to sell for this price as we will see when we look at the competition, but assuming they get their asking price, and assuming a 6% commission, they stand to lose $41,000. In the real world (where prices reflect the market), this seller is probably going to lose closer to $100,000.
Here is a close comparable…
Asking Price: $569,000
Purchase Price: $280,000 ?
Purchase Date: unknown
Address: 46 Alevera, Irvine, CA 92618
Beds: 2
Baths: 2.5
Sq. Ft.: 1,050
$/Sq. Ft.: $542
Lot Size: –
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S490707
Status: Active
On Redfin: 36 days
From Redfin, “Outstanding DETACHED HOME in Prime location of Irvine’s Beautiful Oak Creek, Featuring 2 Beedrooms and 2 1/2 Baths w/ Patio and 2 car garage w/ Direct Access. This TURNKEY Property has many Upgrades of New Flooring, New Carpeting, New Paint, Gourmet Kitchen w/ New Stainless Steel Appliances and Fine Cabinetry, Plus Epoxy Finishing in Garage. Enjoy Resort-Style Amenities of Pools, Spas, Parks and Tennis. This is Truly a Home You’ve Been Waiting For. Near Award Winning Schools, Fwys, and Great Shopping.”
.
.
This listing has some of the worst photos I have seen in a while. Looks like a camera phone, only worse. Another Gourmet kitchen with white tile…
So here we have a property with the same floorplan which is being offered for $31,000 less, and at $542 SF, it is also overpriced.
Let’s see what else you can get in this neighborhood…
Price: $629,900
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,300
$/Sq. Ft.: $485
Lot Size: –
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: P579931
Status: Active
On Redfin: 41 days
PRICE REDUCTION FOR FAST SALE * * EXCELLENT QUIET INSIDE LOCATION * * IMMACULATE CONDITION * * SPACIOUS KITCHEN W/ WHITE CABINET * * SPACIOUS FORMAL DINING AREA * * ROMANTIC ARCH ENTRY * * TRUELY 3 BEDROOMS * * ALL GOOD SIZE BEDROOMS UPSTAIRS * * GOOD SIZE BACKYARD W/ COZY LANDSCAPING * * SPACIOUS MASTER BEDROOM W/ WALK-IN CLOSET * * SPACIOUS MASTER BATH W/ ROMAN TUB & SHOWER STALL * * PRICED TO SELL * * MUST SEE * *
ALL CAPS and astericks ***** GREAT !!!
Comparing this property to 9 Alevera, I get 300 SF more and an additional bedroom for $29,000. Hmmm…
Price: $649,900
Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 1,497
$/Sq. Ft.: $434
Lot Size: –
Year Built: 2002
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S484851
Status: Active
On Redfin: 79 days
NEW PRICE REDUCTION! BEST VALUE IN THE AREA! Beautiful detached home in a quiet/secluded area. Bright and open with lots of grades. 
Gourmet kitchen features plenty of oak cabinets, walk-in pantry and recessed lighting. Three spacious bedrooms, master suite/w walk in closet. The downstains den is perfect for a home office. Award Winning Schools, Close to all freeways/tollroads, Amtrack/Metrolink, The Spectrum, UCI Campus, Dining and Entertaiment.
New price reduction! Hurray! Lots of grades (I hope they were “A”s), and a gourmet kitchen to boot.
Compared to 9 Alevera, this property gives you a 450 SF more space and an additional bedroom for $50K, and it appears this property is not finished reducing its price either.
In short, the seller at 9 Alevera is going to be a loser.
The condo market is in real trouble across the country and leading the market collapse here in the OC. Great profiles. None of those are done shedding value.
People used to talk about buying to avoid “throwing away money in rent” but more and more I hear regular people talk about all the money they “threw away” by buying, on the association fees, the taxes, the interest, the transaction costs, and the losses of value in the properties themselves.
I hate to tell them “folks told you so,” but the fact of the matter is people did tell them so. I have no idea how IR will keep up with this blog when the market is truly under assault from every side, inventories for sale are astronomically high, and nearly all properties are listed for dramatically less than their purchase prices.
—–
You can’t have a “Gourmet kitchen” if the oven and stove are the same unit. That is, unless it’s one of those overpriced, massive French stove/oven combos they offer at Williams & Sonoma, etc. Pew-pew-pew
Of topic – I’ve never seen so many condos, apartments and houses for rent as I now see on Craigs List & the Sunday Register. The local RE bulls have been saying for years that The O.C. has unlimited demand, and a shortage of housing. Yet for sale inventories and available rentals are at very high levels.
This leads me to ask, where’s everyone going? Is there an affordability problem?
The part that cracks me up is when they refer to it as “pent up demand”. What pent up demand? Supply is increasing, prices are falling. If one reads their economics textbook they will find this is refered to as oversupply. It is the opposite of demand.
A little misunderstanding goes a long way to shoring up someone’s denial.
What’s up with the real estate agents taking pics with a cell phone??? I guess they don’t even bother making it look better since these places won’t sell anyways …
What’s an Outomated Irrig. System? Is that an irrigation system that your German (Otto) husband (Mate) turns on and off? Does anyone ever proof these listings? I mean, I can let a lot of things go in a blog, but you would think having someone who stands to make $20K in commissions they could have a shred of professionalism.
And please, just stop with the Gourmet Kitchens … I guess having a single stainless Steel Clad appliance that is semi build in is the one and only qualifier for that moniker.
I’ve been trying to imagine what the agent meant by “grades”. I’ve tried substituting letters and even similar words, but still…no idea.
Anyone have any idea what they might actually mean?
Affordability problem definitely. I’m in my mid-20’s and I would say that more than half of the people I grew up with in OC are gone because it’s just too darn expensive to stay here and have any chance of getting off to a good start. Either you’re making a good amount of money and can afford to rent a decent apartment (no young single person is going to buy a house under legitimate lending standards), or you probably want out.
A number of people who stay are living with their parents because it’s not financially appealing to have such high living costs when you’re on your own.
As for where people are going — pretty much anywhere but here (Florida, Atlanta, Phoenix, to name a few that I know of). Hopefully they didn’t go too wild and buy real estate at the peak of the market in those places just because it’s cheaper there.
Jason
http://caliguy2699.blogspot.com
But, but, but, we have “pent up demand” in Orange County! Do you think the RE bulls are referring to all those twenty-somethings still living with their parents?
I think they meant to say upgrades.
I could understand a first time buyer or retiree shelling out 200 to 300k for any of these, but they look more like investment props which means you have to be able to turn a profit.
For your pleasure, or lack thereof: Bloomberg reports foreclosures are up 87%;
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGBN_ct.a0jk
The article begins:
Mortgage foreclosures in the U.S. climbed 87 percent last month as falling home prices and stricter loan standards made it harder for borrowers to make payments.
There were 164,644 loan default notices, scheduled auctions and bank repossessions in June, led by filings in California and Florida, where home prices have plummeted…
I have a friend who is in management at Cal Pacific Homes. Last I spoke with him he said they were doing fine, even hiring. I just don’t get it. Is he drinking the kool-aid or just trying to keep up the positive spin? We have stopped talking about it. I guess time will tell….
Bloomberg said foreclosures are up 87% year over year:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGBN_ct.a0jk
Lee In Irvine….I know what you mean about all the condos being on Craigslist up for rent. I am currently looking at moving but these guys are so far out of the ball park it is ridiculous. The one thing I have noticed is that it seems to be more heavily concentrated in South County vs Central or North.
Is there any green space or patios for these homes? From the overhead, it looks like the whole thing is common driveway with the homes stacked on top of the garage.
No community pools. No parks. No space for a grill?
Honestly, it looks like apartment living at the worst. Or maybe the REALTORĀ® meant “Resort Style Living++” like I see resort style living which is a little bedroom and bathroom where I then tend to get stuck paying through the nose for meals and any other “service” I want that I use whether having a hostess bring me a drink at the pool or having the “concierge” coordinate anything for me.
One minor note on the first condo, I’ve seen small kitchens like that before and when people upgrade the appliances, often you can’t get the dishwasher door open all the way if the stove is too big. Eyeballing the very bad photo, it looks very close. I wonder the if the door is going to catch the handle on the stoves broiler door.
“Oversupply” is not the opposite of demand. The opposite of demand is lack of demand.
There is certainly demand for housing at the right prices. If there wasn’t, this blog wouldn’t exist.
There is certainly a lack of demand at today’s prices, or we would not have an oversupply.
The opposite of intellect is ineptness. Meaning, hopelessly incompetent.
“Today’s prices” doesn’t tell us much. There certainly are homes that are selling (even today, I promise). Are those homes not priced at “today’s prices?”
Ah, looking at their neighbors house at 52 & 59 ALEVERA ST you can see the “patio” just barely big enough for a small round table and four chairs and a 4×6 piece of grass. Now the question is where are those two tot lots and olympic size swimming pool that are pictured?
73 Alevera provides a nice picture down the “walkway” that actually connects the homes.
52: http://www.redfin.com/stingray/do/printable-listing?listing-id=747849
59: http://www.redfin.com/stingray/do/printable-listing?listing-id=674870
73: http://www.redfin.com/stingray/do/printable-listing?listing-id=862478
I feel cramped and claustrophic just looking.
As IR would say, “nice straw-man argument.”
The first listing boasts “Stainless Steal GE Appliances” along with “Custom Buld-ins”….
Did they steal the stainless? What’s a buld-in? Lastly, people in the publishing biz advise against Putting All The First Letters In Caps….
because your eyes bounce all over the paragraph trying to keep up with the case shift in every word!
More agent idiocy…!
I think the photos in the second listing were taken with a disposable camera – either that, or someone took scanned-in photos from the real estate flyer advertising the house and had the scanner on “low.”
I have 3 cases of immigrant professionals in their mid 30s (with 10 years of work experience at least) that left the OC for Denver, Dallas and Austin since 2005.
All report back the huge houses that they bought in their new places, from $180K to $300K.
One of them cashed in a 100% increase when he sold his house in Anaheim Hills: $320K in 2001 to $640K in 2005.
The interesting thing about 9 Alevera is that the current owners have a $544,000 mortgage on it. I don’t suppose they can reduce their asking price too much without bringing the words “short sale” into play…
On the other side, the only people that I know have arrived to the OC recently are high level executives from my dayjob company, which probably corporate gave them a mortgage allowance or similar benefit.
These foreclosures must be the result of the “pent up demand”, or maybe it is lack of oversupply. Oh gosh, I am so confused.
That $544K mortgage is consistent with what is recorded with a standard HECM Reverse Mortgage with the max loan of $362,790. The recorded lien is for 1.5 time reverse mortgage amount to allow for future interest increasing the amount owed – as there are no payments made by the borrower.
The fact that sales volume is down almost 50% does tell us that there are not enough buyers willing and able to pay today’s prices. In fact, there are more sellers on the market than the number of buyers willing to pay the current asking prices. When there are more sellers than buyers, prices drop.
As for the “pent up demand.” Sure, there are more buyers at lower price points. The real question is, how low do prices have to drop to reestablish an equilibrium which holds prices steady. Many of us here have speculated this new equilibrium price will be significantly lower than “today’s prices” for a variety of reasons which are outlined in the analysis posts.
That neighborhood does feel very claustrophobic. It is not an example of good land planning for higher density.
There is actually a very nice park right across the street, and another nice one just across Barranca. There is no pool nearby.
IR doesn’t dispute that homes are selling at “today’s prices”. See yesterday’s blog where he gives a good explanation as to why some houses will sell at today’s prices.
Essentially, the only problem is that there is a short supply of Fools to buy them!
Whoa. You mean someone has been living rent / mortgage free since mid-2005? If so, I don’t know whether to be appalled or impressed.
Most people think that as prices drop, more buyers appear to purchase at the lesser prices, but in reality the opposite is true. As prices increase, the masses want to purchase; or in other words, more demand. But, as prices decline, the masses become net sellers, therefore more supply, or for those who are linguistically challenged, less demand.
This time will not be any different than every other re cycle or market cycle in history. As prices fall, there will be less and less buyers, causing prices to fall further.
They picture a pool, it must be part of the Association some-where.
Makes me wonder how many complexes are tied together by an HOA? Maybe the pool is in what looks like the apartment complex next door by Oak Glen? It has to be visible on an overhead photo, the pool has at least seven if not eight full sized swim lanes visible in the photo and appears to be 25x50M.
If the park is across Barranca, IMHO, it might as well be on the other side of the country. I wouldn’t want to drag children across the major intersections in Irvine. They’re six lanes wide not including the six turn lanes and have limits of 50 or 60 MPH.
What I don’t understand is why the sellers tolerate the lack of professionalism from the realtors.
If I’m a seller and I know the bozo-realtor will be making 15-20K for the work, I would be saying things like “Hey, perhaps better pictures will help sell my stucco box?” or “Are you sure those words are spelled correctly? What do you mean by “grades”? Also, are not the caps, asterisks, and plus signs a little tiresome to your eyes?”
I imagine you have to nicely coax these imbeciles into doing a better job.
Or perhaps just sell it yourself.
The pool in that picture is of the park at Royal Oak over by the Cobblestone neighborhood. You wouldn’t walk there from this neighborhood.
Wawa – Why do you sound so bitter? Did you buy in 2005?
For the 7th time please provide facts that prove we are wrong.
Very true. There won’t be a significant support level of new buyers until you reach the breakeven rent price threshold. The one below that is where investors can make a return on positive cashflow. There is nothing by air and knife-catchers between where we are now and that first level of support.
According to projections I’ve read there is to be a large influx of population into Kalifornia. I’m guessing all the demand for new housing will come from multi-family Hispanics. But how will they afford these prices? Their raises must be larger than mine.
I’ve spent my entire day today looking up people in our servicing portfolio that live in Laguna Niguel. I got so sick to my stomach that I almost lost my lunch. The first person I looked up did an 80/15 cash out refi in sept 2006. first lien is a 40 year 12 MAT for 1mil @ 8.377 fully amortized rate. The IO payment is 7125..she’s only paying 2985 a month..deferring 4,140 a month. There is a 39k prepay that doesn’t expire until 2009. Her 2nd is for 282,500 with another lender. The broker appraised the property for 1,350,000 in sep of 06 but it won’t appraise for more than 1.2 now.
She’s already over 100% cltv now and she’ll reach her 110% neg am cap in less than 14 months. No chance of refinancing, no chance at selling….
Owned.
This is only one of many of our borrowers in laguna Niguel, which is only one city in Orange county.
Seems that I touched a nerve…graphrix follows me around every time I post! LOL.
What it is you want me to prove you are wrong about now? That wait for collapse’s intellect/ineptness comment wasn’t a straw-man argument?
See the following for a general definition:
http://en.wikipedia.org/wiki/Straw_man
For loan industry illiterate people, where we can go to learn to translate what you just wrote? š
I second that request.
It would be really cool to see a step-by-step explanation of what LeadingMaestro just said.
Translation it’s a 40 year monthly adjustable rate mortgage wiht payment option allowing negative amortization that using the rolling 12 month monthly treasury average.
Product detail: http://www.indymacb2b.com/products/12MAT.asp
Disclosures (ouch):
http://www.indymacb2b.com/B2BAuto/eMITS/ProgramDisclosures/8480196.pdf
Now the question is, what did she do with the refi money? If she bought DOW Diamonds, she’s okay. If she spent it, she’s DOA.
How dare you question the work of the Great Oz, erā¦uh, I mean, a REALTORĀ®. You do not know half the intricacies it takes to sell a home. Please try to wrap your brain around the countless number of man-hours involved in performing market research and implementing continuous improvement to realize how the most effective listing descriptions have evolved to satisfy today world. Strategically placed capitalization and special characters add immeasurable value.
Do you think a computer with spell check and Internet access is all it takes to sell these ābeautifully landscapedā āoutdoor entertainment areaā and ālush lawnsā surrounding ācozyā yet āspaciousā homes (always in āprime locationā) with āgourmet kitchensā, āhigh ceilingsā, ālarge mirrored closetsā, āgraniteā, āmarbleā, āviewsā, ānew paintā, ācrown moldingā, blah, blah, blahā¦?
Look my satisfaction comes not from the commission checks received but rather seeing the smiles upon the lucky new homeowners who just bought a home they could not otherwise afford. Can a computer provide a personal touch? Sir, Iāll do my job; please do yours.
š
these little claustrophobic houses suck. the neighborhood sucks because you have to cross the street to get to the park. the park sucks because there’s no pool, so you have to walk about 10 minutes to another park that actually has a pool. prices are too high in irvine so it sucks. i wanted to buy these homes back when they were $200s, but now i have to wait another long time for prices come back down. it all sucks.
What happens to the 39k prepay if she defaults and the loan forecloses before the prepayment date? It seems she would owe the 39k on a short sale, but not on a foreclosure?
The borrower refinanced last year and took out a first mortgage of 1 million and a 2nd mortgage for 282,500. The house appraised for 1,350,000 at that time. This puts her at 95% combined loan to value.
Her first mortgage is a neg am loan. The actual interest rate is 8.4% which changes monthly. Her interest only payment is $7,125 but her minimum payment is only $2,985 a month. That means every month when she just pays the minimum her balance increases by $4,140 a month. As a result her first mortgage balance is now 1,040,000 in only 10 months. These loans have a built in cap of deferred interest set at 110% of the original balance. This means once her loan balance reaches 1,100,000 she will have to make the principal and interest payment at the market rate. That payment is $8,380 a month.
At her current rate of deferment, this will happen before the end of next year. The loan has a prepayment penalty that doesn’t expire until 2009 in the amount of 39,000. If you do a comp search you will see that there is no way her house will appraise for 1,350,000. This woman cannot refinance. She owes more right now than what the house would appraise for.
She can’t sell either, becuase after all the transaction costs and prepayment penalty it would be a short sale. There is nothing that will prevent her from being foreclosed upon in the next 2 years. Nothing. And she has perfect payment history and perfect credit.
She is only one of many of our customers that are in this exact same situation in Laguna Niguel. My bank has 3673 mortgages in these zipcodes alone: LN, LW, LH, LB, SanClem, SanJuan, Irvine, Lakeforest, MV. 1,181 of these are negative amortization loans.
Agencies cut ratings on risky home loans
Borrowers are missing payments at higher-than-anticipated rate
http://www.msnbc.msn.com/id/19708022/
I think graphix is merely commenting on the general level of venom in your posts. Perhaps you are so wrapped up in your own denial that you fail to see it, but from anyone observing your comments, it is plain to see you are very angry and bitter.
Your comments are laced with sarcasm and a smug oneupmanship. You don’t seem to be here to engage in any real exploration of the facts surrounding the housing market to decipher the direction of home prices. From what I observed, you seem more interested in practicing your debating skills and get in a few snide jabs when you can.
Eventually, you will either tire of being a blog troll, or you will leave on your own convinced we have run you off. Being abusive and claiming victim status is classic troll behavior. I don’t care what you do, but your shtick is getting tiresome.
If you have an honest difference of opinion you want to share, the posters on this board have always been welcoming of differing opinions. If you simply want to be a troll, go somewhere else. Based on your comments to date, few will miss you.
Here’s the step by step:
Prior to Sept. 2006, she bought the house…
Sept 06: she refi’d. Got house appraised for $1.35 Million and took out 95% in loans. She took a $1,000,000 first and a second loan with a 2nd lender for the other $282,500. (1.2825/1.35 = 95%)
The interest on the first is 8.377% APR which generates interest at rate of $7125/month (hmm my math is slightly less, but let’s just use $7125). So on the first, the interest piles up at $7125/month. She get’s the bill… it reads something like this
Payment due $7237.50
Accrued Interest $7125.00
Minimum Payment due: $2985.00
She pays the minimum. $2985. The difference in interest and minimum $4140 (7125-2985=4140) gets added to the principal balance.
She’s been doing this since September 2006. Currently, she’s over 100% current loan to value (cltv). Meaning she likely owes about $1,041,400 on the original $1,000,000 loan.
Making matters worse, the loan has a pre-pay penalty of $39,000 until 2009. Mean if she sold today, she would owe $1,080,400 to the 1st and another $282,500 on the second (provided she hasn’t done the same with the second loan.)
All total, with pre-pay penalty, if she sold today, she owes the lenders $1,362,900. Original the house appraised for $1,350,000 last September. Currently lendingmaestro estimates the house would appraise at $1,200,000. So she is $162,900 underwater before paying commissions.
Luckily, or unluckily, she can continue making the $2985 payment on her loan. However due to the loan limits, she’ll reach the limit in less than 14 months and be forced to make the full amortized payment ~$8000/month.
So when he says owned, he means unless the housing market turns around in such way that in 14 months, she can get lenders to appraise and refinance her house at about $1.5 million dollars, she won’t be able to refi or sell the house without losing ~$200,000.
Since the loan limit hits in 14 months, she’ll either somehow nearly triple her loan payment or likely go into default and foreclosure.
(That’s my take, any other interpetations appreciated.)
Perfect example of the ticking time bombs that are adjustable rate mortgages.
Ouch!
So are these negative amortization loans issued only on the assumption that:
a) the owner’s income will greatly increase over the next few years
b) the home will appreciate greatly over the next few years
Either one seems like a big risk for the lender. Why do they do it?
patience2007,
That simple question is the great enigma of the real estate bubble. You have asked the question that has gone through my mind every day for the last 3 years.
When we look back on this bubble in hindsight, the answer to that simple question will not be answered fully.
Basically, lenders were greedy and stupid.
The interest is recalculated every month, which means here interest payment is increasing every month since it’s based off the higher principal balance. She owes 1,026,322 for August first. That puts her IO payment at $7,164.58
I shocked!
Who would have guessed?
How is it greedy? It seems like the chances of them losing money themselves seems like a good idea if they have a basic concept of economics. Is it agents authorizing loans that they get a commission on, but not their responsibility if it defaults?
In the example above, if this woman is foreclosed on, and sells this house for $400k less than she owes, I assume she’ll file bankrupt. Does the lender eat that $400k, or have they purchased insurance on that loan so they will be OK, but the Insurance company will eat it? I don’t know anything about the lending industry, but my hunch is that all these agencies hedge their risk up to the government in some way, and taxpayers will pay for it in the end (as usual).
Do you think she has any idea of the cliff she’s heading towards, or is ignorance bliss? Or is she a bull assuming the market will come back in the next year?
as homes increased in values less people could afford them so these loans came out to allow people to finance larger debt and/or 2nd homes.
the bulk of these loans are originated through mortgage brokers. Brokers get paid more as the prepayment penalty lengthens and the rate increases. A broker could make $40,000 in commissions on a $1million dollar loan. A 3 year prepayment penalty will mopre than likely pay the broker a 3 point yield spread premium. A broker can also charge a point up front. 4 points on 1mil is 40 friggin grand.
patience2007,
lendingmaestro is right on. The short term fees where all these people looked at. They just ignored the possibility of loss through foreclosure. I know that sounds too stupid to be possible, but that is why I said they were greedy and stupid.
It may take a while to wrap you mind around that kind of stupidity, particularly when you see it on such a grand scale. You wonder if maybe you are missing something which will make this look rational: it isn’t there. This is one colossal, unbelievable screw up.
Patience,
All these loans are packaged and sold to investors in the form of Mortgage Backed Securities ( MBS).
Each month, all the payments are collected by the servicer and redistributed to the MBS bond holders, somoetimes pro rata ( in proportion to the amount invested) and sometimes in what they call “Planned Amortization Classes” or “tranches” which have rules on how to distributes both principal and interest payments.
The bottom line, is that the investors (bond holders, usually, pension funds, ..) end up paying the bill.
“Strategically placed capitalization and special characters add immeasurable value.”
very cheecky, very nice! Can you be my REALTOR (TM). They even make their name all caps. As for the trademark, it definitely is a unique style and vision they possess. I doubt they’ll have to sue for infringement anytime soon. =)
Insert that acronym that means “What the poster above me just said” here.
Brothers and Sisters. Can I get a bear-yea! Bear-yah!!!
OK, let’s see if I have this right – so the lender sells the loans to investors, and pockets the profits. Eventually the lender becomes unable to sell loans because they become known for writing bad loans, but by that time they don’t care because they’ve already made a bunch of money. Company goes out of business, and if lucky everybody goes to work for a new company and repeats the process?
The majority are sold. many are serviced by the lending institution. We sell about 95% of all neg ams. Most are bought by Deutsche Bank & Trust or Lehman Bros. The remainder we retain in our portfolio. Some banks, ie Chevy Chase Bank, and World Savings retain the majority of their loans in their own portfolios.
Personally I think World Savings is going to get obliterated. Since they don’t have to conform to investor guidelines they offer insane loans, such as neg am loans to sub 600 ficos and borrowers with mortgage lates.
exactly
So, in other words, she is renting for a little more than $3,000 a month. Maybe she is not so oblivious and that is her intention.
Oy vey…the dreaded lecture.
“Your comments are laced with sarcasm as a smug oneupmanship.”
Pot, meet kettle. Do you read your own posts?
I don’t think you’ve reached any monumental breakthroughs on “deciphering the direction of home prices,” though I’m sure you feel that talking about how many exclamation points realtors use is a “real exploration of the facts surrounding the housing market.”
It is clear that what you are interested in is not meaningful debate but a forum for mutually consoling each other about not owning your own homes. That is fine, I just think it’s a little smug to present the bitterness as some kind of academic exercise.
Just last week you told me “I hope you continue to keep posting as your posts stimulate good conversation in the comments.” But alas, now you shame me for taking a different viewpoint. Ah well, it was to be expected.
And with that, you’ve read my last post…much like George Costanza, I’m outta here!
My analogy is much simplier. Back in 2005, we reformed the credit card industry so that the minimum monthly payment had to be large enough to pay the accrued interest. Prior to that, credit cards had a minimum monthly payment that would never pay the loan off and allow the banks to permenantly charge excessive rates since the borrowers had little chance of ever catching up to the 30% APRs they levied.
The banks merely turned the first mortgage into the old style credit card. Here’s your nifty new mortgage, with a virtual $100,000 credit card attached. Wink, wink, you just have a low low monthly payment of $2800… 20 months later, blamo, $8000 monthly payment. Desperate homeowner, HELOCs at a high rate to bridge the remaining 4-12 months until the prepay clause goes away. They then just refi’s the new balance forward paying another $20,000 in points and fees up front, at let’s the bank pocket the premium on the 8.5% ARM verus a 6% 30 yr. fixed.
Good Riddance! WaWaWeeWah!!!
Ha, I see, agent fluff. I suppose since I live in Huntington Beach, I should include photos of the Central Park Sports Complex.
The thing is, who really gets screwed here? She has taken all the equity out and spent it, and in exchange, her credit will get dinged. The real loser here is the bank, not her.
There will probably be others lining up to lend her money in another few years, even with a foreclosure, so maybe it’s worth it?
If you think about it for a second, what’s a foreclosure on your credit rating really worth? If you could take a ding on your credit, right up front, in exchange for hundreds of thousands of dollars in cash, would you consider it? Because that’s exactly the trade many of our FBs have made. A lot of the so-called victims of foreclosure have really made out like bandits.
Oh gawd, don’t get started again on gourmet kitchens….my blood pressure’s high enough as it is.
Exactly. Newport Beach isn’t far away, perhaps they will start including pictures of the beach as an amenity of the house.
“A lot of the so-called victims of foreclosure have really made out like bandits.”
Appalling, but very true.
patience2007,
You are exactly right in your understanding. In fact, I am planning an upcoming analysis post I am going to call “The Shell Game” to detail the structure you just described.
The sub-prime companies where basically shell corporations designed to limit liability. These companies originated loans which they supposedly were liable to buy back in the event of foreclosure. They never had enough money on hand to meet this obligation — not even close. Investors bought these loans with a false sense of security, the people who ran the companies made huge amounts of money, and when the going got tough, they just fold up shop and walk away from their liabilities.
Um, I own a home dickhead. But I still think this market sucks.
IR – How could you?!!!! You scared away are best troll ever!!!! ****YOU RUINED MY DAY!!!!****
(sarcasm off)
Please http://en.wikipedia.org/wiki/Troll_%28Internet%29 get your internet facts correct then we can have a discussion. Of course trolls can’t have discussions.
I bet he will be back when we do a post on his neighborhood and the prices have dropped by 30%.
Obviously I hit a hot button with my comment of buying in 2005 since his evasiveness to the question was quite apparent.
“Lucky new homeowners” Adam, you’ve got to be kidding. These “lucky” people you speak of, just happen to be schmucks you snookered. Karma buddy, karma. Realtard.
BEAR YEAH ! Although “Bull – yeah” on IMMR.
Uh, Trooper? Adam was like, being sarcastic and stuff? (insert smiley emoticon here. If I can EVER figure out how you guys are doing that! Or maybe it’s a PC thing and I just haven’t got the hang of my iBook yet.)
Lendingmaestro and No_Such_Reality,
Thank you very much for elaborating on this loan.
I wonder if such people at this stage of the game realize their fate; that they will be foreclosed upon and their credit rating will take a hit, so might as well just make the minimum payments and enjoy the money while its still available.
Dancing on the deck of the Titanic.
What will be interesting is when the dollar amounts start hitting t w o h u n d r e d t h o u s a n d d o l l a r s, (sorry for the spacing, but I think that deserves emphasis.) It’s $200,000 dollars. And I think we’re all a little jaded as to how much money that is to the typical OC resident. That’s two years of gross pay for a wel paid person. Four years of take home pay for an average family income in OC.
When the amounts get that big and the loan was refi’d will the banks burn any money going after other assets since the refi removes the banks non-recourse agreement.
Hopefully they can’t go after retirement funds, but any other savings, I think are game. I’m not sure about other luxury assets, hey, that shiney newist hummer is still worth something whole sale right?
Any in the biz have insights to the limits on the banks? If refi’d and now have a nice boat sitting down in newport, and I default, is the boat game? If I have $100,000 in a brokerage account, is it game?
Unfortunately I went through a bankruptcy many years ago (before I had any assets). If you file bankruptcy, you are able to protect a certain amount of assets, basically a minimum needed for necessities. I think it was around $10k worth. But it was awhile ago and my memory is fuzzy because I didn’t have anywhere near $10k in assets to worry about. Also I think the bk laws recently changed, so I’m not sure if the asset protection part changed also.
No_Such_Reality,
I am not an expert in this area, but I believe everything outside of your retirement accounts (ERISA protections) and above certain very low thresholds (as patience2007 mentioned) is fair game. Boats, cars over a certain value, brokerage accounts, they are all assets subject to seizure.
That’s what I was thinking. So for the person that LendingMaestro first talked about isn’t just facing a ding on credit from a foreclosure, they may be facing forced bankruptcy. And not just paper bankruptcy, but a real liquidation of assets bankruptcy.
There is also a TREMENDOUS amount of what I will call “Pent Up Supply.” I cannot tell you how many of my friends wish they could sell, but are not putting their properties on the market because they know they will not sell anywhere close to where they want. Huge numbers of people think they can weather the storm in a small house on a crowded street with a nasty commute because they cannot get out, and think it will be easier to deal with if they wait until inflation and the market makes the paper loss less significant.
The real loss (time value) is still just as tremendous, though, even if they just lose a few hundred thousand and then wait for prices to get back to the level they are today in another decade or two.
While I can understand why lendingmaestro should be personally sickened by some of the loans (s)he is reviewing, isn’t it the case that at the moment their loan is OK.
On the numbers presented, all the losses are going to be taken by the 2nd, which was specifically stated to be from another lender.
Mind you, that $1.2M “current appraisal” is starting to get a bit close to the $1.1M recast…
I am “truly” impressed that 68 Alavera has
“* * TRUELY 3 BEDROOMS * *”
Does that mean most listings with 3 bedrooms are really 2 bedrooms with a closet that could function as one in a pinch for a very small person?
I doubt this is really, truly 3 bedrooms though, since they only used caps and *** and no !!!!!