Today is gonna be the day
That they’re gonna throw it back to you
By now you should’ve somehow
Realized what you gotta do
I don’t believe that anybody
Feels the way I do about you now
Wonderwall — Oasis
Do the lyrics of that song speak about going through short sales and foreclosures? One thing is certain about housing right now: nobody feels the same way they did about it 2 years ago…
Asking Price: $550,000
Income Requirement: $137,500
Downpayment Needed: $110,000
Purchase Price: $665,000
Purchase Date: 9/12/2005
Address: 43 Ardmore, Irvine, CA 92620
1st Loan $532,000
2nd Mtg. $66,500
Downpayment $66,500
Beds: 3
Baths: 3
Sq. Ft.: –
Lot Size: –
Property Type: Condo/Co-op
Area: Out of Area
County: Orange
MLS#: 07-229191
Status: Active
On Redfin: 2 days
From Redfin, “Short Sale! Seller must sell. Bring all offers. High ceiling. Olympic size community swimming pool. Close to shopping mall. “
High ceiling? Is this the only positive feature the realtor could mention? Does it make you suspect it is a complete dump?
This is perhaps the smallest kitchen I have ever seen.
.
.
Yet another deep, deep rollback. If the property sells for its asking price assuming a 6% commission, the total loss is $148,000: the seller stands to lose their $66,500 downpayment, and the 2nd mortgage holder stands to lose their $66,500, and the primary mortgage holder stands to lose $15,000. Ordinarily, the primary mortgage holder would foreclose rather than take a loss, but for $15,000, they should take the deal and count their blessings. It will be more expensive for them if they foreclose. Alas, since the system is broken, the loan servicer will foreclose and collect their fee, and the mortgage holder will absorb an even greater loss.
Hmmm… Maybe there were reasons we had banks hold their own mortgages in the past…
Wow, that place is horrible. I guess when it’s a short sale, you don’t even have to orient the Redfin photos correctly. Half a million dollars? SRSLY? That’s a lot of money for a dump apartment, with unusuable space in the form of a racquetball-court ceiling’ed living room with unreachable dust collector windows. Didn’t Vivid used to shoot B roll in this place? I’ve seen bigger kitchens on a sailboat. This depressing hovel reminds me of one of those executive residence hotels, where you pay by the week. Which makes more sense for this place, because next week it’s gonna be a whole lot cheaper.
—–
Yes!! Your comment about banks holding their own mtges is right
on. I worked for a firm representing an S & L when it went from holding
its own mtges to selling them.
They went from worrying about the quality of title and the survey and
whether the borrowers were working at jobs likely not to fire them,
and the value of the house, to worrying about whether there was Wite-out on the note.
Of course, holding the mtges had problems too: remember disintermediation, where they were paying more out to savings acct holders than they were bringing in with mtg payments? But surely
there were solutions to that, which could have been used. Interet rate swaps, say?
To me, that house isn’t appreciably awful-er than a lot of the other pictures you’ve shown.
Every single one of them have been ridiculously overpriced, even at the
reduced price now being demanded.
Oops, “interest”
“Cute little 250k starter condo in Irvine!”
That’s what the listing description should say!
Anyway, I am having an easier time finding out how to build an atomic bomb than finding the square footage for this place.
The interest rate on the first loan started at 1.0%, so we can pretty much guess what that was about – financial suicide.
Here’s the most popular phrase uttered by brokers/agents to clients over the last few years: “Don’t worry, you can just refinance before the loan resets.”
“This is perhaps the smallest kitchen I have every seen.”
IR, you do realize that all the REALTORS you have skewered will be coming after you now. 🙂
Alas, since the system is broken, the loan servicer will foreclose and collect their fee, and the mortgage holder will absorb an even greater loss.
It was reported in the NY Times a couple of weeks ago, that Countrywide Mortgage makes more money when the home is foreclosed, thus they’re not working out many deals with troubled borrowers.
Fortunately, I am not too proud to edit.
How could that be true?
Is it that they are the servicer, so they get more
fees for servicing a foreclosure, supervision of
the law firms in judicial foreclosure states, pretending
to mow the lawn and doing drive-by inspections.
And some one else gets the loss?
Read it with your own eyes:
http://www.nytimes.com/2007/09/30/business/30country.html?_r=1&oref=slogin
And read this Op-Ed about the evil Tan Man @ Countrywide:
http://query.nytimes.com/gst/fullpage.html?res=9401E1DA1F39F932A35753C1A9619C8B63&sec=&spon=&pagewanted=1
That is exactly how it works. Since Countrywide does not keep any of its loan in its own portfolio, they are not concerned with minimizing losses. Their incentive is to maximize fees, which is what they accomplish when going through foreclosure.
Does anyone think it’s possible a rogue realtor set the fire in Trabuco Canyon in hopes of taking some supply off the market?
Yep, pretty much. Generally the owners of the loan is the one who bears the loss. Once Countrywide sells the loan, they’re out of it (unless the buyers can allege any default against the Seller’s reps and warranties. As servicer (under an entirely separate servicing agreement) simply acts in an administrative function. Depending on how the waterfall payment structure is set up, generally the servicer’s costs, expenses and fees are high on the priority list of what gets paid out first out of loan payment proceeds. They get their third party collection fees reimbursed and they get their own servicing fees paid, PLUS a special foreclosure fee (last deal I did, it was an additional 1% of loan balance).
There were 3 fires set according to news here.
From watching from far away, it seems that the fire people
set great store, rightly, in protecting houses and relatively few
burn in y’all’s fires.
But to take a joke seriously, realtors are not especially smart,
so may not realize relatively little excess inventory will burn.
I really should get to work.
Why don’t the owners of the loans realize this and
do something about it?
By, say, extra fees for saving a mtg?
“Why don’t the owners of the loans realize this and
do something about it?”
Liz, they are. Have you tried to get a nonconforming jumbo these days?
Most of these loans are tied up in CDOs with specific procedures for loss mitigation. Countrywide is doing exactly what it is contractually obligated to do.
The real problem is with the loss mitigation procedures outlined in these CDOs. Most of these were not written with the idea that the entire real estate market might collapse.
I have also read that CW is also required to buy back loans that they modify with new terms. That would put a damper on working with screwed borrowers since they would have to come up with cash to pay off the bond holder.
This is brilliant………..
About two years ago there was an article in the register or times about how countrywide was renting up space and filling it up with foreclosure type employees. At the time I figured they were just forward thinking about how to save their business…..
Are they on the bandwagon for the next real estate juggernaut?
Is the tan man a business genius?
So technically, the 3300 or so California homes Countrywide has on their website as REOs arne’t Countrywide’s. Countrywide is just the servicer that continues to accrue charges that will be paid when the house is eventually sold. Is that correct?
What an ugly home and for over $500K, no way. That kitchen is so small that you will bang heads against walls and cabinets.
In addition, I prefer two entry points in kitchen just in case you have to run out if your wife is chasing you 🙂
I believe that is the case. There may be some of those homes with mortgages still held in their CDO pipeline that they have not sold, but the majority should be someone else’s problem.
Parked car in front of my front door, put the kids in, we all had paper towels over our faces as improvsied air masks.
Opened the hatchback, ash flew off it.
Drove to school, saw a few people walking (walking?!) to school with their kids, but most people drove.
Got to school, principal on the PA said for students to come inside the building immediately, do not linger on the playgrounds.
Walked in, all of us with paper towels, past people without them, staring at us. Except the school nurse, smart gal, both she and her kid had a health mask on.
PE activities outside cancelled for all Irvine schools today.
I think I read somewhere that the particulate matter from fire is really bad, far, far worse than just standing in the middle of the freeway and inhaling. So try to minimize your time outdoors today.
Can you fathom the genius who plunked down $665K for this place. And what did they think? That it would be worth $750K next year?
$310K Max
here is new “Monthly Mortgage Reset Chart” from Credit Suisse on Calculated Risk blog. Looks like we are here for a longer home depreciation than we initially thought. Many will face rate reset in 2010-2011.
Which partly explains why CW just sits on an ever growing pile of REOs. If they sell it, they stop making money.
Oh yeah, and one more thing. The Servicer also usually gets to keep all “late charges” and “late penalties.” And also gets to keep any “modification fees” it may charge to the borrower for the privilege of modifying their loan.
The right to service a loan portfolio is highly coveted. I hear the competition is fierce over who gets to service a CDO portfolio. It usually ends up being the original Seller or whoever sucks up the most to the issuing investment bank. Regardless of whoever ends up getting the servicing rights, the servicer make sure that in the contract that it is pretty hard to get rid of them.
To be fair, sometimes the servicers’ hands are tied as to how much power they have to work with the borrower. Many servicing agreements only give them limited power to change things like due dates. If the parties want to change interest rates or principal amounts, they have to get the approval of the owners of the loan. Depending on how many investors there are, you can imagine that this can take a while. The other consideration is whether they used a “REMIC” structure for issuing the CDOs. This is a tax device to reduce taxes, and to be entitled to the tax benefits, the types of loan modifications the parties can engage in are pretty strict — regardless of what the owners of the CDO pool would otherwise be willing to agree to.
The servicing bank is the entity that takes it up the tail pipe. When an originator, CFC, IMB, WAMU, WF, etc., sells a loan to an investor, that particular investor is only purchasing the income stream from the mortage loan. The default risk associated with the property itself is assigned the servicing bank. The wall street firm or GSE will take a write-down impairment.
The CDO is chopped up in many ways. You can purchase the interest only portion of the payments, the principal payments, you can even purchase the prepayment penalty.
Banks are hesitant to start unloading REO’s because it will affect the EXISTING loans that they have (LTV) and also guarantee that future loan originations will decrease.
Interesting charts in there
Assessing Risks to Global Stability
http://www.imf.org/external/pubs/ft/gfsr/2007/02/pdf/chap1.pdf
Here’s the link
http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-reset-chart.html
Well, quit peeking in the stewpot to see if the dumplings are done yet. That ruins them everytime :).
Worst job market for O.C. real estate/finance since ‘91
http://lansner.freedomblogging.com/2007/10/22/worst-job-market-for-oc-real-estatefinance-since-91/
SoCal foreclosures seen rising 16% in a year
http://mortgage.freedomblogging.com/2007/10/22/socal-foreclosures-seen-rising-16-in-a-year/
California Homes Are Overvalued by as Much as 40%, Goldman Sachs Says
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=awTwHUdj2wM0
This confirms our 40% or steeper drop in OC
It’ll be interesting to see what effect, if any, psychology has on the timing of the depreciation.
One reason for depreciation would be can’t refinance despite owners best effort to make the payments, so forced sale by foreclosure.
Another reason would be, homeowner is sick of working 2 jobs to pay for a home who’s loan balance is growing every month, and the loan balance already greatly exceeds the appraised value of the home … so homeowner gives up and walks, even before the reset.
“$310K Max”
hahah you’re to generous…
$175k MAX !
Anyone who pays over $175k for this is a SUCKER.
Thanks! Great link!
U.S. Housing Decline Threatens to Last Into 2009: John F. Wasik
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_wasik&sid=aOaXXjyhYd4c
Mortgage Security Bondholders Facing a Cutoff of Interest Payments
http://www.nytimes.com/2007/10/22/business/22market.html
Lawmakers weigh mortgage overhaul
The legislation aims to embrace ‘common sense principles’ that will eliminate the industry’s predatory lending.
http://www.latimes.com/business/la-fi-mortgage23oct23,0,5772918.story?coll=la-home-center
That what’s I told my wife last night as we were watching this over HDTV channel 7-2 ( We got an antenna so we’re not held hostage to Cox’s selection and charges of HDTV).
The fire started really close to those new homes ( hmmm, homesite pads ) that we visited a few months ago. So, from the builder’s point of view, they’d be better to get see those homes burnt, take their money and just sit tight for three or four years.
But, in Irvine, unlike other places, the homes are usually shielded behind roads and plenty of fire hydrants. Hence, I would have been surprised if the fire had jumped the toll road.
We were here through the Laguna fire ourselves when TR got evacuated. I stayed behind and the Fire Dept. had the fire beat by midnight ( used a backburn where TRidge is today ) and then sat on their trucks hooked up to the fire hydrants all over Bonita Canyon Rd.
You know, a lot of people complain that Irvine is too planned and too fake.
But when you live through a major wildfire and see how all of that planning ensured that there would be fire breaks in place and fire hydrants available to stem the fire… while in other supposedly “better” places you see how ad hoc development goes down in flames…. well if you live through that you appreciate that “planning”.
Just check out Poway, Malibu, Laguna, Rancho Bernardo… beautiful places. Up in flames, though.
To lee in Irvine–
Haven’t closed a single transaction since mid August, so I
don’t know where jumbos or anything else is these days.
I just got a potential closing. Buyer is a contractor getting
an excellent price on a townhouse (on the end) which was
destroyed in one of the hurricanes. Buyer is going to use
a line of credit on his house. Told him not to. Years ago told him not to touch his house.
He’s an adult and I’m not his mother. So, I’ll make a little bit of money. On non-litigation.
I will have to double check but I looked at a CW MBS prospectus from 2005 and one from 2007, the verbiage changed so that in the 2007 deal CW would be more responsible for losses. It was interesting to see how it had changed because the older ones basically kept CW off the hook unless there was fraud.
CW services a lot of loans from other lenders and this is why if they ever did fail that would be the one portion of their business that another company would want. I know that they service a majority of Impac’s loans. There was a home at the REDC auction that was an Impac loan but CW was processing the foreclosure.
A chance for first-time buyers
Public and private programs can help low- and moderate-income families gain homeownership.
http://www.latimes.com/classified/realestate/news/la-re-first21oct21,0,4946555.story?page=1&coll=la-class-realestate-news
Ohmigod, look at those negatively amortizing option arms out til 2011!!
Back when I still had closing business, I advised a lady who didn’t realize until her first or second loan payment came in that she had
signed up for negative am. And no, she wasn’t stupid.
She refinanced into a reasonable fixed rate, but between the loan
closing costs and the prepayment penalty she paid $17,000. I told he not to do it, just to pay as much as she could to minimize the negative am. And when the penalty expired to refinance then. But she couldn’t sleep at nite with that neg am mtg ticking away.
By the way, it was Countrywide and they were merciless in demanding the prepayment penalty.
Irvine Renter, the excrement won’t stop hitting the fan intil those
negative am mtges are cleared away, which won’t be til 2012 or 13.
err… not the toll road…. Portola Pkwy…. details, details.
No, No, No, lawyerliz. The federal reserve and the government and the banks will work together to get those folks in mortgage trouble, refinanced into a fixed rate loan that they can afford. It won’t cost anybody anything. Who could possible be negatively affected if the ARMs are not allowed to reset to higher rates. Foreclosures just cost everybody.
And I have a condo in Florida that I want to sell you.
Thanks! That was a really interesting post.
Did anyone notice that after 500+ days on the market, 3 Redbird (McGuire’s old house) seems to have gone into escrow this weekend? I bet the selling price was less than $3 million. It had already been reduced to $3.29 (from a starting point of $4.2 and a previous sales price of $4.1). Can anyone get more info?
And I know of a bridge that I could sell YOU.
There are now entry level houses that are not trailers, on
the space coast with prices under $100,000. There was a Florida condo or 2 that actually intrigued me. One was a “surfer” getaway (mind you we almost never have any surf here) for $79,000, furnished, supposedly a few minutes’ walk
to the beach , a studio. Hey, you could rent it part time, and it could be a gettaway. And that was an asking price of course.
A few minute’s walk away from a well know pier, with restaurants, and often outdoor musical entertainment.
How about it, awgee, want to go halvsies?
And if we buy right now, we can watch the shuttle take off,
weather permitting, this week.
Actually I’d say she was very smart to refi. The prepayment penalty is held by the wall-street investor, not Countrywide.
1.) She refi’d before values came down
2.) The prepayment penalty is tax-deductible
3.) She got into a better rate before they get any higher
Actually, her new loan was with Countrywide, and I have
the impression that the loan hadn’t been sold because she
refied right after she discovered how horrible her loan was.
So, it was Countrywide to Countrywide. Or, so I thought at the time.
Did McGuire buy the house back for a hefty profit?
LOL!!!!!!!!!!!!!!!!!
This is not a real estate comment, but I just want to point out IrvineRenter’s brilliant music taste. Oasis’s “(What’s the Story) Morning Glory?” album is one of the best album ever with Wonderwall being its most popular single. Great job! 🙂
Your basis for the $175k would be…? You don’t even know the square footage, yet you KNOW it shouldn’t sell for $175+. Nice…
“It’ll be interesting to see what effect, if any, psychology has on the timing of the depreciation.”
I think this is the biggest variable in the depreciation equation. We know where the median price “should be” based on the historical relationship of household income to price. We know that many buyers in the last 2-4 years cannot afford the price they paid for their homes, and they will lose them over the next couple years.
What we don’t know, and can’t quantify is, of the rest of the borrowers who refi’d or purchased with adjustable rate mortgages, what level of depreciation will be necessary before they walk away from their homes? Keeping in mind, that not every borrower using an adjustable rate was at 100% LTV at origination.
i.e. At what ratio of mortgage to home value will the average borrower choose to walk away when “home values are only going down” and the most optimistic view is that home values will stagnate for years?
These were sold for about $250k a pop in 1999, the original buyer paid $265 for it in 2000, probably a later phase. I’m not too sure about that exterior photo, it’s showing the garage and unit above garage. The unit that sits over the garage is 2/2 condo, the 3/3 is behind it toward the back with a side yard.
I actually like these… comes with small bedroom/office downstairs with a full bath (shower stall) next to it. The kitchen is kinda tight. There’s a lot of empty space over the living room (thus the tall ceiling) and I’ve heard of some home owners building a deck over it to expand the 2nd floor.
The 2 bedrooms on 2nd floor is correctly designed so that each has its own full bath, and the bedroom section doesn’t share wall with each other.
I recall another builder has a similar floor plan, with furnished attic added for even more space. There are also other floor plans in this community with more floor space and larger kitchen.
It looks like the owner (or original owner) put $10k-20k into the side yard. Looks pretty nice. But I still wouldn’t pay $550k for it.
It was interesting just how quickly Cramer shut up after making his “walk away” speech. Must be quite a few who wanted him squelshed…
Where’s the wine celler, does it also come with it’s own Sommelier?
They were just showing the fires on tv.
Is it as bad as it looks?
Looks like a fair number of houses burnt.
Any of you guys in danger?
Vicstah – Could not agree more about Oasis. Saw them live back in 1997 at the Oakland Coliseum when they were touring in support of this album. If you can believe it, Oasis was the opening act for U2. What a show that was. Too bad those brothers Liam and Noel could not get along or stay out of the bar enough to make some more music.
I will never get the lack of pride from these Realtors.
The primary picture has not less than 3 trash cans
and 3 bags of trash right under the bedroom balcony.
Imagine smelling this trash in the summer sitting
out on the patio.
The cans have wheels on them… what would it take to roll them
aside for the picture… not doing so says I really don’t give a damm,
just like the tilted blurry pictures.
I was gone for the week that my property was listed.
When I returned there were 2 dead roaches right inside
the entry way. My realtor said she showed it 3 times with the roaches..
not her job to move them. I swear… no pride at all.
Robert
My earlier comment about the fires disappeared, but check out this picture from NASA MODIS:
http://rapidfire.sci.gsfc.nasa.gov/subsets/?AERONET_La_Jolla/2007295/AERONET_La_Jolla.2007295.terra.250m.jpg
A really interesting article. Dense, but some interesting and novel ideas there.
The First Crisis of Financial Globalization and Securitization. And the Coming Generalized Credit Crunch
http://www.rgemonitor.com/blog/roubini/222079
More Debtors Use Bankruptcy To Keep Homes
Chapter 13 Filings Gain In Popularity Because They Halt Foreclosures
http://online.wsj.com/article/SB119309633953367729.html