Bank of America underwrote a $300,000 HELOC that was a complete loss in less than 1 year.
Asking Price: $429,000
Address: 8 Sunstream Irvine, CA 92603
Sunshine on my shoulders makes me happy
Sunshine in my eyes can make me cry
Sunshine on the water looks so lovely
Sunshine almost always makes me high
Sunshine On My Shoulders — John Denver
Sometimes, I see property records that look proper, but something is very wrong. I don’t know what happened, but we can all speculate on this one.
Today’s featured property was purchased on 3/2/2007 for $600,000. The owner used a $480,000 first mortgage and a $120,000 downpayment. For historical reference, March of 2007 was the month subprime imploded.
On 5/1/2008, Bank of America authorized a $300,000 HELOC on the property. WTF?
Did the owner pay down the first enough to have $300,000 in equity on 5/1/2008?
Did an appraisal come back at $780,000 after a year of property declines?
Unless the owner paid down the first mortgage a great deal, the $300,000 Bank of America loan was wiped out in foreclosure 12 months later. Yikes!
Foreclosure Record
Recording Date: 04/22/2009
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Document #: 2009000196117
Foreclosure Record
Recording Date: 01/12/2009
Document Type: Notice of Default
Document #: 2009000009612
The borrower stopped paying the first mortgage by September of 2008 which was three months after the HELOC was opened. It doesn’t look like the HELOC money was needed to make payments. The quick timing of the default does look like a strange coincidence.
This property went to auction on 7/6/2009 for $351,158. That is 41.5% off the 3/2/2007 purchase price.
The recovery amount does not satisfy the first mortgage, and the $300,000 HELOC is gone. Perhaps Bank of America got lucky, and the owner did not max out the HELOC.
LOL!
Yeah, that happened….
Asking Price: $429,000
Income Requirement: $107,250
Downpayment Needed: $85,800
Purchase Price: $600,000
Purchase Date: 3/2/2007
Address: 8 Sunstream Irvine, CA 92603
| Beds: | 2 |
| Baths: | 2 |
| Sq. Ft.: | 1,100 |
| $/Sq. Ft.: | $390 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Other |
| Stories: | Split-Level |
| Floor: | 1 |
| Year Built: | 1981 |
| Community: | Turtle Rock |
| County: | Orange |
| MLS#: | S586198 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 3 days |
Bank Owned. Sold AS IS. A Beautiful Avalon Floor plan in the community
of Ridge Townehomes in Turtle Rock. Light and Bright 2 bedrooms in a
quiet and peaceful location. This home offers two bedrooms with a
vaulted ceiling family room that is open to a formal dining room. An
attached 2 car garage. Sunny patio off the family room with a marble
fireplace in family room. Close to award winning schools, and a five
minute drive to UCI.
Light and Bright? Not judging by the pictures.
What do you think was going on here?
Maybe the owner knew someone at the bank who authorized this little gift and even split some of it with the appraiser as well. Smells like fraud to me since not one dime of that HELOC was spent on the condo.
https://www.youtube.com/watch?v=M-vBd-r_Pww
Yikes. Even the current asking price is above the apparent moving average per sq foot for Turtle Rock, and this is for a crappy little condo – not the houses that drive the TR values. Maybe I’m wrong, but I would guess $300 per sq foot might be more in line with the market, giving a price of about $330,000. Or go with the auction price of $351k.
That compares well with the historical trends: apparently this place was sold in 1991 for $190,000, and again in 1998 for exactly the same price — nice demonstration of the California peace dividend slump. That $190,000, adjusted for inflation, might be more than the place is worth today.
Foreclosures continue Bataan death march.
http://online.wsj.com/article/SB125113686930654371.html
But the new appraisal requirements will result in so many bad appraisals…this one looks like a great appraisal. In early May subprime was still ‘contained’. It looks like they just beat the heloc freeze:
http://www.cleveland.com/business/plaindealer/index.ssf?/base/business-6/1211877159236540.xml&coll=2
190k in 91 is ~300k today. This’ll probably hit 2003’s 343 price – eventually.
Why & how is BoA still in business?
Why & how is BoA still in business?
It shouldn’t. But since both Bush and Obama administrations thought the best course of action was to socialize the loss for our “too-big-to-fail” financial institutions, we are now stuck with giant zombies disguised as healthy beings roaming the land (thanks also to the mark-to-myth accounting rules). So welcome to our zombie-land where the living dead competes and sucks the life blood out of the healthy. The bad loans will eventually be either transferred to public (or to other private entities at public expense via schemes such as PPIP) or written off supported by Fed subsidies thru ultra-low borrowing cost (i.e., zero rate). The financial and social cost of sustaining zombies to the long term health of US economy could be astronomical. Just look at Japan…
This one is priced just below $250/sf. All comments are welcome.
22 Rockwren
Irvine, CA 92604
Price: $869,900
Beds: 5
Baths: 4
Sq. Ft.: 3,495
$/Sq. Ft.: $249
Lot Size: 5,500 Sq. Ft.
Property Type: Single Family Residence
Style: Cape Cod
Stories: 2
View: Pool
Year Built: 1978
Community: Woodbridge
County: Orange
MLS#: P699738
Source: SoCalMLS
Status: Active
On Redfin: 9 days
http://www.redfin.com/CA/Irvine/22-Rockwren-92604/home/4690654?utm_source=myredfin&utm_medium=email&utm_campaign=listings_update&utm_nooverride=1
$250/sq foot is good for Irvine I guess. How’s Woodbridge doing these days?
The kitchen-cabinet looking built-ins in multiple places that aren’t kitchens aren’t to my taste, nor do I care for the style on the master bath. But I can’t tell if that’s just my preference or if they’ll be seen as widely unappealing. I do like the styling on the kitchen and the built-in in the dining area. It’s a good thing you don’t need much heating or cooling, because those cathedral cielings everywhere would make that a pain and an expense.
So, I would say, it’s not a bad house, I just personally am not drawn to it.
22 Rockwren was IR’s featured house last Saturday. You should go back to Saturday and read the comments. They are planning for a bidding war.
Sue:
I just did what you suggested. Now I’m up to speed. I came away agreeing it would fetch $900k+ in a timely fashion.
Thanks
George8
As far as Irvine Condos are concerned, these ones are pretty nice, but not $780,000 nice.
Why don’t people go to jail for behavior like this? If you went down to Bank of America and demanded that the teller give you $1,000 you would be put in federal prison for a very long time. But for some reason it’s ok to “borrow” hundreds of thousands of dollars with no intention of paying them back.
“Why don’t people go to jail for behavior like this?”
Because in the first case, you are forcing BoA to give you the money (at gun point or some other threat).
In the second case, BoA willfully gave you the money. In fact, they run ads to entice you to come on down and get some money.
Big, big difference.
If the appraisal was fraudulant, then the 300,000 HELOC was fraud. It’s a white collar crime. Bank fraud is a big income earner for organized crime.
Bank fraud is a big income earner … for bankers. Or to be technically correct, a big bonus earner for bankers. I grant you that “organized crime” applies just as well. 😉
Using that logic, I should have taken advantage of all of those checks the credit card companies used to send in the mail. I could have lived quite comfortably in Thailand for a long time with the amount of credit they extended.
I will be faintly contrary by giving some praise.
This listing includes decent pictures. The pictures convey an overall impression of the property layout, including the outdoor space, instead of showing multiple pictures of the front of the building and the association swimming pool. The pictures lack good lighting but they were clearly done with the intention of providing information instead of trying to fool people.
Another picture positive- they show the garage. The garage is very important to many guys including me. Strictly speaking the picture doesn’t give much info about the garage but it creates a potential enthusiasm for the property that most realtors don’t understand. I’m suprised by how many property listings have no picture of the garage inside or out.
It would help if BofA wouldn’t hire monkeys as loan officers. But even a monkey would have declined this loan so this must be fraud…
There’s been discussion about letting go of the anger and not being upset about HELOC abuse that we can’t control.
Then you realize we are all going to pay for these people’s abuse.
Here’s an excerpt from the LA times today:
http://www.latimes.com/news/local/la-me-taxes27-2009aug27,0,1796963.story?track=rss
Under the latest changes, for a married couple filing jointly, the top tax rate of 9.55% now begins at $92,698, down from $94,110. Combined with the earlier increases, such a couple with two children, earning $100,000, will see their California income tax bill rise by 22.3%, or $716, according to the state Franchise Tax Board. Their tax would go from $3,208 to $3,924, factoring in a $110 drop in the standard deduction for joint returns.
“Then you realize we are all going to pay for these people’s abuse.”
Actually, it is worse than that — our children and grandchildren will be paying part of the tab.
There is more to this story. Either the HELOC is in first position or there is additional collateral. It doesn’t pass the smell test.
After the owner took out a $300,000 HELOC, there must be an illness in the family! 🙂
It looks like this unit sold 3 months before the $600,000 sale – at $590,000. Could be some kind of fraud, but unless you have the goods, I wouldn’t be so quick to ridicule someone putting up $120,000. But that’s what this here blog is all about.
Loans That Looked Easy Pose Threats to Recovery
When Harvey Clavon took out an exotic mortgage to refinance his home in Santa Clarita, Calif., three years ago, he thought he knew what he was doing.
Mr. Kopff got lucky with an adjustable rate mortgage; many others did not.
Mr. Clavon, 63, was planning to sell the home in a few years and retire to Palm Springs. So he got a loan called an option adjustable rate mortgage, or option ARM, which allowed him to pay less than the interest for the first five years.
On his annual salary of $100,000 as a television camera operator, he could afford the $2,200 initial mortgage payments. And he planned to sell the home before the mortgage reset.
Now Mr. Clavon is part of what many economists say is a looming threat to a housing recovery: more than a half-million option ARMs scheduled to reset in the next four years, at rates many homeowners cannot afford. His mortgage payments have risen to $2,700 a month because of a clause he did not notice on his contract, and are scheduled to rise above $4,000 in two years.
Since February, default and foreclosure rates on option ARMs have passed those of subprime mortgages, according to the research firm First American CoreLogic, in part because so many subprime mortgages have already failed.
Because Mr. Clavon made only minimum payments on his mortgage, his balance has risen to $680,000 from $618,000, on a house worth closer to $400,000.
“I don’t know what I’m going to do, ” he said. “I got duped into the loan, and I consider myself an educated man.”
In June, he filed for bankruptcy protection and stopped making house payments.
As the housing market seeks a bottom, option ARMs, which accounted for $750 billion in mortgages made from 2004 to 2007, according to the industry newsletter Inside Mortgage Finance, remain a risk, especially because many are not eligible for refinancing. About a third are already in default, according to analysts.
Compared with subprime loans, option ARMs are fewer but tend to have larger balances. Resets on option ARMs in recent years have often doubled the payments.
“Everyone’s been focused on subprime, but we’re more concerned about this,” said Todd Jadlos, managing director of LPS Applied Analytics, which analyzes data for the financial industry. “By the time subprime defaults had increased 200 percent, in June and July of 2007, option ARMs had gone up 400 percent. People just didn’t notice because the overall numbers weren’t as high.”
First American CoreLogic anticipates 600,000 option ARMS will reset within four years.
Option ARMs, which lenders stopped offering last year, gave borrowers four payment options: less than the interest, which increases the balance every month; just the interest; the equivalent of a 30-year fixed-rate mortgage; and the equivalent of a 15-year fixed.
Three-quarters of borrowers take the minimum option, which usually expires after five years or when the balance reaches a cap, generally 110 percent to 125 percent of the original loan, according to the Mortgage Bankers Association.
Once the cap is reached, borrowers have to pay down a higher balance at a higher rate in a shorter period of time.
“This was a loan meant for sophisticated investors, or people who expected their cash flow to increase over time,” said Elena Warshawsky, a residential credit analyst with Barclays Capital, which expects 81 percent of the option ARMs originated in 2007 to default, with many ending in foreclosure.
“But then they were extended to all sorts of buyers. Now it wasn’t people hoping their income would grow. It was people hoping their house price would increase” so they could refinance or sell, Ms. Warshawsky said.
The firm projects that banks will lose $112 billion on option ARMs written from 2005 to 2007.
The respite for option ARMs recently is that interest rates have dropped, so loans take longer to reach their cap and do not recast to as high a rate, said Chandrajit Bhattacharya, a mortgage analyst at Credit Suisse. Loans that would have recast this spring will remain at low rates until next year, Mr. Bhattacharya said.
Banks are using the reprieve to help some owners refinance into more conventional loans, said Michael Fratantoni, vice president of single family research for the Mortgage Bankers Association.
But the loans have had extraordinarily high rates of failure even before reaching their reset dates. Ron Dzurinko, 62, who lives on a fixed income in Sacramento, took out an option ARM five years ago without understanding it, knowing only that he could afford the initial payments of $900 a month. “The mortgage person said, ‘It could adjust, but we don’t foresee any major bumps,’ ” Mr. Dzurinko said. “It sounded good to me.”
I got duped into the loan”
Yeah, right. His ‘plan’ was to flip the house in 3 years and retire to Palm Springs. He funded this ‘plan’ with an option ARM so that he could buy a more expensive house (…so that he could make more on the sale in a few years). He clearly planned to sell before the re-set, but did not ‘plan’ or protect himself for a market downturn.
And of course its not his fault (“I was duped”), and his problems are due to “a clause he did not notice on his contract”
He gambled and lost (although he didn’t lose much as all he paid was less than the interest on the loan).
Now he files for bankruptcy to get out of his legal obligation.
I have no sympathy.
Don’t worry Baby Boomer – No expects you to be responsible. That type of personality trait is reserved for your parents and now, by default, your kids and grandkids.
Yes, A typical baby boomer view. He was greedy and couldn’t think past his on delusions of wealth. He gambled and lost as the golden bubble crashed.
“I was duped too”. My stock broker told me the market always goes up. However, there was a clause I didn’t notice that I can lose my shirt if I borrow on margin to make more money.
I’m surprised I haven’t heard this one yet.
I would like to point out that the media distorts coverage of baby boomers. Just because they show a lot of greedy idiot baby boomers whining, does not mean that all baby boomers are greedy idiots. The financially literate ones are quietly going about their lives.
Greedy idiots can be found in all ages.
When you remove the complexities, this guy’s “plan” was to ride out a Ponzi Scheme. The fact that this can be considered a “plan” shows how financially illiterate people really are.
What’s bizarre about this is that the writer clearly sympathizes — shouldn’t the writer, at least, be financially literate? And maybe be expected to ask a few tough questions?
We don’t require that of our media. The people want stories, not journalism.
I love the use of the term “exotic” when describing a mortgage. I envision the loan paper had cheetah stripes or was written in a foreign script from a far off country. I guess “exotic” is kinder way of saying recklessly irresponsible.
This guy was a camera operator who made 100,000 a year. If he was a little old lady or a public servant (Police or fire) making the bare minimum, I would understand. He was a 6 figure earner buying a 600,000 dollar house!!!!! >:( He was hoping to beat the system and get out, he lost.
As for Bank of America, if this collapse of Commercial, Alt-A and Prime is as bad as I think it will be. Bank of America will probably become a casualty as well. This 300,000 HELOC on a 1,100 sq condo proves their complete disconnection with reality.
Did Mr Clavon do a 100% refi, or at that time did he have any equity – rhetorical question.
For a $600k loan, $2200/mo is about half of what it should cost. He should not be surprised at the jump to $4k, and it may even go higher! There’s no way he should have qualified for that – 4k x 12=48k/100k = 48% DTI – no-go.
When the NYT does a piece like this, they should ask – ‘what did you do with the cash you got at refinancing?’
81% default rate!!! You would have been better off handing people 200k and sending them to Vegas to bet on black.
“It sounded good to me.”
This should be the phrase for the decade. All of the stupid stuff we have done as a nation could be captured in this one comment.
This condo is the essence of overvaluation. It is in original 1980’s condition – Look at that Kitchen. $400K!!!!! Please – This should be $275K max and will be soon enough. Since when is there WTF REO pricing?
I have to agree, there is still signs of koolaid intoxication about irvine being different. If anyone follows the economy, despite MSM cheering that things are getting better, actually things are getting ugly with high unemployment, fear for those still employed, we may be in a recession for a very long time. there will come a time when people will be scared to borrow that kind of money for a CONDO, OLD UGLY POS. 275K sounds like the max, IMO no more than 220k so you have room to update the place to your liking 😆
I got depressed just looking at the photos. I can’t imagine living in this place much less living here AND making large monthly mortgage payments. Almost a half mil for this? Huh????
Have we all gone insane?
I just got back from a short walk on what is another nice sunny day here Irvine.
Feeling better now.
Note to self: don’t look at pictures of that depressing Apartment highlighted in today’s Irvine housing blog.
Lansner: Is housing bottom at hand?
http://tinyurl.com/ksg4zl
The toxic house loans were very similar to the highly leveraged stock loans just before the great depression or maybe that will be renamed to the great recession in 2050. Only the the stock loans were callable upon demand and less leveraged than the house loans of the last 15 years.
Art Student in Atlanta, $100,000 is not that much in S. Calif. Check out the OC Register for some OC govt. salaries. Calif is a non-recourse house loan state, but can be made into a recourse loan very easy. So easy that people are waiting in line to covert their non-recourse to recourse loans because we hava a govt. that care for you and here to help you to refinance.
https://www.youtube.com/watch?v=mQkFxfyHgMk