People concoct all variety of foolish plans to make riches in real estate. Most of them involve some form of appreciation dependency. When their plans fail, what happens to them?
Today's featured property is a short sale likely going to trustee sale on April 1.
Irvine Home Address … 95 Mission, Irvine, CA 92620
{book1}
Ah, look at all the lonely people
Ah, look at all the lonely people
Eleanor Rigby picks up the rice in the church where a wedding has been
Lives in a dream
Waits at the window, wearing the face that she keeps in a jar by the door
Who is it for?
Father McKenzie writing the words of a sermon that no one will hear
No one comes near.
Look at him working, darning his socks in the night when there's nobody there
What does he care?
Eleanor Rigby died in the church and was buried along with her name
Nobody came
Father McKenzie wiping the dirt from his hands as he walks from the grave
No one was saved
All the lonely people
Where do they all come from?
All the lonely people
Where do they all belong?
The Beatles — Eleanor Rigby
There is a deep sadness in emotional impoverishment and loneliness. There is a tragic sadness in foolishness that leads to financial destitution. By seeing what these people did wrong, we can avoid the same mistakes.
Underwater mortgages drain equity, dampen retirement
By Stephanie Armour, USA TODAY
When Jennifer and David Wakefield bought their home at the end of 2005, they believed its value would rise. After all, the couple they'd bought it from made a $100,000 profit in just three years.But instead, the housing market foundered, and the house in Oviedo, Fla., that the Wakefields bought for about $230,000 is now worth just $115,000. Jennifer Wakefield says she's put off hopes of moving to a larger home. She once thought she could use a home-equity loan to help cover the $30,000 cost of adopting a child, but now there's no equity to tap into.
"We're in the middle of adopting our first child and would have loved to have used a home-equity loan to borrow from — if we had home equity," says Wakefield, 32. "Now, we're faced with coming up with $30,000."
This woman fully expected her house to provide her the money to have a child. The house pays for the children? I had it figured the other way around; shouldn't the ability to shelter the child come first?
Gone are the days when households relied on their homes' ever-rising values as family piggy banks that would pay for everything from new cars to college tuition. Legions of borrowers who once thought they could count on equity in their homes as a financial safety net are finding there's nothing there. Instead, they're discovering it may take years before their homes are worth as much as they owe on them.
A typical borrower who is "underwater" won't see positive gains in equity until 2015 to 2020, depending on the market, according to a study of 10 major metro areas by First American CoreLogic for USA TODAY."It's a rude awakening. There's a total change in thinking going on," says Amy Bohutinsky of Zillow.com, a real estate website. "People got caught up in the idea you could borrow against your homes, but they no longer think of them as savings accounts. We're going through a big psychological shift. Will this recession change how we think about our homes? Are they an investment vehicle or a place to live?"
I wrote about Our Changing Relationship to Debt back in July of 2008. "By 2010, people will realize the thought patterns of the bubble, the religion of real estate, are no longer operative. As this slow process of change grinds forward, people will start thinking in terms of taking on manageable debts with an eye toward paying it off to build equity the old fashioned way through retiring debt. This will be a big change for the market."
'What if I want to move?'
At 39, Tage Woehl already fears for his family's financial future.
Woehl, of Eastlake, Calif., is about $80,000 underwater on a home he and his wife, Imelda, bought for $430,000 in 2003. He's locked into a 5.99% fixed-rate mortgage that no bank will refinance.
To hold down other expenses, the Woehls go without cable TV, and he's holding onto his 1999 Dodge Intrepid, which has 188,000 miles on the odometer. The Woehls' daughter, Nika, is only 4, but Woehl, an accountant, already is worrying about how he'll afford college tuition in 13 years. He says he feels like he's lost his financial life jacket: "It's not too comforting."
Woehl says it sometimes feels unfair that other homeowners who don't pay their mortgages on time get federal bailout assistance in the form of mortgage modifications and lower monthly payments.
"I'm the one who's paying every month, and when all is said and done, I'm scraping by," he says. "We can't refinance. We're upside-down now. What if I want to move? I'd like to be closer to my job."
Another side of moral hazard; the responsible get screwed, and they are pissed about it. As a renter, I could move anywhere in the country in 60 days. The millions who are trapped underwater couldn't move in the next 60 months. How many house debtors are enduring long commutes when they could be renting a nicer property nearer work for less money?
But it's also older borrowers without young children who are frustrated by their financial situation and feel stuck because they are underwater on their homes.
Vicky Dicristo, 64, bought her home in Soquel, Calif., in 2006 for $535,000 with plans to fix it up, live in it awhile, then sell and buy a nice retirement home in Arizona, where she has family. She bought the home with a five-year, interest-only, adjustable-rate mortgage at a 5.9% interest rate.
Her home is now worth $350,000, according to the local assessor's office. And Dicristo, who was laid off nearly two years ago from her job as a mortgage loan underwriter, has lost the $135,000 she put down on the house as well as the more than $15,000 she put into renovating the home with new floors.
"I lost $150,000," Dicristo says. "I haven't been able to make payments, either. I thought I was going to be able to sell it and move to a less expensive area. That had been my plan when I bought it, to move to someplace like Arizona and pay all cash. But that whole plan fell apart."
Whether this woman recognizes it or not, she is a retail property flipper. She planned to ride the equity wave into a free property. The fact that people like her thought this was possible amazes me. She, and millions with the same faulty plan, helped drive up prices. This plan only works if property values where you are flipping are going up at a much faster rate than where you want to be. California really is a magical place, right?
For Dicristo, losing equity in her home has meant losing the cash she sank into it and losing much of her retirement dream.
"Emotionally, this has had a very big impact on me," she says. "It's changed how I view housing."
The Unceremonious Fall from Entitlement. Her plan was not based on reality, and her "dream" of retirement was simply a dream, a fantasy created in her own mind. If she doesn't create the fantasy — if prices had never bubbled — she would not have filled her head with silly ideas about a retirement not to be, and she would not be suffering right now.
When foreclosure looms
Losing equity has also cost Henry Oviedo, 75, an engineer, his retirement dream.
He bought his home in 2005 in Owings, Md., for $642,000. It did not have a complete basement, so he spent nearly $100,000 to put in an office, a small theater, a bathroom, a fitness room and a big living room. He took out a five-year, adjustable-rate mortgage at 5.85% interest.
He pimped the place out and now he can't afford it.. Stupid.
When he went to refinance recently, his home was appraised at $590,000.
Oviedo says he has been unable to get his home refinanced because he is upside-down. Nor has he been able to get his mortgage modified. Oviedo is now paying $3,200 a month, but come November, he could face higher payments when the 5.85% rate on his mortgage will be adjusted.
He must retire this year, and Oviedo says his Social Security check won't be enough to pay his mortgage. His wife, Giselda, is unemployed.
This guy took on $642,000 in debt about six years prior to retirement? That was his plan? Was the house going to be his breadwinner? How do you retire with $642,000 in debt? 
"I am very worried," he says. "I put $100,000 into the house. It's very uncertain what is going to happen. I would have liked to have had this as my home in retirement, but I am going to have to go into foreclosure."
If this fool would not have put $100,000 into the house, he would still have $100,000 for his retirement, albeit in a house a bit less pimped out. The lower payment might have been affordable to him.
The problem of negative equity is getting worse. The average equity amount that an underwater borrower was in the hole for in the fourth quarter of 2009 was $70,700, up from $69,700 the previous quarter.
Without equity in their homes, many homeowners no longer have collateral for personal loans that financed new cars, vacations, home improvements and college educations before the housing bust.
Home-equity lending has plummeted. Lenders made $77 billion in home-equity loans or lines of credit in 2009, down from $430 billion during the housing boom in 2006, according to Inside Mortgage Finance.
"That's not likely to change any time soon until equity picks back up," says Guy Cecala, CEO of Inside Mortgage Finance.
HELOCS are dead
Many people buying today believe they will have HELOC riches soon. This will change slowly. As interest rates go up, HELOCs — if they are still made widely available — will be much less desirable.
If you locked in to a first mortgage at 5% and your house has gone up $100,000 in value, are you going to open a HELOC at 7% and take on the added payment? You see, falling interest rates that allowed first-mortgage refinancing at ever-decreasing rates allowed many borrowers to increase debts without increasing payments. That ability goes away when interest rates creep up. When people open HELOCs in the future, they will not be refinancing their first mortgages, and the HELOC debt is an additional payment that eats into monthly cashflow. HELOC borrowing is dead for the foreseeable future. 
The negative equity problem also is threatening future inheritances. Many homeowners who counted on their home equity as a substantial part of the estate they'd pass on to their heirs are now worrying about the welfare of their spouses and children after they die.
Bob Riley had thought the equity in his home would provide for his wife, Dawn, and provide an inheritance for his three adult children. Now he fears it will just be a financial albatross for them.
Equity is never an albatross; debt is an albatross. If he wanted to provide an inheritance, he should have worked to pay off the debt.
His home is one of the 2.2 million in Florida with negative equity. He and Dawn, of Tallahassee, spent $220,000 five years ago and took out a fixed mortgage on their four-bedroom, one-story home that backs up to a lake and includes a 1-acre yard for their two dachshunds.
A nearly identical home across the street recently sold for about $180,000, and Bob guesses they're at least $20,000 underwater on their house. He used to work as a concrete salesman but is currently out of work. Dawn sells insurance.
It's frustrating, Bob says, because there's a home they'd like to buy with more square footage that's newer, but they'd have to write a check just to get out of their house. He says they've paid off all their bills and are now trying to decide whether to continue paying the mortgage.
"It'll take years for the equity to get back," he says.
Four or five other homeowners in his neighborhood, he says, have simply walked away and left their properties to the bank. And there are other hard realities to come to terms with.
Reverse Mortgages
Bob, 60, says he'll have no home value to pass on to Dawn or his three grown children.
He had thought he could take out a reverse mortgage on the home. That's when a homeowner who is older than 62 borrows money from his or her home. It isn't paid back until the owner dies, sells the home, or permanently moves out.
"I can't retire. I'm looking for work," Bob says. "I thought whatever we'd have, I'd pass away and leave the house to her, and she'd have a reverse mortgage to live off of. Now we don't know what we're going to do."
Reverse mortgages are a financial cancer. If this man's plan was to leave his wife a reverse mortgage, he was planning to leave her with a financial cancer which would have consumed the house and left her trapped and penniless. Downsize and diversify before taking on financial cancer.
What will become of all the foolish people?
Each of the people mentioned in the article made foolish plans. What will become of them? The young may recover, but the old will almost certainly endure a fall from entitlement. The lifestyles they enjoyed or envisioned are gone.
These cases are sad but instructive.
Irvine Home Address … 95 Mission, Irvine, CA 92620 
Home Purchase Price … $749,500
Home Purchase Date …. 12/29/2005
Net Gain (Loss) ………. $(211,812)
Percent Change ………. -23.7%
Annual Appreciation … -6.3%
————————————————-
$572,009 ………. Asking Price
$114,402 ………. 20% Down Conventional
5.00% …………… Mortgage Interest Rate
$457,607 ………. 30-Year Mortgage
$118,440 ………. Income Requirement
$320 ………. Special Taxes and Levies (Mello Roos)
$48 ………. Homeowners Insurance
$270 ………. Homeowners Association Fees
============================================= .jpg)
$3,590 ………. Monthly Cash Outlays
-$550 ………. Equity Hidden in Payment
$222 ………. Lost Income to Down Payment (net of taxes)
$72 ………. Maintenance and Replacement Reserves
=============================================
$2,914 ………. Monthly Cost of Ownership
——————————————————————————–
$5,720 ………. Furnishing and Move In @1%
$5,720 ………. Closing Costs @1%
$4,576 ………… Interest Points
$114,402 ………. Down Payment
=============================================
$130,418 ………. Total Cash Costs
$44,600 ………… Emergency Cash Reserves
=============================================
$175,018 ………. Total Savings Needed
Property Details for 95 Mission, Irvine, CA 92620
——————————————————————————–
Beds: 3
Baths: 3 full 1 part baths
Home size: 2,110 sq ft
($272 / sq ft)
Lot Size: n/a
Year Built: 2006
Days on Market: 75
MLS Number: S601797
Property Type: Condominium, Residential
Community: Woodbury
Tract: Wdtr
——————————————————————————–
According to the listing agent, this listing may be a pre-foreclosure or short sale.
This property is in backup or contingent offer status.
SPACIOUS THREE BEDROOM END UNIT, attached only on one side and very private. Painted throughout, very clean and spacious. Has a front courtyard off the dining room and small courtyard off of downstairs bedroom. Huge MASTER BEDROOM, with handsomely done master bath. Twin vanities, huge tub and LARGE WALK-IN CLOSET. Spacious kitchen with modern cesearstone countertops and stone backspash. Has a wine captain, stainless appliances including a refrigerator. Custom fans throughout. Windows have formal casing and the master bedroom has plantation shutters. In an excellent Woodbury location: WALK TO ELEMENTARY SCHOOL, the resort The Commons' with 5 private pools, private tennis courts, incredible amenities. Photos soon.
HELOC abuse
I didn't think a loan owner who bought at the peak would be able to squeeze out a few pennies, but then again, I constantly underestimate lender stupidity. On 9/25/2006 the owners obtained a $640,000 first mortgage and a $150,000 stand-alone second. The got $40,500 out of their nine months of ownership before the music stopped. Once the cash cow stopped giving milk, they stopped paying and found a new way to milk it. They haven't made a payment in well over a year.
Foreclosure Record
Recording Date: 03/09/2010
Document Type: Notice of Sale (aka Notice of Trustee's Sale)
Recording Date: 05/20/2009
Document Type: Notice of Default
Trustee Sale
The margins on the more desireable properties are certainly smaller. With little or no time or cost required to fix these properties up, flippers are merely arbitraging the cash and resale markets. It isn't rocket science.
| Comparable Trustee Sales | Auction Date | Amount |
| 92 TOWNSEND — A 0 bed Condominium — 0 | 12/3/2009 | $ 451,000 |
| 68 TOWNSEND — A 0 bed Condominium — 0 | 2/3/2010 | $ 501,000 |
| 84 TOWNSEND — A 0 bed Condominium — 0 | 9/23/2009 | $ 502,200 |
| 89 WINDING WAY — A 0 bed Condominium — 0 | 2/10/2010 | $ 515,597 |
| 53 CHANTILLY — A 0 bed Condominium — 0 | 10/21/2009 | $ 523,100 |
| Comparable Resales | Resale Date | Amount |
| 115 Spanish Lace — A 3 bed 1,960 SF CONDO — 2006 | 12/09/2009 | $ 550,000 |
| 84 Townsend 1 — A 3 bed 2,100 SF CONDO — 2005 | 12/22/2009 | $ 594,000 |
| 81 Mission — A 3 bed 1,960 SF CONDO — 2005 | 8/28/2009 | $ 560,000 |
| 57 Flamenco — A 3 bed 2,165 SF CONDO — 2005 | 1/07/2010 | $ 598,000 |
| 53 Chantilly — A 3 bed 1,960 SF CONDO — 2006 | 12/31/2009 | $ 625,000 |
| Comparable Rentals | Rental Date | Amount |
| 62 Shadowplay — 3 bed SF CONDO — 2,146 | 33 | $ 2,900 |
| 28 Pink Sage — 3 bed A SF CONDO — 1,745 | 66 | $ 2,800 |
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since 2006.
Have a great weekend,
Irvine Renter
I thought like the people in the stories; still do. It is just timing.
The difference between your thinking and their thinking is that you recognized buying and selling the house was a trade. These people think it is a buy-and-hold investment with magical characteristics.
You should spend more time in the land of magical thinking. Only then will you truly understand the plight of these poor souls.
http://www.crackthecode.us/images/fantasy_land.jpg
How’s the For Sale signs been at Woodbury recently? Last I remember, back in ’08, For Sale signs were everywhere. You wouldn’t believe the amount of For Sale inventory we had back in those days.
Irvine Co development For Sale signs still up.
Not sure about private sales.
The second story doesn’t even have a logical narrative to it. Guy gets a loan and has to scrimp to pay it off. The house could have doubled in value and he still would have been driving his Intrepid and watching broadcast TV, because his financial problem is his loan and his loan hasn’t changed. After spending many years traveling to Ethiopia, Madagascar and other garden spots, his problems seem pretty puny to me.
You screwed up the HOA here, it should be a lot more usury to live in the rat race of fascist Irvine, in the special sub segment of Woodbury.
I also think your mortgage rates need some adjustment based on amounts greater than the standard conforming limit and in other cases FHA, rates, fees, etc.
If we are going to talk rental parity, the calculations should be as accurate as possible. We don’t want anyone handcuffed to their Irvine town home thinking they were at rental parity when they weren’t.
I fixed the HOA amount.
I take the mortgage rates from Bankrate.com. It is usually a conservative rate, but since the spreads to jumbo are so large, I could hunt down the jumbo rate on loans in excess of the conforming limit.
You are correct that the numbers must be as accurate as possible.
This is a minor issue, but I also think your insurance and maintenance are low. Maybe as much as 100 bucks too low combined.
The rate issue should be easy to fix. Set up an If-then statement in excel to account for the spread. That also may add 100 bucks here.
I hope the kids who move in here get to meet the dozen superstar students who make the difference in Irvine test scores at their school. It will surely make them more well rounded and socially acceptable individuals.
Huh? How do test scores of individual students somehow make other students more “well rounded and socially acceptable”? You realize that its the parents and their culture that drive students to excel which is a double edged sword since there is also a corresponding high rate of suicide due to failure to get high enough scores to get into the best schools. There’s more to life than just acing tests.
sarcasm alert!
There is not more to life than the wheel. All run on the wheel. The wheel is perfect, a non-stop 360 degree continuous run for the sake of running. Do not so denounce such a beautiful creation of voluntary enslavement.
I’m not sure if anyone posted this link yesterday regarding principle write downs:
http://money.cnn.com/2010/03/26/news/economy/Obama_mortgage_relief/index.htm?hpt=T2
People are hoping that if they ignore it, it will go away.
LOL, If you ignore it, it will only get bigger. Even if you acknowledge it, the bailouts for the banks will get bigger.
I know what this will do for Riverside – not a damn thing. For areas like Irvine and Coto it’s a different story.
The Wakefields buy a house in 2005 and are fully aware that the sellers are making a 100K profit. They didn’t think anything fishy was going on, didn’t ask any questions, or do any homework. In 2005, all one had to do was google “house prices” and see tons of blogging going on about a housing bubble. I guess these people figured all that housing bubble talk was just a bunch of internet UFO nonsense.
They happily went along with the scheme, probably dressed up in nice outfits to attend the signing ceremony, and grabbed the bag because they believed they would be next in line for their own 100K profit in a few years.
And now they are adopting “the children” and would have loved to have had their house pay for it.
I am glad that this couple is not producing genealogical offspring – at least the adopted kids have a chance of developing a brain so long as they can unlearn all that garbage the Wakefields will be teaching them about personal finance.
Can anyone explain what the hell kind of business does a 75 year old man have in taking out a 600K mortgage? He states that he is an engineer which astonishes me. I’m guessing that he is not a very good one (just a guess).
It was the old buy a 650K house and install a movie theatre in the basement routine. How could it have not worked out?
He spent 100K installing fluff upgrades to trick out the basement – obviously assuming that a wealthy rapper or movie star would be there to pay him a king’s ransom for his totally sweet handywork.
Amazing. This man’s parents would be so ashamed.
Cmon, he was only 70 when he got the loan…
Why don’t the lenders just start offering 100 year mortgages for senior citizens? What’s the big difference between doing that and offering them 30 year mortgages? Either way the thing isn’t getting paid off in their lifetime.
This whole charade calls into question the practice of a 30 year mortgage. Why not try 40, 50, 100 year mortgages if the theme is to never pay off debt.
Nah, once it’s past 30 years, the longer amoritization doesn’t gain you much. They skipped straight past those and went with Interest-Only, and then blew right through that to negative amoritization.
I thought the exact same thing. This guy should have been comfortably retired long before age 75. I don’t know what he was thinking. Pathetic.
If I were in my eighties, I wouldn’t mind a variable mortgage with a five-year neg-am period. Nothing wrong with being insolvent when you’re dead.
Not to be ageist, but why would you give a 5-yr IO-arm to a 60 year old? Was she planning on still being working in 5 years when the payment jacked up? So income goes down, payment goes up, and it makes sense how?
She should not have been loaned the money to try that plan. I feel bad for her, but we all would have been better off had she moved into somewhere smaller to begin with. I put a lot of blame on the lenders as they should have known her situation. When you get a mortgage, the person loaning you the money should know a lot about you and your plans for the home. Either she didn’t disclose her plan or the lender didn’t ask – I’m guessing the latter.
She may have told them the truth. That she planned on selling within those first 5 years. That’s the people for whom this product “makes sense”. It makes owning more similar to renting both in price and in lack of equity. The problem is the whole downside risk part. But that’s a problem regardless of age.
I’m sure the lender’s loved the arrangement since house prices never go down. Sell the house to an idiot on a toxic loan knowing that they will want to retire out before the loan is due. Then let the house get flipped to another idiot on another toxic loan. A never ending revenue stream for the banking system on this house. Good thing house prices never fall! Might be a bad idea otherwise!
All these sob stories have one thing in common. The idea that real estate prices never go down and there is forever appreciation.
The lady who wanted the house to pay for her adopted child, the guy sentenced to drive a car with 188K miles on it, the couple who might have to write a check for 20K to sell their house to upgrade to a bigger one…boo hoo, cry me a big river. These people sound like they have intellects of a 14 yr old. Nothing is guaranteed in life regarding investments (real estate, stocks, baseball cards, collector cars, etc) all can lose money.
I am disgusted at our entitled society today. These people should be happy they have a roof over their heads and food on the table. Rant out.
I like the 60 year old guy who is thinking about walking away from the mortgage because it is 20K underwater. Give me a break. His generation has experienced unprecedented prosperity for many years and he thinks the rest of us should now make good on his negative equity. Great lesson for the next generation, sir!
That’s the problem – all these people walking around in their 60’s and 70’s with all of this debt. WTF? Just when are these folks ever planning on paying their tab?
Oh wait, they aren’t planning on paying anything off that’s the younger crowd’s problem – let them deal with it. I see how it is.
Americans (the boomers and current generation) have a nasty sense of entitlement. They really have no idea how good life has been to them!
Both my parents grew up during WWII in Germany. Their hometowns were bombed beyond recognition, homes destroyed, my mom ended up living in a barn for a while, being cold and hungry was normal. This is probably why they are super tight with money…they have seen the bad times. These assclowns complaining about driving an old car and not having cable TV are just plain ridiculous. Get a life you losers!
Grandpa had similar german upbringing but came here when he was 2. Grew up broke as a joke. That damn guy will use a screwdriver until it is a nub and then grind it into a punch or ice pick. Frugal beyond belief. It is awesome but I can’t get anywhere close to being such a tightwad.
The entitlement generation is in for a rude awakening.
AZDavidPhx
The fellows is an engineer and likely able to do the math. His mistake was putting extra money (if his own) into the house with little or no chance of payback. If he’s still hasn’t put any of his own money, he may be able to walk away with a few years of free rent. He and his wife are in the special catagories for banks — senior citizens. Hope they enjoyed the movies at home.
The 100% or more loans made a lot of sense in CA. If the market goes up, I win. If the market is steady, I win. If the market crashes, I get 2 years of free rent and get a ROI of at least 200%. The only losers are the taxpayers, renters, real shareholders (who used their own money) and those that put put down more than 12% on housing or investment property. Note that it’s shareholders that purchased with their own money, not the banksters who were reward with the shares or options. The bansters cashed it at the high and then repurchased after the crash.
I lost on all 3 factors. :{
The only difference between these stories and my mother’s story is the amount of money put down. My parents bought a house to retire to when Dad was nearing retirement. They put 50% down on a house that cost $600k at the time. It’s now worth more like $500k, $520k if she’s lucky. When my father passed away Mom sold the year-round house and kept the proceeds (well actually I think she spent them on french drains, new gutters, and much-needed deck refinishing before it rotted). SS and a small pension are enough to cover the mortgage payment on the retirement home, and the substantial 401k pays for the rest.
But at some point she will want to downsize to a home that she owns outright. She could do so now, buying a $170k condo, but (a) I don’t think she’s ready to realize a 44% loss on her downpayment and (b) the big house has it’s uses for now, since all of the daughters can visit at once and still fit.
The similarity is that (a) the 30 year loan she has, she doesn’t intend to pay off entirely by paying down the loan, she intends to pay it off in a sale. (b) if she knew then what she knows now, she would have gone for something she could own outright in the first place. Which, a $300k condo at the peak, might very well have been nicer than a $170k condo now… (depends on the market of course).
Because essentially, even with 50% down, the leverage is what’s hurting her. It’s not a 20% loss it’s a 40% loss.
Cara,
Like I said the “really wise” ones were the “ilresponsible” ones who had nothing or negative down. They can just walk away with 2 years of free rent and some with lots of cash from the refinance loan.
The “prudent and responsible” ones put a large down, so can’t walk away without a loss of the downpayment. No free rent for the responsible ones. Only more taxes to pay for the wise one who have walkaway loans, negative house equity and/or borrowed home loan cash in their pockets. Your tax dollars at work.
I’m a late baby boomer that figured out 15 to 20 years ago that I would be more likely to be abducted by an UFO than collect on significant SS benefits. ;}
Real penisons have gone like the wind for my age group and younger except for govt, banksters and the exec.
The new govt health plan is the latest to take away a workers health benefit. Instead of the employer paying for a good plan, the taxpayer will be forced to purchase a poor to average plan. New entillement for the corporation (they won’t need to pay for health insurance in a few years and the insurance companies will be getting lots of new taxpayer money).
Excellent post newbie, and I not only agree with you, but fit in the guidelines of one of the “foolish” ones to put down 20%. I watched 15 years of hard work and investment go POOF, rather than financing 100% and investing my $100,000 in the Wall St. Indian Casino.
The wise and conservative investors have been played. What I thought was good and just and right, is now just a price to be paid in order to artificially prop up home prices and home debtors (banksters, remember, unless you own outright, you don’t “pwn” jack, that’s why the banksters are getting the $$, they are the “real” homeowners).
For me, it’s all one big sh1tstorm and I’m caught in it on both ways. Paying for the bailouts with my taxes, and watching my house value drop like a rock while still paying to re-imburse the banksters for their losses. I’d sell this damn house if someone re-couped me 80% of my loss underwater, but I’m just a little guy, I don’t get jack sh1t, but if I default on this house, the banksters will get covered on the “loss” because our corrupt politicans pay them. It’s mean all the way up and down and makes me shudder to think how corrupt the system is while have people hating on people, rather than fixing the system to punish the corrupt.
Over the past 25 years in the mortgage biz I’ve found the four groups of people with consistantly low common sense levels are:
1) Teachers. (Those who can’t do, teach, has never been more true in my experience. Most believe they have smarts, but their decisions have shown to be otherwise)
2) Engineers. (They over analyze things to death, trying to save a penny, but at a cost of a dollar. The story in todays post is not unusual)
3) People in the mortgage biz. (A small amount of information based on limited experience will certainly become weaponized quickly. Again, from this post “lost her job as a mortgage underwriter…”)
4) Attorneys. (Most of the lawyers I’ve worked with believe they are bulletproof, able to fall back on their litigation skills to extracate them from looming financial peril. Serial refinancing and HELOC abuse has been their kryptonite.)
I’d list Realtors but I try to avoid Realtor loans because of the moral hazard issues associated with lending to people you work with. Kinda like loans to family members. You’d love to help, but if things go sideways it makes for a very tense relationship thereafter. Given how many realtors have found out that being a mini-Trump also means multiple bankruptcies to avoid creditors, they are too easy a target to comment on.
repeat ad infinitum: Common sense isn’t.
My .02c
Soylent Green Is People.
You are probably aware that being the actual Donald Trump also means multiple bankruptcies to avoid creditors.
People are just blinded by the moonshine koolaid. I’ve met some really smart folks who are sooo DUMB regarding real estate. In all fairness, the propaganda abounds.
How many “R” realtors actually exist in Socal? My guess is 50. They should start a Guild and bash the shills.
WAIT.. not all engineers are that bad… Of course, I’m a prostituted physicist!
If I were a conspiracy theorist I’d think this was all a grand plan to get boomers to work and pay taxes until they drop dead, like many of them will. A former freind of mine in Escondido is just getting into the screenmobile business at age 67. They got foreclosed out of their custom home of course and had NO savings or rentals.
Great post Larry
I love how my $150k Riverside house would rent for about $1,500 but an Irvine condo that costs four times as much would rent for less than twice as much.
REVERSE MORTGAGE: “That’s when a homeowner who is older than 62 borrows money from his or her home. It isn’t paid back until the owner dies, sells the home, or permanently moves out.”
They forgot to mention one other scenario: When the old person just won’t die and the equity is drained, the bank kicks his butt out to the street.
Who’s the fool? The people who borrow too much money for more house than they can afford, who then make a hundred K a year in HELOC income off it for a few years, and then live in it rent free for a year or two, or the people like us who are still renting and getting stuck paying for the government bailouts of the banks that should have been allowed to go under?