The push to drive squatters from houses they are not paying for has begun. We have eclipsed our previous foreclosure records, and foreclosures will continue to increase in number for the remainder of 2010.
Irvine Home Address … 43 PARTISAN Pl Irvine, CA 92602
Resale Home Price …… $655,000
{book1}
Oh yes, I'm the great pretender
Pretending I'm doing well
My need is such
I pretend too much
I'm BROKE but no one can tell
Oh yes, I'm the great pretender
Adrift in a world of my own
I play the game but to my real shame
You've left me to dream all alone
Freddie Mercury — The Great Pretender
Californian's are great spenders living in a world of their own. They play the game with no real shame pretending they really have wealth. They are below broke and left alone dreaming of lives they do not own.
Today's HELOC-abusing squatters
Usually, I conclude with the sordid details about the property owner's finances, but today I am starting with it. When presented with statistics about macroeconomic events like "foreclosure activity goes up," it is easy for readers to lose the connection between the decisions lenders and borrowers made and the macroeconomic event. The increase in foreclosure findings I am reporting today is the direct result of thousands of families making bad financial decisions just like the owners of today's featured property.
When I first started covering HELOC abuse, many readers thought I was searching through many property records to find an isolated case. In reality, I have to search through many property records to find an owner who didn't spend their house. The HELOC abuse and debt dependency is the rule not the exception.
Policy makers have scared everyone into bailing out the banks ostensibly to help loan owners stay in their houses. In reality, this is a poorly disguised bailout of the banks. For the banks to stay in business, they will need to obtain income from their non-performing assets. That means they need to foreclose on people and either rent the place out or sell it to be rid of it.
It is appropriate to feel compassion for people losing their homes, but this compassion must be tempered by wisdom. For the most part, the people losing their home made bad decisions — remember, responsible homeowners are NOT losing their homes. Expressing compassion does not mean bailing these people out. That is enabling. Do California debtors really deserve our financial assistance?
Let's take a careful look at the loans that were made and how these owners lived and see if the lending or the borrowing is wise behavior we want to see more of.
- This property was purchased for $321,000 on 12/18/1998, near the last market bottom. The mortgage information is not available, but the borrower likely put 20% or more down.
- The first mortgages was refinanced on 4/11/2002 for $200,000. A second party appears on the mortgage. Apparently, when the owner was single, the demands for money were a bit less.
- On 2/4/2005 the first mortgage was refinanced for $480,000. A HELOC was also opened for $195,750.
- On 7/31/2006 the owners refinanced with a $693,000 first mortgage and a $153,000 HELOC.
-
On 10/2/2006 the HELOC was increased to $200,000.
- Total property debt is $893,000.
- Total mortgage equity withdrawal was $693,000 since April of 2002.
They have since been squatting for more than a year:
Foreclosure Record
Recording Date: 10/29/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 07/22/2009
Document Type: Notice of Default
What prompted these people to spend nearly $700,000 in just a few years? And does it matter? Are there any circumstances where you believe these debts should be forgiven at the expense of the US Taxpayer? How do you feel about their squatting for over a year on your dime?
When you read the grim statistics about foreclosures, do you tear up for the poor families who lost everything or rejoice for their new lives free of entitlement and debt? Foreclosure is not the crisis; it is the cure.
FORECLOSURE ACTIVITY INCREASES 7 PERCENT IN FIRST QUARTER
New Quarterly Records for Scheduled Auctions and Bank Repossessions
All Foreclosure Types Spike in March, Which Posts Highest Monthly Total for Report
IRVINE, Calif. – April 15, 2010 — RealtyTrac® (realtytrac.com), the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 properties in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009. One in every 138 U.S. housing units received a foreclosure filing during the quarter.
Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.
“Foreclosure activity in the first quarter of 2010 followed a very similar pattern to what we saw in the first quarter of 2009: a shallow trough in January and February followed by a substantial spike in March,” said James J. Saccacio, chief executive officer of RealtyTrac. “One difference, however, is that the increases were more tilted toward the final stage of foreclosure, with REOs increasing 9 percent on a quarterly basis in the first quarter of 2010 compared to a 13 percent quarterly decrease in REOs in the first quarter of 2009.
“This subtle shift in the numbers pushed REOs to the highest quarterly total we’ve ever seen in our report and may be further evidence that lenders are starting to make a dent in the backlog of distressed inventory that has built up over the last year as foreclosure prevention programs and processing delays slowed down the normal foreclosure timeline.” …
… California foreclosure activity decreased 6 percent from the first quarter of 2009, but the state still documented the nation’s fourth highest foreclosure rate — one in every 62 housing units receiving a foreclosure filing. …
… California alone accounted for 23 percent of the nation’s total foreclosure activity in the first quarter, with 216,263 properties receiving a foreclosure notice — the nation’s highest foreclosure activity total.
Readers here are not surprised by these numbers. Last year, there were stories planted in the mainstream media that the foreclosure crisis is ending because filings were down. Well, filings were down because banks stopped filing, not because borrowers stopped defaulting. Shadow inventory is a disgraceful squatter's paradise. Fortunately, lenders are finally moving to clean up their books. It is about time.
Irvine Home Address … 43 PARTISAN Pl Irvine, CA 92602 
Resale Home Price … $655,000
Home Purchase Price … $321,000
Home Purchase Date …. 12/18/1998
Net Gain (Loss) ………. $294,700
Percent Change ………. 104.0%
Annual Appreciation … 6.1%
Cost of Ownership
————————————————-
$655,000 ………. Asking Price
$131,000 ………. 20% Down Conventional
5.24% …………… Mortgage Interest Rate
$524,000 ………. 30-Year Mortgage
$139,354 ………. Income Requirement
$2,890 ………. Monthly Mortgage Payment
$568 ………. Property Tax
$117 ………. Special Taxes and Levies (Mello Roos)
$55 ………. Homeowners Insurance
$0 ………. Homeowners Association Fees
============================================
$3,629 ………. Monthly Cash Outlays
-$714 ………. Tax Savings (% of Interest and Property Tax)
-$602 ………. Equity Hidden in Payment
$272 ………. Lost Income to Down Payment (net of taxes)
$82 ………. Maintenance and Replacement Reserves
============================================
$2,667 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,550 ………. Furnishing and Move In @1%
$6,550 ………. Closing Costs @1%
$5,240 ………… Interest Points @1% of Loan
$131,000 ………. Down Payment
============================================
$149,340 ………. Total Cash Costs
$40,800 ………… Emergency Cash Reserves
============================================
$190,140 ………. Total Savings Needed
Property Details for 43 PARTISAN Pl Irvine, CA 92602
——————————————————————————
Beds: 5
Baths: 3 baths
Home size: 2,300 sq ft
($285 / sq ft)
Lot Size: 8,500 sq ft
Year Built: 1998
Days on Market: 17
MLS Number: S611660
Property Type: Single Family, Residential
Community: West Irvine
Tract: Heri
——————————————————————————
According to the listing agent, this listing may be a pre-foreclosure or short sale.
One of the Larger lot in the Tract. Cover Patio, Extra Long Drive Way. Formal Living Room, Downstairs Bedroom with full bath. Large Master Bedroom and Bath, Walk-in Closet. 4th Bedroom Upstairs is the size of a 2 Rooms combined and can easily be converted into a 5th Bedroom to become a SIX BEDROOM house. Award Winning Schools, NO HOA, Low Tax.
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’ve been overseas and it seems that the English language has evolved since I have been away. Let’s see: “Larger” is now a proper noun, and we seem to have dispensed with the convention of making a distinction between singular and plural nouns. Is this, I wonder, the impact of Twitter? Seriously, how many listings does the average agent handle? Is it so many that she can’t learn how to spell or write a coherent sentence?
Reading this blog does indeed make me angry. I feel ever more justified in my belief that while the banks were guilty of faulty stewardship, the actions of the so-called ‘homeowners’ was simply criminal. I can only assume and hope that that the creditors will be hounding these people for the debts they owe until the next market peak in 10 or 20 years time.
“the actions of the so-called ‘homeowners’ was simply criminal”
If the loan owners did not lie on the application and the bank gave them the money, there was nothing criminal in the borrowers actions. It may have been opportunistic, foolish, or reckless, but the bank gave them the money; they did not steal it.
The banks on the other hand had wanton disregard for their investors money. They were driven by quick profit(I know, I worked in IT at New Century). The banks are also expected to have the sophistication to avoid these types of looses. I think the banks and supporting players are a more fertile area to find criminal behavior.
The loan owners, if they can not honor the contract they signed, they can rent.
One could certainly argue that there was collusion between the borrowers and the lenders to scam the public. I used to work in the same building as the New Century crowd — they reminded me of those ‘pump and dump’ idiots in that movie Boiler Room — the even wore the same ‘bling’. I was embarrassed to work in the same building as them, and I’m no snob.
But the culpability of the banks is a separate issue. If you knowingly borrow money that you can’t and don’t intend to repay, it is still a fradulent act. At the very least they deserve to be hounded for the gain of relief of indebtedness.
If you borrow $900k your payments will be in the $75k – $100k/yr range. I was wondering how much heloc/refi cash-out money went into paying people’s payments on loans. A neat trick if there’s an income dip, but still just a trick.
As an Obama donor, I am upset by the fact that Obama doesn’t really get the housing bubble. The goal is not to just keep everyone in their home, it’s to get every home to have someone in it who can afford to make the payments. Tweaking a payment to the point that an owner still can’t really afford it, and is so far underwater that the home in no way resembles even a modest investment, you’re prolonging the agony. The incentivization of short-sales seems a better policy to me, but 2nd lien holders don’t seem to be happy with the haircuts they’re looking at, even though projecting out a few months to foreclosure, their hair will be completely shaved.
Frankly, the governmental incentives not to foreclose only work on the marginal cases. If somebody really can’t afford their house, they are still going to lose it. I know somebody whose monthly payment (on a 30 year fixed) takes up all but $200 of his take home pay from his day job. He has a roommate and used to do lots of side work, so he was fine for a couple years, but the side work has dried up since the recession began. He’s arranging a short sale. There was never any chance he would have kept his house.
obama gets the housing bubble. its economics he doesnt understand.
politically, he must make it look like he is doing everything possible to help these poor homeowners regardless of how bad the idea. He really just wants to pump house prices so his bailouts dont look like a massive FAIL. He’s a charmingly sly little bugger and the people eat it up.
Never has a politician so misread the mood of the public than Obama when he decided to pander to the po’ suffering home debtors.
Did one of Obama’s flunkies ever tell him: Lookit, Mr. Obama, 75% of all homeowners are current on their payments, at least, and a third own their homes outright. 40% of our citizens are renters, and renters are the majority in our large cities, notably NYC, Los Angeles, and Chicago. And if you use our tax money to help irresponsible borrowers,you are going to piss off a majority of the homeowners and all the renters; in other words, a large majority of the population.
Obama and his fellow Dimmocrats will pay the price of violating your principals to pander this November, unless they can make a lot of hay out of the GS fraud case. That might be difficult for them to do, inasmuch as they are so cozy with GS and have a number of GS people in the administration.
“Readers here are not surprised by these numbers”
Wanna bet?
I’m still astounded. :gulp:
Thanks for another helpful post.
You write: “Policy makers have scared everyone into bailing out the banks ostensibly to help loan owners stay in their houses. In reality, this is a poorly disguised bailout of the banks.”
My position is that the bailing out of the banks was a well thought out plan to centralize power in the Federal Reserve and in the US Treasury.
The chart of distressed securities FAGIX, JNK, IAT, and KME compared TLT, for the last 12 months shows how the swapping out of US Treasuries for motgage debt held at banks, investment brokerages, insurance companies and others under TARP and other facilities has monetized debt, as well as stocks, and has depressed the value of US government bonds. The result has been a bloodless coup which has privatized wealth to Wall Street and investors who were savy enough to go long the markets and has socialized losses and toxic debt to the tax paying public. The design and use of the revolutionary Fed Facilities were well thought out and premiditated by Ben Bernanke as a ploy to centralize economic, banking, and monetary power in Washington. This coup was assisted by the SEC and the AICPA with their FASB mark to fantasy ruling (when this came out, I was stunned, like I could not believe it). There could have been another option, that being to shut banks with toxic debt down; but that did not happen; as Ben Bernanke designed a bailout of the banks not the people.
So now after Quantative Easing has ended and all 1.25 Trillion has been used up, banks will start foreclosing and taking losses on the books — from their point of view extend and pretend is out of fuel.
You relate: “That means they need to foreclose on people and either rent the place out or sell it to be rid of it.” … I agree.
There is something much greater here than just the people living in the home or the local community or the area of Irvine — a beast political and economic system is rising in Washington DC
You probably see CIA agents in your rose bushes too. Sometimes things really are just what they seem on the surface. The TARP and other assorted things were an attempt by the government to prevent a recession from becoming a depression, not a “bloodless coup”.
Not in the rose bushes! They’re in the black helicopters! Don’t you know anything?
Just curious, do you know who owns the Federal Reserve Bank?
Geotpf, you truly believe all this palm greasing is to prevent a depression? And you truly believe it will actually prevent it?
yenguy laid it out crystal clear. WashingtonDC and wall st is a big frat party of self perpetuation. “you make the rules, we’ll make the money, everyone else pays for the wealth transfer.”
Geotpf has a point: the Fed and the Administration were trying to avert a banking collapse. Yet, their interventions went far beyond what was necessary to protect the bank depositors and prevent a deflationary collapse of the money supply. As you describe, the Treasury and Fed actions have amounted to a huge theft from taxpayers and savers in favor of banks and other leveraged speculators.
The root problem is the fraudulent practice of fractional reserve banking.
I just received a letter in the mail from my bank advertising their new “HIGH YIELD” savings account that pays 1.4%!!!
Uh, yeah, I want to put *all* my money in there. At least it’s FDIC insured.
1.4% actually IS a high yield savings account when government interest rates are zero and inflation is negative.
Absolutely correct, along with central banking and fiat currency.
The reason Bernanke bail out the bank and keep lying to us is quite simple, he wanted to be next Greenspan, he wanted to be in office for next 20 years.
Greenspan has been friend of every president and he was biggest lair in the human history, he printed enormous money to simulate economics to help every president reelected, but at end of day US is in the big financial hole: Mountain of debts and all the printed money has been flood to China, India to help them to grow.
Now Bernanke just claimed that he can be even bigger lair than Greenspan so that no matter who is the president, the president will needs he (include Obama and next presidents).
For Obama, he is a great president but given the problem we are facing great is not enough, what US needs now is Washington and Lincoln type of leaders, who has great courage and real experience to battle in the difficulty condition but Obama is just a lawyer and talk is cheap. He surrounded to Wall Street last March when the Dow breaks 6500. At one time he had choice to how to save our country: for the long term or just take a popular solution to delay the problem. Given the reasons he is elected, our county experience a revocation and which starts with Americans themselves, deep in Americans mind, we are looking for a real change and If he is the Greatest he will take another approach but too bad, he picks the easy one
Obama a ‘great’ president? By what criteria do you judge greatness.
I respectfully disagree. I believe him to be one of the worse. To me, he’s way over his head – a misplaced slacker of the highest degree (never had any accomplishment besides running for and winning office). Certainly not even close to CEO material.
But, in the end,history will decide.
Yes, of course, because “president” is just a synonym for “CEO”. You know, people like Angelo Mozilo.
Idiot.
At least Mozilo created an empire from nothing. What has Obama ever done? He’s destroying the country in favor of socialism.
The owner of this house must have had some type of illness or family emergency…
just like everyone else in Irvine… everyone in Irvine has major illness or family catastrophy to explain the HELOC!!!
A family illness was depression.
The cure was buying a trip to Tahiti and staying on a hut above the water.
You can justify anything to yourself when you want it enough.
I bet the advertised open house on Sunday is going to be a mad house. This is priced $100k under comps.
At current price monthly cost of ownership is $2670?
Dare I say this is under rental parity in Irvine?
Planet Reality, a first hand report from the open house would be a good addition to the blog.
Of course at this price, what are the odds of the short sale being approved? The price is less than the 1st mortgage, and then there is the 200K HELOC lienholder who would also have to approve the sale, taking a 100% loss on their position.
Unless this house is trashed it will be under contract next week and probably at a higher price.
I have no interest in attending the open house but would be interested in hearing about it. Maybe IR can take the reporting to the streets.
I agree the debt and short sale status means another round of extend and pretend.
Agree! I think this house is also $100k under comps (was going to say under priced but decided against it…). This is short sale so it will be up to the lienholder how much it will go for.
IR,
I noticed that you found Banksy. Cool stuff, eh? Did you see his “Village Pet Store And Charcoal Grill” show?
Back on topic, why did these folks only get a HELOC abuse grade of E? Why not an F? A total property debt of $893,000 & a total MEW of $693,000 on a $655K house makes Dillinger look like a piker, even after adjusting for inflation. Plus he got killed, these folks only have to move…
I was thinking same thing – $693k of MEW is about $300/square foot maybe MEW/sq foot is an interesting metric?
Though in this case it does seem they must have made paymnets from 2006 until early 2009 (likely was a low pay Option Arm of course). If they had defaulted shortly after the last refi I’d say that would be different. Also an F is ‘gaming’ the system. As much as this pains me to say I don’t think these people ‘gamed’ the system – what they did was ‘the system’.
darms,
I really enjoy Banksy’s art, and I admire that he retains much of his artist’s purity. I hadn’t seen the “Village Pet Store And Charcoal Grill” show. His creativity is delightful.
I can see the case for an F. The amount of MEW clearly shows a complete disregard for financial self discipline. The question becomes one of intent: did these people set out to game the system for every penny, or did they just stupidly stumble into it. I try to reserve the Fs for those who who look nefarious. These people just looked foolish to me.
OT: SEC Charges Goldman Sachs
My comment: BFD. How much do you wanna bet the result will be a slap on the wrist?
Can you say “re-election bid for the incumbents”?
GS can just fart a $billion – no big deal. But what the SEC says is that they maybe looking at other things, and that’s what spooked the stock market this morning.
Well, the civil charges will be hard to prove. On the other hand, the SEC is also looking into other matters that may yet result in criminal charges. I’m going to waiting very eagerly to see what else comes down the pike on GS.
I thought GS shorted the market yesterday in preparation for todays news. So they should already have the $1 billion ready to pay.
re – ‘civil charges will be hard to prove’
I thought that that standard for ‘civil’ was a preponderance of evidence, where ‘criminal’ required ‘beyond a shadow of a doubt.’
Wasn’t this why they sued OJ in a civil trial (even after the criminal trial was resolved)?
Additional question would be about discovery. Would the civil trial be enough to allow compulsory discovery (which might reveal all sorts of things under those stones).
The child begging for donations for CA debtors is so true. The Fed printing of money is trying to stick it to other countries that purchased US T bonds and note for safety, but will be paid back in inflated dollars. Japan and the Arabs fell for that trick, let’s see if the Arabs and PRC will be left holding the bag (of course US middle and lower class savers will be holding the bag too).
TARPs were just justifications — putting lipstick on a pig.
newbie2008’s comment is so true. It’s not only those countries that bought treasuries, but dilution will affect everyone in the world holding dollars both staeside and abroad.
“It is appropriate to feel compassion for people losing their homes …”
Is it appropriate to feel compassion for me losing $60K to Enron’s bankruptcy?
Obviously, I am not looking for compassion, pity or bailout. Despite Enron’s bankruptcy my bottom line was 6% profit in that year.
Over-borrowing + default is actually indirect sale. Sometimes very profitable one. Good price, no agent/broker comissions, no general/termite ispection, no advertisement fees, no open houses.
;-P
Is it appropriate to feel compassion for people making a lot of money?
That’s funny.
How do you look up the loan and HELOC record for these houses? Is there a public search for this?
For those who are local as well as in the biz, I highly recommend coming to the Irvine Area broker’s preview meetings every Wednesday at 9:00 AM. These meetings have a great cast of Realtors and is a frequent haunt of “The Emperor of Irvine”. TEoI recently spoke of how the market is fully stabilized, how distressed inventory has been stemmed, and that an expected appreciation rate of 5% is not out of the question for Irvine properties in 2010. Yes, this is being said for the benefit of the Realtors there, but with REO’s on the rise and HAFA getting revved up, 5% upward is, shall I say, a bit on the bright side. It’s part kabuki theatre, part slow motion multi vehicle crash scene, but that is the conventional wisdom out there.
If you did not see the “other meteor” movie that came out when “Armageddon” did, “Deep Impact” had a scene where two of the main characters are standing on the beach right after the comet hits the Atlantic. A mile high wave comes right at them with predictable results. That scene reminds me of the Realtor commmunity, led by TEoI cheerleader types, standing on the Pacific, as the long anticpated foreclosure wave crests right in front of them. Unfortunately the only thing they will say at the time will likely be “It’s best to buy now before you get priced out forever”.
My .02c
Soylent Green Is People
when ever i am ready to buy i come across a post like yours and start reevaluating my options. I will either buy next month or end up thanking you and IR next year.
IR,
Don’t be so sure about any “down payment”. Many deals done during the bubble included a transfer of funds into the buyers account from their Real Estate agent. This was to satisfy asset requiremnts. This money was kept there during the application process and then transfered back to the agent after the close of escrow. “Down payments” were done in the same way. When escrow closed the HELOC was opened and the proceeds went back to the agent.
Hi OCBear,
Without knowing all of the facts, but based on the face value of this post, do you know anyone who did this? I know many, many borrowers who dummied up their income to qualify, but I’ve not spoken to any one who committed this level of fraud. To have the Loan Officer, the borrower, and Realtor involved in this chicanery without being caught is pretty rare from what I’ve heard. Would be curious to hear what their thinking was then, and what it is today about purchasing.
My .02c
Soylent Green Is People.
there are some top producing agents who did this and should be put in prison for defrauding taxpayers. I should have bought 10 houses this way and dumped them all near the top of the market. I would be willing to bet it was far more prevalent than you and I think – do they hire people to sniff these people out? they should. do a records search for any transaction where an equity line opened within the first 6 months – bingo. Agent/Broker & Mortgage broker & Borrower to the Hoosegow. I’d take that job in a heartbeat. Maybe IR can really try to make a difference and post on this topic interviewing OCBear. I dare ya.
It sounds like ocbear has some scumbag, bloodsucking realtor/loan officer acquaintances who just can’t say no.
An empire for whom? How about Ken Lay–how’s that empire going? Look, if you’re going to switch the topic from housing to politics, don’t expect to not catch some blowback. And your use of the word “socialism” tells me all I need to know. If you think Obama has adversely affected the economy for the majority of middle class Americans any more than had GW Bush, Bush senior, or Reagan, then you are deluded. Taxpayers always clean up the messes that genius Wall Street, Greenspan-approved Ponzi schemes, and other foolish “free marketers” have created through abuse, corruption, and system gaming. Privatize profits, share losses: there’s your “socialism”.
Yeah, CEO types sure have all the answers. What a joke.
(For some reason, my response ended up at the bottom of the thread)
An empire for whom? How about Ken Lay—how’s that empire going? Look, if you’re going to switch the topic from housing to politics, don’t expect to not catch some blowback. And your use of the word “socialism” tells me all I need to know. If you think Obama has adversely affected the economy for the majority of middle class Americans any more than had GW Bush, Bush senior, or Reagan, then you are deluded. Taxpayers always clean up the messes that genius Wall Street, Greenspan-approved Ponzi schemes, and other foolish “free marketers” have created through abuse, corruption, and system gaming. Privatize profits, share losses: there’s your “socialism”.
Yeah, CEO types sure have all the answers. What a joke.
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Richard