Despite California's withdrawal from the foreclosure settlement talks, the negotiations are continuing with other states.
Irvine Home Address … 3 ABETO Irvine, CA 92620
Resale Home Price …… $699,900
As usual, I'm in a tricky predicament
Weather in my thoughts, on the roof sneaking a cigarette
Dear California, it's been nice to know ya
Tell me, will you miss me when I'm gone?
Vanessa Carlton — Dear California
California recently pulled out of the settlement talks with the major banks. Does anyone miss California?
Foreclosure Talks Push Ahead Absent California
Bank representatives and government officials are working on a broad settlement of most state and federal foreclosure-practices investigations that could move forward without the participation of California, long considered a key to any deal, people familiar with the negotiations said.
The terms of the deal remain fluid. Banks have proposed a deal excluding California that would carry a value of $18.5 billion, though the final outcome remains uncertain, people familiar with the discussion said.
Negotiators are continuing to make a push to persuade California to join a settlement valued at $25 billion among federal officials, state attorneys general and the nation's five largest mortgage servicers: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. The talks center on the banks' use of “robo-signing,” in which employees approved legal documents without proper review, and other questionable foreclosure practices.
The only reason the California Attorney General is not signing on is because she wants to extort more money out of the banks. The robo-signing issue was not a problem here because we don't have a judicial foreclosure system. By and large, there have been no questionable foreclosure practices. Nobody who was making their payments was foreclosed on. What we do have is a lot of squatters in shadow inventory gaming the system and hoping the California AG will bail them out with principal reduction in order to secure re-election.
The dollar value would include the value of principal write-downs, interest-rate reductions and other benefits to homeowners as well as cash penalties.
But negotiators now are discussing how to structure an agreement if California remains on the sidelines. Until recently, it seemed unlikely that a settlement would be possible without the participation of California Attorney General Kamala D. Harris. She left the discussions in late September, calling the deal then on the table inadequate. The state accounted for 13.1% of all mortgages outstanding at the end of September and 10.8% of all loans in foreclosure, according to the Mortgage Bankers Association.
“Our position remains the same. We are focused on securing maximum relief and lasting reform for California homeowners,” said Shum Preston, a representative for Ms. Harris.
Her position is the same. She is still posturing for more extortion money..png)
Attorneys general in several other states, including Delaware, Massachusetts, Nevada and New York, also have raised questions about the potential settlement.
Participants on both sides are eager to reach a resolution after months of discussion. Administration officials have viewed the foreclosure settlement as a chance to break the foreclosure logjam, increase the number of reductions in loan principal and provide other assistance to homeowners. Banks, meanwhile, would like to reassure investors and put questions related to foreclosure practices behind them.
It's the banks who desperately want to make this deal to limit their future liability. They are right that investors will not buy banking stocks while there is a giant black hole eating everything on their balance sheet.
Any deal would require banks to use a portion of the penalties to modify mortgages by writing down loan balances, among other actions. In exchange, banks would be released from legal claims tied to servicing delinquent mortgages as well as certain mortgage-origination practices. Government officials still would be able to move forward with other legal claims, including those stemming from the packaging of loans into securities.
The discussions have turned in recent days to crafting a formula to determine how any settlement is scaled depending on which states opt out of the deal. Officials have discussed limiting the amount of loans that could be written down or refinanced in states that don't join the settlement, people familiar with the matter said, in order to provide a stronger incentive for states to join. States that don't join the settlement wouldn't receive any of the funds that will go directly to the states, nor will borrowers in those states receive cash payments for which they might otherwise be eligible, these people said. If California doesn't sign on, the state would lose billions of dollars in potential benefits, the people said.
Nice try, but California will extort even more money out of the banks with a separate agreement. It's wishful thinking to believe they can limit California's recovery from the banks if California refuses to participate in the deal.
The participation of California isn't the only item still on the negotiating table. The two sides still must agree on the choice of a monitor, who will be charged with ensuring that banks comply with the settlement, people familiar with the discussions said.
Following the departure of Ms. Harris from the talks, the price tag of a settlement rose by at least $5 billion and negotiators came up with a plan to help certain “underwater” borrowers, those who owe more on their mortgage than their home is worth, to get refinancing assistance.
California has more than two million underwater borrowers, more than any other state, according to CoreLogic.
That's a lot of houses. How many of them will survive to have equity again? Not many, I imagine.
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The refinancing plan will remain in the deal even if California doesn't because it is attractive to other states that have seen large home-price declines, the people said.
Ms. Harris has come under pressure from labor and progressive groups seeking to extract greater penalties from banks for alleged mortgage-related wrongdoing.
Now we see the real reason she pulled out of the talks. The extreme left who want to give away free houses to loan owners are pressuring her. The extreme left is wrong on this issue. Is fiscal responsibility completely out of favor on the left?
Last week, her office issued subpoenas to Fannie Mae and Freddie Mac, the government-controlled mortgage companies, according to people familiar with the matter.
The subpoenas asked the firms to provide responses to about 50 different inquiries, according to these people, including demographic information about borrowers who have missed payments and who have received loan modifications, among other items.
The state also requested information on foreclosed properties owned by the firms, including any evidence of unpaid taxes or drug abuse on vacant properties.
If she really wanted to do something useful, she could request information on unpaid HOA dues by the banks. HOAs are getting killed by lenders who don't foreclose because when they finally get around to it, the HOA lien gets wiped out. Many HOAs are grossly underfunded.
Representatives of Fannie, Freddie, and the Federal Housing Finance Agency, which regulates the firms, declined to comment.
Ms. Harris has a limited ability to bring legal claims related to originations and servicing practices if she decides not to agree to the foreclosure deal, people familiar with the negotiations said.
How can she be bound by an agreement she doesn't sign? Her failing to sign the agreement does not limit her in any way.
The statute for filing cases related to loan originations is four years in California, meaning any legal action could cover mortgages originated only in 2007 and after. California allows foreclosures to proceed through a nonjudicial process, limiting the state's ability to argue that banks lied to the courts, these people said.
Separately, the Office of Comptroller of the Currency on Tuesday released a broad summary of the actions financial firms have taken this year to overhaul foreclosure practices. Bank regulators also posted copies of the agreements between banks and thrifts and the consulting firms, which include Clayton Services LLC, Ernst & Young LLP, PriceWaterhouseCoopers LLP and Promontory Financial Group LLC, that have been hired to review millions of foreclosure files for potential defects.
—Alan Zibel and Maya Jackson Randall contributed to this article.
Write to Ruth Simon at ruth.simon@wsj.com and Nick Timiraos at nick.timiraos@wsj.com
I am torn on this issue. 
I want to see the banks pay a very heavy price for inflating the housing bubble, but I don't want to see them get punished for their proper foreclosure practices.
I want to see the banks lose a lot of money, but I don't want to see these losses occur because some politician wanted to buy some votes by giving free money to a loan owner.
The punishments being inflicted on the banks are warranted, but not for the reasons being given. Two wrongs don't make a right.
Half a million dollar Ponzis
My data source for today's featured property doesn't tell me exactly when the previous owners bought the house, but the assesed value is $280,838 which suggests they paid about $265,000, probably sometime in the 1990s.
My records pick up with a $438,750 first mortgage on 3/21/2003. By this time, the owners were committed Ponzis.
Over the next four years, they proceeded to borrow and refinance many times culminating in a $744,000 Option ARM on 7/31/2007. The also managed a $29,900 HELOC on 10/11/2007. 
They racked up $773,900 debt on a house they paid less than $300,000 for.
They quit paying, and got to squat for at least 15 months.
Foreclosure Record
Recording Date: 09/09/2010
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 06/07/2010
Document Type: Notice of Default
I'm out of unique ways to describe this behavior. I hope they enjoyed the money because they will likely never live that well again.
——————————————————————————————————————————————-
This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707
949.769.1599
sales@idealhomebrokers.com
Irvine House Address … 3 ABETO Irvine, CA 92620
Resale House Price …… $699,900
Beds: 5
Baths: 3
Sq. Ft.: 2864
$244/SF
Property Type: Residential, Single Family
Style: Two Level, Traditional
Year Built: 1978
Community: Westpark
County: Orange
MLS#: P803969
Source: CRMLS
Status: Active
On Redfin: 2 days
——————————————————————————
FANTASTIC BUY ON THIS SPACIOUS 5 BEDROOM 3 BATH EXECUTIVE HOME WITH TILE ROOF LOCATED IN AN INTERIOR TRACT LOCATION VALUE PRICED FOR QUICK SALE! TILE ROOF, FORMAL LIVING ROOM, DINING ROOM, SEPARATE FAMILY ROOM WITH FIREPLACE AND WETBAR, ONE BEDROOM AND BATH DOWNSTAIRS, SPACIOUS MASTER SUITE, HUGE BONUS ROOM UPSTAIRS, BRIGHT KITCHEN WITH GRANITE COUNTERTOPS, SPARKILING POOL AND SPA, FORCED AIR HEATING AND CENTRAL AIR CONDITIONING. FRESH INTERIOR TWO TONE PAINT AND NEW CARPET. SUPER MOTIVATED SELLER. SUBMIT!!!
——————————————————————————————————————————————-
Proprietary IHB commentary and analysis 
Resale Home Price …… $699,900
House Purchase Price … $664,114
House Purchase Date …. 6/24/2011
Net Gain (Loss) ………. ($6,208)
Percent Change ………. -0.9%
Annual Appreciation … 10.5%
Cost of Home Ownership
————————————————-
$699,900 ………. Asking Price
$139,980 ………. 20% Down Conventional
4.02% …………… Mortgage Interest Rate
$559,920 ………. 30-Year Mortgage
$136,606 ………. Income Requirement
$2,680 ………. Monthly Mortgage Payment
$607 ………. Property Tax (@1.04%)
$0 ………. Special Taxes and Levies (Mello Roos)
$146 ………. Homeowners Insurance (@ 0.25%)
$0 ………. Private Mortgage Insurance
$97 ………. Homeowners Association Fees
============================================.jpg)
$3,529 ………. Monthly Cash Outlays
-$434 ………. Tax Savings (% of Interest and Property Tax)
-$804 ………. Equity Hidden in Payment (Amortization)
$196 ………. Lost Income to Down Payment (net of taxes)
$107 ………. Maintenance and Replacement Reserves
============================================
$2,594 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$6,999 ………. Furnishing and Move In @1%
$6,999 ………. Closing Costs @1%
$5,599 ………. Interest Points
$139,980 ………. Down Payment
============================================
$159,577 ………. Total Cash Costs
$39,700 ………… Emergency Cash Reserves
============================================
$199,277 ………. Total Savings Needed
——————————————————————————————————————————————————-
Ya’ll really need to bail on California. I did, and it is the best move I ever made. I was part of the exodus from California (Irvine specifically) to Central TEXAS. I’m finally in a place where I don’t have to constantly worry about my house value dropping. The annual tax assessments here are pegged at 10% a year, and I can borrow against my house at that rate. If you think somehow TCAD is just full of it with their assessments, just look at my neighbor’s house that went pending last night:
http://www.zillow.com/homedetails/1603-Wethersfield-Rd-Austin-TX-78703/29332112_zpid/
He paid 300K in 2003. Seven years later, and about twenty thousand in repairs and updates, he’s made out like a bandit. Reminds you of the good old days in California, right? Only TX missed the bubble completely. There was no speculation here in Austin.
There should be an entire article on this. To hell with Irvine and the Real Estate shenanigans. Glad I got out. Now I just need to convince the rest of my family!
1603 Wethersfield Rd, Austin, TX 78703
Last sold: August 05 2004 for $300,000
Pending: $549,000
Zestimate®: $398,500
Beds: 3
Baths: 2
Sqft: 2,012
Lot: 6,054 sq ft / 0.14 acres
Type: Single Family
Year built: 1939
We don’t know yet what’s the final selling price is, but let’s say it’s $500K, which is g in 7 years or almost /year.
Did income in Austin increase /year. Highly doubt it!
Smell like bubble already inflates in Austin 🙁
Irvine Renter,
It’s time to speculate in Austin, buy houses there, HELOC the hell out of them, take the money and run. YOU always said you wish you could have Ponzied like those Irvine people in the early 2000’s. Well, here is your chance 🙂
Somehow the percent sign did not work.
This house price increases Sixty seven percent in seven years or almost ten percent per year.
Did income in Austin increase ten percent per year since 2004?
It’s time to speculate in Austin, buy houses there, HELOC the hell out of them, take the money and run. YOU always said you wish you could have Ponzied like those Irvine people in the early 2000’s. Well, here is your chance
IR is a smart guy, and knows his stuff. I don’t know what your point is, but I do want to defend IR current investments in cash-flow property.
It’s so much better and safer to buy tangible assets (things people live in, aka shelter), that have collapsed and now have a greater breakup value .. i.e. Las Vegas housing, than to buy assets that are still declining and still have intangible value (goodwill). In the real estate world they call intangible value Location, Location, Location. The intangible value of a Newport Coast ocean view home is declining thousands of dollars every single month. That’s no longer happening to the same extent in Las Vegas because the price (cost basis) has been crushed.
People can use OC land as a tangible asset, however we’re now rediscovering the old slogan, “nothing declines faster than DIRT in a depressed real estate market”. Land has an extremely high beta and performs better than just about anything in a healthy real estate market.
There is value in owning a rental and collecting rents, but it’s much safer to own a house that has a higher rental value to cost basis. Kinda like income investors owning Phillip Morris @ $28 and collecting a 5.90% annual dividend versus Target @ $52 and collecting 2.30% dividend. Though it’s politically incorrect to own MO (kinda like owning LV housing), it’s a safer bet due to the breakup value.
If you spend $65,000 on a LV REO, and it declines 10% next year that’s an unrealized loss of $6,500 … however you’ll likely make this up in rents during the same year. You can’t say that about owning any rental in Orange County.
Just saying 🙂
No bubbles here, just a healthy robust market driven buy solid employment. Google the Texas Miracle. Austin, with its tech sector, awesome University, and benevolence to small businesses is at the epicenter of this miracle. I guarantee whoever buys the property I mentioned will sell again at a handsome mark-up in 4-5 years.
Maggie,
I happen to like Austin too, so don’t be defensive. We can argue whether there’s a bubble in Austin or anywhere in this earth for that matter ’till eternity.
But all you need to know whether there’s a bubble or not by just answer a simple question. Did house price increase in line with wages?
So just answer this question:
Did wages in Austin increase ten percent per year to justify ten percent per year of house price appreciation since 2004???
John — I’m sorry, but that is not the definition of a bubble. Austin is booming not bubbling. There is no subprime lending going on. I’m sorry. It’s just a healthy HOT market here where you can actually build equity. A lot of money moved in from California and NY. Where do you think all that HELOC money sucked out of homes in Irvine ended up? Austin, that’s where.
As for wages/salaries — flips and landlording are still major going concerns here. Check it out: this is in a..ah, “less than desirable” part of town.
http://www.redfin.com/TX/Austin/1804-Wildrose-Dr-78721/home/31393322
The couple that Ikea’d this place up made 240K in a little over six months. WITHOUT subprime lending! Yes, a house flip. This is happening right now! What do I need to do to prove it you?
Maggie,
Somehow you’re stuck on this thought that there has to be subprime lending for a bubble to occur.
There’s no question that subprime lending had inflated housing bubble exponentially. But a bubble is a psychological thing, i.e. there can still be a bubble if people with cash are willing to dump their money into houses that actually worth more than their fundamental values. It just inflates more slowly than without subprime lending. So when the bubble without subprime crashes, these people just lose more of their cash than back in 2005-06.
And what is the fundamental value of a house?: it is anchored to rent and income.
That’s why I kept asking you: “did income in Austin increase at ten percent per year since 2004?” Not to be a smart ass or anything, but I actually am curious if that did occur. If your answer is “Yes, income in Austin did increase at ten percent per year” then I agree with you that Austin has a healthy housing market.
If your answer is “No”… well then, you know what’s the implication!
John – sorry if I seemed defensive. The answer, to the best of my knowledge, is NO. I know one person who changed his job and is making 13% more than he was this time last year, but I confess, that is one person. As far as I can tell, the income is the in the form of California equity/IPO wealth/investment property wealth.
FWIW I thought supply and demand were what supported fundamental values. Rents are really high here, too.
“And what is the fundamental value of a house?: it is anchored to rent and income.”
This is one of the false-ities that helped to create the bubble. Value of single family homes and individually owned condos is based NOT on rent, but on INCOME. Commercial properties are based on the income the property produces. Residential properties are based on the income of the borrower. That’s why IR’s “rental parity” formula makes no sense if it doesn’t include HOA, Mello-Roos, insurance.
Of course, supply and demand is always at work, but demand in a bubble is a false demand, a psychological demand, not real demand based on fundamental.
Wouldn’t say there’s a demand in housing in Irvine in the early 2000’s?
I’ve been to Austin, like the city a lot, and would not mind moving there if there is job opportunity. But I think part of housing demand there is real, and part is bubble, especially now. Just like anything in a bubble, if you get in early, you get the benefit of a bubble. If you get in late, you’ll be screwed.
I miss typed:
Wouldn’t You say there’s demand in housing in Irvine in the early 2000’s?
There was ‘demand’ in the early 2000’s. If demand is measured by sales. At TIC then, we had extensive measures to check all the interest lists of every building/project. Followed up by checking the names/address’ of buyers to see if they might be buying at more than one project/builder. Everyone had to sign an “owner-occupancy” agreement as part of purchase documents. TIC expected builders to exercise right of recission of that was violated.
So you tell me….demand?
John — the psychology can’t exist without 1 of 2 key components: either 1.) sudden windfall either from stock cash-outs or equity from a sale in a high priced state like CA or NY, or 2.) expansion of easy cheap credit. In other words, if buyers are provided the facility with which to overpay for something, (anything), they will. No facility, no overpaying.
There is a smattering of the former component here in Austin, but not the latter (EZ credit). We do have subsidies for lower income buyers, but nothing like you saw in the 2000’s in Irvine or elsewhere in places like Vegas or Orlando or Miami. Quite simply, you have a very real exodus of homebuyers from California who move here with their “winnings.” They move here or they move to Portland or Seattle (all of which for tax purposes.)
I like Austin, too. One of the reasons I like it is because I am earning money with my house. It’s actually building equity as I type. Every year I see homes, even some in the ghettos, selling in the high fours. It’s almost 2012, and this is happening. Sorry, but a bubble does not explain it. This is a boom, and there is not an end in sight. If you want to move here, you should do so post haste. Strike while the iron is hot.
“It’s actually building equity as I type.”
“This is a boom, and there is not an end in sight”
Maggie,
I just crinched when reading these lines.
Referring to “It’s actually building equity as I type.”:
It reminds me of the early 2000’s when homeowners (everywhere in the US, not just Irvine) DAILY went on Zillow or similar websites and check to see how much their homes had increase in values compared to the day before, like stocks.
In reference to “This is a boom, and there is not an end in sight”:
Everyone, doesn’t this remind you of the proverbial “House price will only go up, it never goes down”
After all we’ve been discussing about income/wages and fundamental values, and you wrote “It’s actually building equity as I type.”
Well, I’m glad for the Austin residents because you know what this means? It means that their income also goes up as you type!!! 🙂
Sighhhhh, that’s just to show how strong bubble mentality can be.
I don’t know that market, but maybe not. Your link shows that he started off wanting $625k 6 months ago, and is now down to $550k and still on the market. Zillow’s estimate is $340k and the guy is arguing that Zillow is all wrong. If Zillow turns out to be accurate, $300k purchase and $20k in repairs and updates for a $20k profit after 7 years and before commissions, etc. is making out like a failed bandit. We won’t know until he sells it, but perhaps neither he nor you should go out and spend your windfall appreciation before you cash out.
I know the market fairly well, and I’m telling you it is like the good old days but without subprime nonsense. Here is another house a couple blocks away:
http://www.zillow.com/homedetails/3200-Bonnie-Rd-Austin-TX-78703/29335355_zpid/
damn good appreciation for someone who bought in 2006. Show me where that happens in Irvine?
Austin, with all due respect, is awful. Beastly, ungodly heat for 6 months every year. Landlocked. Full of students and bars. So it’s an apples and oranges comparison to suburban Irvine.
And please god don’t tell me about the “great music scene.”
There are lots of other issues Kamala Harris could direct her office toward. Your mention of HOA’s is one of them. Excessive rental rates is another. If we are moving toward a marketplace where fewer own[loans], and more rent, don’t we need some regulatory function over rent gouging?
What are the specific market failures that you see occurring in the rental market? How are you defining “excessive” rental rates? Who’s being gouged?
I live in a 1000 sq.ft. house. When I moved in here 6 years ago the market value of the house was $450,000, rent was $1800/month. Now the market value of the house is $300,000. Rent is still $1800. Rents have not changed along with market values for the last 7 years. It is hard to get definitive accurate numbers, as nothing is recorded. Then we see OC Register (if you want to believe anything they print) forecasing 12% increase in rents in the next year. I stay here because the cost of moving is too great for little benefit and because I know the owner owns the property free and clear, so I won’t suddenly be evicted by an angry lender.
“HOAs are getting killed by lenders who don’t foreclose because when they finally get around to it, the HOA lien gets wiped out. Many HOAs are grossly underfunded.”
The would mean a changing in business practices. Currently paying HOA members and renter are getting stuck with the bill for the squatters and FC. Punish the innocent and reward the guilty. That’s the way business and politics are done.
Rents are priced at what people can afford (based on income or Section 8) — not on the RE purchase price. That’s why there are lots of negative cash flow properties.
There’s also a lowest rent- where the wear and tear cost, liability or marginal/taxes will be greater than the forseeable income. That’s when the bulldozers were used on TX commerical and apt buildings in the 1980’s.
For educated high tech white collar worker, TX wages are just a little under CA. When RE and other cost are factored in, TX will beat CA. Lots of TX schools are also excellent and unversities are excellent and low cost. The climate is another matter.
The HOA issue is easily fixed by the legislature. Simply allow HOA fees to survive a foreclosure. Other states have this in place (I think IR has even written about this in his Vegas chronicles).
Well, no, actually – wages are not on par with CA. That I must confess is false. I am in IT, so I know. Then again, with no state income tax, the pay does not need to be as high.
Also, while Universities are good, but the schools rank at the bottom. Creationism is taught in schools here,
I’m just saying that we don’t have a speculative bubble here. We have real values bid up by real people with real dollars who want to live here as a sanctuary from California or NY. The price of my neighbor’s house is not the result of speculation but REAL PROOF of a market that can escalate given the right components. That this is happening in a downturn is remarkable. Google Austin and bubble and see what you get. ZERO.
The companies that I’ve worked in CA have not paid the IT people that much. The higher IT pay was in the financial firms and electronic high tech firms. CA IT took a big hit in the mid-1990’s.
Some non-IT tech staff have commented that their pay upon moving to CA was not much of an increase in $. They also complain of CA’s high cost of college tuition, public school quality, housing,etc.
Pez Dispenser,
The HOA power for owners that have equity. If underwater HOA member does not pay, the HOA can foreclose, but the lenders, i.e., the banks, will need to be paid before the HOA gets title. The money left-over (non in this case) will then be used to pay the back HOA. The HOA is stuck paying off the underwater property and legal fees. No money to collect for the back HOA fees.
I agree that the HOA laws could be changed to survive FC, but that would stop punishing the innocent paying HOA members and change business practices.
“HOAs are getting killed by lenders who don’t foreclose because when they finally get around to it, the HOA lien gets wiped out. Many HOAs are grossly underfunded.”
Unless I’m mistaken, HOAs are not without a remedy. Don’t HOAs have the ability to bring a foreclosure action and evict someone not paying their HOA fees? Why couldn’t an HOA hold a foreclosure auction and buy the property for the amount of the debt owed the HOA and then rent the property out until the mortage holder finally comes and forecloses on the property?
I’ve been an executive officer of more than one HOA. As I recall, most CC&R’s require a 75% vote of the HOA for capital expenditures, so they do not have the capital to foreclose and pay off existing loans, much less to market the property. Yes, they supposedly do have the ability to foreclose, but none do. Many are already using reserve funds for normal operating expenses rather than raise dues to keep pace with inflation.
Also, when did PR move to Austin and change his name to Maggie Jode?
You don’t have to exit California to any other state. Texas is a fine state, but now that prices are lower here in California, and Kamala Harris finally arrested someone for loan modifications that simply a rip off..
Optimistic I am with California now, can beat this weather…
Blando — howabout that 10% property tax rate? That’s quite a premium for some weather. And the ongoing budget crisis? Our mayor is lobbying to get our public school teachers a 4% raise this year.