Life’s Been Good — Joe Walsh
I nominate today’s featured song as the ode to The Great Housing Bubble. If you drank the kool aid, I mean really drank the kool aid (like today’s owner), life must have been very good. All this free money allowing you to do whatever you want whenever you want. Life must have been very good to those who lived off their houses. There is nothing wrong with living well, and there is nothing wrong with becoming accustomed to a certain style of life, it just isn’t very wise to build this life on an unsustainable foundation of Ponzi Scheme financing — it will collapse, and you will lose the life to which you have become accustomed.
Perhaps I should nominate Tequila Sunrise by the Eagles? The hangover must be a killer…
Asking Price: $489,000
Income Requirement: $122,250
Downpayment Needed: $97,800
Monthly Equity Burn: $4,075
Purchase Price: $289,500
Purchase Date: 6/21/2000
Address: 16 San Clemente, Irvine, CA 92602
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,664 |
| $/Sq. Ft.: | $294 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Bungalow |
| Year Built: | 2000 |
| Stories: | 2 Levels |
| Area: | Northpark |
| County: | Orange |
| MLS#: | S540591 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 5 days |
Floors, Crown Moulding, Surround Sound, In Wall Speakers, Custom Paint,
Finished Framed Windows & Custom Window Treatments, Nice Master
w/Walk-n-Closet & Small Balcony. Finished Garage w/Built in
Storage. 3rd Bedroom is currently a loft w/Built in Bookcases. Lots of
extra parking. Walk to Elem. School. Sep. Laundry Room upstairs.
Amazingly quiet and safe neighborhood. Highly sought after floor plan,
rarely on the market.
Highly sought after floor plan,
rarely on the market. This kind of nonsense statement always annoys me.
Sep. Laundry Room upstairs. What is going on with this sentence? Why abbreviate separate? Perhaps the realtor can’t spell it? Why capitalize Laundry Room? In fact, why did the realtor switch between Title Case and sentence case throughout the description?
Have you had your fill of HELOC abuse stories yet? I am constantly amazed at how common this behavior was. Today’s owner is going to make $200,000 on the sale and fail to pay off the bank. Let’s look at what she did:
- The house was purchased on 6/21/2000 for $289,500. There was a $231,200 first mortgage and a $58,600 downpayment (20%).
- On 11/5/2001 she refinanced with a $235,000 first mortgage and opened a HELOC for $85,000.
- On 2/4/2004 she opened a HELOC for $150,000. So far she was conservative by local standards, but the kool aid must have tasted good because she went all out afterward.
- On 4/30/2004 she took out a stand-alone second for $233,500 and paid off the HELOCs.
- On 9/16/2004 she opened a HELOC for $250,000.
- On 4/20/2006 she opened a HELOC for $395,600.
- On 9/27/2006 she refinanced with a $559,200 first mortgage.
- On 9/27/2006 she opened a HELOC for $84,860. Based on her history, it is safe to assume she spent it.
- The total property debt is $644,060.
- The total mortgage equity withdrawal including her downpayment is $412,860
Countrywide was her last refinance, so they will endure the losses, or perhaps it is the CDO these loans were packaged into. Who knows? If this property sells for its asking price, the total gain on sale will be $170,160. The total loss to Countrywide will be $184,400.
This woman is obviously a serial refinancer whose spending is out of control. I can understand the borrower. She is just acting like a child trying to get whatever she wants without regard to the consequences, foolish but understandable. I can understand the lenders. They did not care if she defaulted because these losses are passed on to some investor somewhere who doesn’t have the slightest clue what they are investing in. I can understand the investors because they were buying a product given a AAA rating from a rating agency who is supposed to understand this stuff. I can understand the rating agencies that were running statistical analysis on data from a bull market. As long as the bull market continued, everything would be OK. Of course, the ratings agencies were so far removed from the micro circumstances of the individual borrowers that they had no idea whether or not people could afford their payments to keep the bull market going. Everyone was doing the right thing in their little world, and the system was too complex and unwieldy to hold together. Those few people who saw this and warned of its collapse were ignored because everyone involved was making money and the religion of real estate said prices always go up, so we built an enormous financial bubble. All perfectly understandable and totally wrong.
BTW, you have to love the album cover for this one.
.
I have a mansion but forget the price
Ain’t never been there, they tell me its nice
I live in hotels, tear out the walls
I have accountants pay for it all
They say I’m crazy but I have a have a good time
I’m just looking for clues at the scene of the crime
Life’s been good to me so far
My Maseratti does one-eighty-five
I lost my license, now I don’t drive
I have a limo, ride in the back
I lock the doors in case I’m attacked
I’m making records, my fans they can’t wait
They write me letters, tell me I’m great
So I got me an office, gold records on the wall
Just leave a message, maybe I’ll call
Lucky I’m sane after all I’ve been through
I can’t complain but sometimes I still do
Life’s been good to me so far
[Instrumental Interlude]
I go to parties sometimes until four
It’s hard to leave when you can’t find the door
It’s tough to handle this fortune and fame
Everybody’s so different, I haven’t changed
They say I’m lazy but it takes all my time
I keep on goin’ guess I’ll never know why
Life’s been good to me so far
Life’s Been Good — Joe Walsh
I apologize for the late post. I put PM rather than AM in the time slot.
IR, I do NOT understand the investors, because the investors in CDOs are generally not individuals, but are almost always QIBs- Qualified Institutional Buyers.
Institutional investors generally do not appoint just any moron with a Series 7 and 63 license to run their pools of money- we are talking pension funds and mutual funds with $50 billion or more in assets. I have been in financial services for 20 years, have S7,24,4, and 27 registrations, and I can tell you that I could not begin to get hired to run a large pool of institutional money, and that only people with Ivy League degrees and really impressive credentials otherwise, get near these types of jobs. These people are supposed to be at the top of the field.
Can an institutional money manager who has an MBA in Finance from someplace like Harvard or the University of Chicago,and a PhD in Econ, and who is being paid anywhere from $200K a year clear up to a 7,or even 8-digit salary, be expected to look at a particular pool of mortgages and make sense of the detail on the Bloomberg wire? After all, the features of the CDO are there in detail- the % of loans in the pool delingquent, NOD, whatever.
The rating agencies certainly were culpable, but the buyers of this crap were much more so.These people knew what they were doing and the risk they were taking, but no one wanted to tell his board that maybe the super-high returns the CDOs were posting for a brief while were maybe not worth the risk. No one could bring himself to pass up those returns no matter how much risk was involved.
This has been just like the 80s, when $600K- a -year money managers somehow couldn’t tell the diff between a pre-sunk AAA municipal GO; and a D-rated subordinated note for Southland Corp, even though they had the best academic credentials in the world and were paid to know stuff like this.
These people are really bright, but they don’t live in the “real” world. They sit behind their computers and do regression analysis, factor correlation coeffients, and make computer models.
But because they have no grounding in real life, they never went out and said, “Hmmmm….how can this clerk at Albersons afford the payments on a $625,000 mortgage? And how can this banana-scanner make $137,000 per year?”
Hell, for all they know a banana-scanner at Albertsons really does make $137,000 per year. They can be incredibly brilliant and yet still have absolutely NO CLUE. And that’s why we are today where we are today.
These people DO know the real world, they know damn well what they are buying, and they are often the very same people who designed and packaged the garbage to begin with.
The world of institutional money managment in particular and top finance in general, comprise a very small universe in human terms. Everyone knows everyone else. When a trader in CDOs, or whatever, calls another trading desk, he knows who he is calling. People who are top fund managers usually know the people in the derivatives trading units at the top firms, they know the people who put these things together, they even know the people at the rating agencies. The business is a revolving door, and a pension fund manager has probably been in the bond unit at a major house somewhere in his career, and has usually spend a number of years on a trading desk.
These people are NOT “ivory tower”. They are as “real world” as you get. They are savvy, flexible, and fast; and they also tend to be cynical, greedy, and extremely unscrupulous.
I feel very sure they knew just exactly what they were buying, but they figured that they were making big enough annual bonuses in the near term to make it worth the risk of collapsing their funds? Have you ever SEEN the bonuses some of the hedge fund managers get? Do you think that some people will take a few additional risks with Other People’s Money to get those returns on which their $100MM bonuses are based? Do you think that you would be just heartbroken to find yourself out of a job 3 years later, if you’d gotten a bonus big enough to support you and yours for 3 lifetimes in a style of life that included 40-room houses and 500′ yachts? Many fund managers, remember, are paid seven figure salaries; eight figures are commonplace, and nine digits not unheard of.
These people are NOT “ivory tower”. They are as “real world” as you get. They are savvy, flexible, and fast; and they also tend to be cynical, greedy, and extremely unscrupulous.
That’s your answer.
They can work the safe path, have boards that are PO’d about the ‘under’ performing returns compared other pension funds and be out of a job or they can juice the returns with poison, the board is happy, they get fat bonuses, and when it all falls down, they can point to a AAA credit rating and safety of the herd.
Laura there are several factors that lead to this oops. The short-term bonus scheme is definitely a big part of that.
Another is the need to not sit on capital. The money needs to be out in the market place in order to make returns. That sometimes leads to a “get the money out” mentality that sometimes supercedes the risk/rewards calculations.
Further, I can see how the rewards today would skew any analysis. These things were doing fine, and hte credit agencies called the triple or double AA. A fund manager could go to a committee with that kind of info and get an OK fairly easily.
Wasn’t there a story that came out last year, how the credit agencies said the model they used to rate the CDOs had a ‘glitch’ that was giving the investments a higher grade than they should have?
Lots of blame to go around!
Lots of the mid-level guys that you’re describing were the same ones carrying boxes out of BSC last month, or they’re living in terror of the the pink slip at wrc, bac, jpm, c, mer, and pondering how they’ll pay for their kid’s school without this year’s xmas bonus and a possible permanent expulsion from the finance biz.
Can you really blame the fisherman when fishing stocks collapse? It’s just a job.
I just happen to have one of those Univ of Chicago degrees, and an MBA.
I’m one of the people who tried to convince others how insane the situation was. However, when you look inside of the bank where I worked, you realize that the people approving and administering the loans weren’t rocket scientists. I had great difficulty convincing any of them that housing prices could fall nationwide.
The people responsible for deciding to try to sell mortgage backed securities with wildly low underwriting standards (at other firms) had a feeling things might go wrong. They were surprised at their ability to sell the bonds so easily.
I am taking the deposition of one a HELOC abuser in the next couple of weeks. The pattern and total amount is very close to what is provided in this post. She will be under oath and have to answer questions about what she did or didn’t do with the money.
Any guesses as to what she will say? Oh, and she has already stated that she never “upgraded” the home…
Why are you taking a deposition? Is somebody coming after her for the HELOC abuse? I was under the impression that people were getting away with this.
Don’t forget, that any loan forgiveness that is not part of the original purchase loan counts as income. I hope it’s the IRS starting to come after these abusers.
Would she not have the absolute right to remain silent? I would think that she would. It’s likley that some DA could twist one of these casees into a crime and therefore the defendent would have the right not to incriminate herself.
There is generally no “5th Amendment” right in a civil case seeking money damages. A defendant can be compelled to answer under penalty of perjury if it’s civil.
You can always assert the 5th amendment in either a criminal or civil case but, in a civil case, your silence can be used against you. The jury/fact finder would be entitled to draw the inference that the person did the act or omission that they are taking the 5th in reference to.
IANAL but I don’t see how the 5th Amendment would apply to a civil case. By definition, in a civil case neither your life nor your liberty is at risk. You can’t ‘self-inCRIMINate’ in a civil case because you can’t be found ‘guilty’.
Loan forgiveness only applies to the IRS. The debt is only discharged when the bank forecloses on a purchase money loan.
For refinanciers like most of the borrowers featured in the blog, I believe the bad debt can follow them post losing their home.
I suspect in 2010, we’ll start to see a cottage industry of firms buying the debt gap between the loan amount and recovered liquidation proceeds of the property for fractions of a penny on the dollar and then hounding the former owners until they pay or declare BK.
But maybe not, I’m not 100% sure how the debt issue works once the bank takes it back at the courthouse steps. If the borrower owes $680,000 in principal, back interest and fees, and the bank takes it back at the price, then does the bank eat it? What if the bank offers it for sale at $480,000 on the steps and takes it back? Can they tag her with a deficiency? Can that be sold?
Either way, if there’s a way to come back after these people for any portion of the money I’m sure someone will try. Heck, they’ll try if there’s any grey nature to the rulings.
Does it help to go after most of these people (aside from the conceptual form of Justice that is)? It is doubtful that even 5% took the money out and invested it wisely, so it could be taken back to pay off the debts. The rest blew it on toys, consumption and vacations where they didn’t care about vastly overpaying for whatever they ended up getting. Recovery value of plasma TVs, cars, digital cameras, etc. probably won’t cover legal costs. Isn’t the whole problem that they do not have income or assets that come anywhere close to their debt service payments, much less the debts themselves?
I guess the IRS could get some of them in prison, except that the prisons can’t hold another million or more. I think that in the end, most or all will essentially get away with it. When there are a million bankruptcies, just hide in the crowd and all will be as normal.
It doesn’t matter. Contrary to popular belief, turnips do give blood.
That’s the whole debt purchasing thing. The credit card company writes it off and sells the debt for a point, 50 basis points or less depending on the age of the debt, type of debt, borrowers, balances and last payment and write off time.
The buyer then hounds the defaulter for partial payment, full payment until they get the money or BK.
Yes, it might pay off handsomely if the right debtors are targeted. The creditor can force them into bankruptcy, and if the debtor has an income, and especially since the change in bankruptcy laws, the debtor will mostly likely be forced into Chapter 13 requiring a 5 year payoff plan. In that case, the debtor will have to get agreement with the court (mostly working it out with the BK court trustee) as to an accurate representation of income and expenses… down to the nickel. All ‘surplus’ income is paid to the BK court trustee on a monthly basis for 5 years or until all the creditors are paid off, whichever comes first. Payouts go first to taxes (and this can force the payment plan beyond the 5 years), then to secured debt (if the debtor has car payments, they are accelerated and paid in full, and this can also extend beyond 5 years), and then to unsecured debt (which takes the scraps for 5 years but that’s it).
BK law could be a booming business for the next decade, kept busy by the notional cottage industry of debt scavengers postulated here.
This is what the country gets, thanks to the bill which finally sailed through congress when it became GOP-dominated enough a few years ago.
We made it infinitely harder to wipe out personal debts. I wonder if the 45% of our country which thinks that the earth is 8000 years old (and empowered these congresspersons) is happy about this part of their legacy?
Congress is dominated by Dems, not Reps, get yuor facts straight.
I was thinking how her HELOCs worked out to about ten grand a month, which, around these parts, would keep about anyone in a comfortable very upper middle class situation: think travel every few months, a nice Japanese or German car, education for the kids at a good state school, and upgrades on the house (and, BTW, where is the damned granite in the kitchen in her hosue–we spent thirty grand here trying to get to that California-looking kitchen and it is very disappointing to see that you all are letting the standard suffer).
From what I recall in HELOC commercials and the damned promos that accompanied the checks that Countrywide mailed us every month, we were encouraged to live the good life, which included investing into our houses. Nobody told me that I couldn’t spend my HELOC dollars at a casino, and I’m being deadly serious here. Think of the context of advertising in the HELOC abuse years and you’ll not recall words of caution; they were words of abandon.
Go ahead and take my deposition, you cheap punk real estate attorney. Maybe I bought a Steyr Aug, maybe I bought a fat hog, or maybe I was all agog.
JPrice Vincenz
Actually, the housing bill signed by Bush, the first one, not this last one, forgave this type of income so they won’t be paying taxes on this. Another bailout for the abusers that the rest of us have to pay for.
Oh please say that people are being brought to court for fraud and theft!
BTW, under oath or not, people will habitually LIE no matter what they even think the consequences are. Perjury is not usually prosecuted. However the upside for going against a liar, is that they will reveal just how big a liar they are if they are given enough time and enough questions to hang themselves.
Cruz, you have to post what the HELOC abuser said in the deposition.
Will make it happen. I suspect there were a series of vacations (according to some preliminary discovery we have received) but I also find it hard to believe that not a penny was put into remodeling/upgrading the home.
She probably would have gotten away with the HELOC abuse but tried to go all Donald Trump with a series of real estate transactions (you guessed it, all 100% financing), which is where she has gotten herself into trouble.
I would be curious to know if the borrower was writing off the interest on the increased HELOC lines. My understanding is that only the interest on first $100,000 of a HELOC can be written off but I feel that those who were borrowing these vast sums were abusing that as well. Of course I could be misinformed about those facts and would appreciate any feedback.
She probably paid bills with it. In other words, it untimately all went to interest. This is mainly what is happeneing. It seems like the money is disappearing, because it is disappearing.
I can only imagine the fees that were generated for loan brokers, title and escrow agents.
It is going to take decades, but that paper will find its way back through the system and these abusers will find out that a contract is a contract. As much as everyone is thinking all this will get swept under the rug I am not of that opinion.
I cant imagine banks just letting people walk on this stuff especially since the bankrupcy laws have changed. They will get away with it in the near term, but you cant just ring up that kind of debt and walk away.
Personally I hope they do persue litigation against these people, they borrowed enormous amounts of money with no regard to paying it back.
I lost my ass in the stock market at the turn of the decade because I was a fool, and believed in the “New Economy” and that valuations didnt matter.
3 bedrooms in 1664 square feet?? This thing is tiny! It looks large from the outside, but it must be a duplex to be so small on the inside.
How do they fit it all in? Oh wait, it’s not actually a 3 bedroom, the “3rd bedroom” is a loft which opens out over the kitchen, (and who’s carpet is in remarkably dirty condition or an incredibly questionable color choice or both).
No wonder this thing was only $289k in 2000. My guess? Despite the nice size kitchen, this will be a 2000 roll-back at the bottom. Not plus inflation, straight back to $280k. Because at that price this would be a nice cute townhouse with a 2 bedrooms plus office/library.
What an ugly apartment, the wall colors are hideous, the bedrooms are tiny and the bathroom is nothing special.
Also I concur, since when is 2 bdrm + loft = 3 bdrm. This is false advertising and the listing agent should be fined.
Nice balcony, though even with small plants on it, I doubt you could find much room for your feet to stand.
[img]http://i-0.rfimg.us/photo/46/bigphoto/591/S540591_12_0.jpg[/img]
Also, I hate to be a stickler, but the HOA dues are unbelievable for this little place. $300/mo! Does it come with a free 4-passenger luxury car in the garage?
Thanks IR for a very informative and useful blog. I’ve been reading everyone’s comments for the last several weeks and this is my first post.
There was a cover story in Barron’s last week saying the real estate crash may be nearing it’s end and the rebound may be closer than most people believe. Much of the hypothesis comes from Chip Case, founder of Case/Schiller. He sited three main factors. (1) New housing starts have dropped from over 2 million to under 1 million. The other three times that has happended over the last 30 years, housing rebounded much quicker than the industry expected (usually in 2-3 quarters). (2) Mortgage delinquencies (a precurser to foreclosures) have actually been dropping for the last 8 months in a row. Case believes that many of the future ARM resets are not waiting and are already throwing in the towel. (3) Prices have already come down to historical multiples of income in many geographic areas.
IR, you recommend using 4 as the multple of income for fair value. I was surprised to see long term graphs in the Barrons article that went back to the late 80s. LA’s historical multiple has always fluctuated between 6 and 10 (don’t ask me how someone can pay for a house at 10!). Chicago has always been 5-6, Phoenix has always been 5-7, but none of the geographic areas sited were ever as low as four.
The article was interesting because it counters the current headlines. During the bubble, many of us were too optomistic. Perhaps now, some of us may be too pessimistic. My own view is that prices are still too high relative to rents (perhaps 10% or so). But I think the bank crisis will play out similarly to the S&L;bailout in the early 90s. The foreclosures will be gradually absorbed and the bottom will come sooner than most people think.
I’ve both made and lost significant money on past houses I’ve owned. The next time I buy, I will do a rigorous rent/buy computation on the house I’m considering and also make sure I plan to stay in the house for at least 4 years.
Thanks again IR (and other contributors)!
Barron’s has been spot-on before (they called the dot-com bust just before that bubble imploded), and it’s risky to argue with Case, but I think they are being optimistic. As others have stated, I think that prices will overshoot the fundamentals due to much tighter lending standards, distress selling and a general fear and loathing of putting money into the housing market.
I guess time will tell who is right.
On a seperate topic, what amazes me about the houses IR profiles (beyond, of course, the ubiquity of OC HELOC abuse into the six figures) is that there are more than a few which started out as relatively reasonable purchases. For instance this house was a traditional 20% down purchase. I’ll leave it to others to debate where the $289,500 paid in 2000 was a good price, but I certainly don’t think that it was an outrageous price nor an unreasonable mortgage to service.
If the owner had simply not drunk the kool-aid, they’d be doing OK right now and might even have some equity appreciation to show for their fiscal prudence.
The late 80’s? wow, what a convenient starting point, right as the *last* bubble began. that’s gonna make for a chart that’s not artificially skewed to the high side, right?
the historical price to income ratio that i’ve seen for LA sits between 4.5 and 5.5, it spiked higher in the boom of the early 90’s, but the only time it got to 10x was at the tail of this last boom. in the period in between the two booms, the ratio (iirc) was under 4.5x, around where it would have stayed if not for jolly greenspan.
hmmm … looking around the intertubes, i find that case-schiller often uses “per capita” income in creating their ratios, rather than per household income. that would certainly skew things towards a higher ratio.
No market goes straight up or down. What the Barron article is arguing, I believe, is simply a pause or dead cat bounce in this prolonged deflating cycle.
Main reason for this prolonged agony is actions taken by our government and congress.
I’d say this is about 3rd inning.
You need to be careful with price to income charts. The basic question is always, which income are they using?
Per Capita income?
Median income (individual)
Median Household income
Household income of home buyer
Median Family Income
Average Income (Individual)
Average Household Income
Yeah, something isn’t right with those numbers if they are saying that I should be able to buy a house that is more than 4x my household income. I could swing 4x, but at 4.5 we’d be eating Ramen and mac and cheese. At 5, we’d be eating Ramen and mac and cheese straight outta the box because we wouldn’t have any money left for water or gas to heat the stove.
I would normally be swayed by arguments like those in Barron’s, but there are extra dimensions present in this current collapse: widespread bank failures, with possibly the collapse of the dollar, along with all lending of any sort, private or governmental. The government is running out of money to bail everyone out, and it can’t bail itself out.
Any writer in a mainstream financial publication can only tell so much truth at a time. Some financial journalists and analysts think we’re headed for financial collapse, but you can’t say that in a magazine with advertisers who are extremely uncomfortable with such declarations — businesses depend on a sense of stability and continuity among the general public.
I would imagine Baron’s is referring to the national bubble, and they may be right. Here in North Carolina, for example, many areas make sense to invest in already on a purely cashflow basis and the still inflated areas aren’t all that expensive relative to earnings.
However, I think there is still a lot of localized pain coming down the chute. And sadly, OC is right in the cross-hairs.
Besides sky high prices, the other thing that California real estate is famous for is volatility. You can bet that prices are going to fall hard here, and way below historic lows.
There will be far too many people for the banks to go after. Any money they could recover will be spent on hiring counsel to pursue the matter. They’ll continue the handwringing and grandstanding until early February when new President Barack Obama (absent a miracle) signs the great F**k the Responsible Citizen Bill…I mean Housing Protection Bill. You know, to protect middle America from the greedy lenders.
I’m so pissed at myself for not getting cups of Kool-Aid. I knew that things were going to crash, and my damn morals kept me from jumping into an obligation I knew I couldn’t meet. Next bubble I am front and center!
You can’t put a price on being able to sleep well at night.
Well, in this case, maybe you can… $150,000 of free money?
Too late. Bush is going to sign that piece of junk. It’s criminal!
This bailout brings the paranoid version of me out.
I feel like this will hold the housing prices up. Responsible people won’t be able to get in the housing market. Faith in the banking system is going to be lost. All the banks will be run on. Taxes will rise. Chaos in the streets.
Time to start saving bottles of water.
Well Eric, you can now thank President Bush for the Great American F**k the Responsible Citizen law. Check today’s financial headlines.
[url]http://money.cnn.com/2008/07/23/news/economy/housing_bill/index.htm?postversion=2008072317[/url]
“Increase the Federal Housing Administration’s role. The FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers in owner-occupied homes if their lenders agree to write down their loan balances to 90% of the current appraised value of their homes.”
So let me get this right. A lender has a house on the books–say the property featured here today, 16 San Clemente, Irvine, CA 92602, with $644,000 in debt–and knows this house is going to fall into foreclosure. So they get the same shady appraiser who appraised the house at 600+K during the bubble to appraise the house “10% under market”, which just so happens to really be oh, say 15% above market, and the lender dumps the loan onto the US government.
Is the government doing full-documentation loans or just trusting the lender?
If there aren’t any safeguards in place here, this legislation will open the doors for rampant fraudulent activity.
I’m so glad my tax dollars are going to work! After all these years I’ve been waiting patiently to buy a house I can afford, conservatively saving and renting an apartment, its good to know that the people who spent lavishly during the bubble with the bank’s money and can no longer afford their mortgage payment will continue to be able to live in their house instead of selling it to me and renting MY apartment.
As we all know, if you lose your house to foreclosure then you will be homeless and have to live under a bridge and beg for change at the freeway offramp.
1) The party starts. I buy a house for 400K with zero down. This is more house than I can afford.
2) I take out 300K in equity through refinancing and HELOCs and blow the money on strippers and beer.
3) The party ends. I can’t pay my mortgage because I can’t refinance because the party ended.
4) My house is appraised at 300K. I have 400K in debt.
5) I file bankruptcy.
(ignore the last part of that post 1-5, that was a cross post)
Don’t forget you get to live 8-9 months free while the bank does the paperwork to kick you out of the house.
Today’s realestateguy does it all!
http://plazairvinerealty.com/sitemap.shtml
Michael Walsh
“‘Sepuhrate…’, no, ‘Seperitt’… hm, no, that doesn’t look right… ‘Seprate’ — aw, to hell with it. ‘Sep. Laundry Room’. OK, what else? ‘Walk to Elemintry Sch…’ Aw, crap.”
IrvineRenter, the “I can understand” explanation of how this mess came to be is the best one paragraph treatment I have seen. Will keep it handy to help explain to my friends WTF happened.
Much to my disgust, REMAX is still broadcasting a commercial in my area in which a cheery female voice says, “It’s a great time to buy a house.”
Goddamn, how stupid does REMAX think people are? Well, the sheeple are pretty damn stupid as a whole, but right now i think brokeness and fear trump greed.
I find it mind boggling that the realwhores use the same line wheter prices are up, sideways, or down. They never adjust their spiel.
You forgot to watch the WHOLE commercial. At the end, they whisper “IT’S A GREAT TIME TO BUY A HOUSE so long as you don’t negotiate fees and can pay me a big, fat commission.”
The “sheeple” are stupid? Ugh, how elitist and arrogant. Sorry, can’t take anyone seriously who uses such derogatory terms.
It annoys me because by saying “now’s a great time to buy,” you’re suggesting that there was a time when it wasn’t a great time to buy. So I’d like to know from REMAX when was it a bad time to buy in their opinion and did they share that opinion with their clients?
No worrys ‘mon – the government will bail all of ’em out!
(hiccup)
We are entering the era of no risk behavior as the Feds absorb all risk results. Once the overseas population wakes up an stops subsidising our excess, risk will return with incredible and unavoidable harm. I fear for the future.
I call for debtor’s prisons to make a come back.
Maybe then people will start acting responsible.
English workhouses perhaps?
Many people say that the length of the Great Depression could have been avoided, if it were not for government intervention.
Like the government intervention that we are now witnessing on a weekly basis.
Maybe, LC, your grandparents are still alive and can fill you in on what starvation, homelessness, and a collapsed economy were like. Maybe you’ll reconsider that “many people say that the length of the Great Depression could have been avoided, if it were not for the government intervention.” Tell me, do the same “many people” remain quiet when the Fed underwrites the buyout of Bear Stearns but get all in your face when individuals are being protected by the government they fund?
What do you mean, grandparents? I lost my own house, and nobody did sh*t for me! I have starved myself. You obviously have no idea how wonderful the economy has been for many people the past eight years. Get out of your bubble, and you will see homeless and starving right now. Don’t lecture me with your patronizing history lesson. I didn’t write the laws of economics. The day of reconing must come. This is just a bone tossed to make the banks richer. Suddenly financial stock are hot today. Do you honestly think this is going to help anybody else? They just want to go back to playing the same game. Do you know anybody who became rich because of a bank?
New Coke was “new” but not improved. Also, I purchased my house three years ago (not in Irvine, Vegas, DC, etc. thank God) the first day that it was on the market (below asking, we got lucky and simply stumbled across it on a visit from out of town). We later found out that the previous three times that our home sold were within house week of hitting the market. Though this is one house and it has “only” been on the market four times in the past 12 years (bit of a starter home), I would say that it is – when available – in high demand.
See this is what happens when you fetishize something. Suddenly the home is a collectible (a disgusting word) and realtors comments start reading like ebay descriptions:
MINTY HOME!!! LOOK!!!
Rare, highly sought-after floor plan not normally found on MLS. This LNIB home shames all the other cheaper condos around it. HOA fees attest the great value of this property. Best neighborhood in this particular part of Irvine. Send your kids to the very best schools in SoCal. Authentic surround sound style speakers and customized paint in every room (see the pictures!) This is the deal you have been waiting for. Don’t wait because an exclusive home like this one won’t come up for bid again soon. No reserve, your high bid wins!
I don’t mind this place.
I wouldn’t mind paying $280K for it.
(Paint and furniture can do wonders)
I thought you might find this interesting:
Thank you for contacting me regarding housing market reform and foreclosure prevention legislation. This is an important issue for Americans facing the threat of foreclosure, and I would like to share with you what Congress is doing to help.
Like you, I am very concerned about the current economic downturn and declining housing market. To address record high foreclosure rates among American homeowners, on July 11, 2008, the Senate passed a housing and foreclosure prevention bill (H.R. 3221), introduced by Senators Christopher J. Dodd (D-CT) and Richard C. Shelby (R-AL). I am hopeful that this broad housing package will help hundreds of thousands of Americans keep their homes.
Specifically, H.R. 3221 would help prevent foreclosures by reforming and expanding the Federal Housing Administration to allow homeowners to refinance their mortgages at more affordable interest rates. It establishes a new and independent regulator for Fannie Mae and Freddie Mac to ensure that they responsibly fulfill their role in the housing market. It also includes a provision sponsored by Senator Mel Martinez (R-FL) and myself known as the “S.A.F.E. Mortgage Licensing Act of 2008,” which would require all mortgage lenders and loan brokers to meet minimum national licensing standards in an effort to curb abusive lending.
The House of Representatives is currently considering its version of H.R. 3221. I hope that the Congress can quickly pass a final version of this important legislation and send it to the President for his signature. Please know that I will keep your comments in mind should further legislation to address our country’s housing crisis come before the Senate.
Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Additionally, if you are experiencing difficulty with your mortgage, please contact my San Francisco office at (415) 393-0707. Best regards.
Sincerely yours,
Dianne Feinstein
United States Senator
BTW, this is a real email…
senator@feinstein.senate.gov
I just called the DC number and recited the following message to the lad who answered the phone. Perhaps we all should do this.
My name is XXXX of XXX, CA, zip code…
I am calling to express my vehement opposition to the current housing package making its way through Congress. The capital markets
created the present situation and the capital markets should be allowed to correct it without the interference of the government at the
expense of responsible taxpayers such as myself. I will remember your vote at election time.
Thanks.
Standard reply, and one that makes sense. I’ve worked on the Hill and written many of these.
If you write in supporting the position she’s taking, the first paragraph would include something noting that agreement.
If you write in disagreeing, the letter leaves that part out.
Both letters are mostly bill histories and arguments along the lines of what the MC is doing.
Writing your Member of Congress CAN change their position on issues, but not on major issues (which they’ve already come to a position on based on a combination of polling, staff & lobbyist opinion, and the member’s personal feelings). This housing bill is a foregone conclusion.
HOWEVER, once this is off the radar, send an email. Heck, mention it to all of us and get us to all send our own, INDIVIDUALLY WRITTEN emails. Incoming letters are treated as the tip of an iceberg; the level of the water varies with the coverage of an issue. Lots of coverage means 1000 letters reflect a small iceberg. Little coverage means 1000 letters reflect a HUGE iceberg.
Yup. Nothing is stopping this bill. Enjoy the higher taxes folks!!
Conservatives republicans and liberal democrats can agree one one thing: Dianne Feinstein is a duplicitous crook who talks one way and acts in the exact opposite.
Ditto!
3 bedroom? I think the realtor got the listing wrong. This is a 6-bedroom. However, the 4th and 5th and 6th bedrooms are currently bathrooms.
LOL
literally.
1. Heloc abuse. Our criminal/civil courts simply cannot and will not jail/fine all the working people who took out HELOCs and then did NOT use the money “for the home.” Its like when everybody goes 75 MPH in a 70 zone – the populace makes the law. (In this case.)
2. Many of you obvisously do not spend your time with enough “$30,000 millionaires.” I do. Masquerading a life takes MONEY. I have seen people spend $400 on drinks and NOT GET DRUNK! Do you know how many friends of mine question the type of vodka used in their drinks now and scoff at the “cheap stuff.” Three years ago, they did not know that there were even different brands of vodka. My point: These people (consumers to the end) weren’t even criminals. The money did not go to gold eagles, corp bonds, or even GOOG stock. It was spent on crap – to make them feel good about themselves.
3. These Remax adds will work. Its still all about getting yours. Markets change but humans don’t. Bottoms occur after all hope is gone. Here is an example of th end of hope.
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=idmc&time=9
We have not seen that yet. When the concept of home ownership as a road to wealth is replaced entirely in the public mindset and there are no more Property Ladder, Flip This/That/The Other House shows on cable that is the time to buy.
I come for the financial analysis, but I stay for this kind of stuff: “Sep. Laundry Room upstairs. What is going on with this sentence? Why abbreviate separate? Perhaps the realtor can’t spell it? Why capitalize Laundry Room? In fact, why did the realtor switch between Title Case and sentence case throughout the description?”
Man, IR, that is funny!
Looks like the homeowner abandoned the house and left poor Fido to defend for himself. He probably wishes his master didn’t sign those neg am docs.
We should all send emails to Fienstein and others volcing our lack of confidende and withdrawl of our vote of confidence and clearly indicate that we will not vote for her in the future. I am sure this bill will pissoff a lot of people democrats/republicans alike. People who will actually get help is just a fraction of the entire voting population. This will be huge issue going into elections.
John Campbell has just lost my vote going forward (from an LA Times article on the Housing Bill):
“The other California Republicans who voted for the measure are Ken Calvert of Corona, John Campbell of Newport Beach, David Dreier of San Dimas, Elton Gallegly of Simi Valley, Duncan Hunter of Alpine, Jerry Lewis of Redlands, Dan Lungren of Gold River, and Howard P. “Buck” McKeon of Santa Clarita.”
Reckless!
Too funny Irvine Renter.. Great cover from Joe Walsh… Talk about under water!!!
Joe
Anthem of the HELOC Kool-Aid Drinkers:
Cash Cow by Steve Taylor
The Real Estate Market Starts Climing Again
During the past couple of years we’ve all seen a tremendous change in real estate in the country.
This change actually has spread all over, businesses loosing money while gas prices are extremely high.
The real estate market has become a big issue for all of us out there, we’ve seen many homeowners loosing their homes and struggling to find a home to rent because of their credit.
What happen to us?
Remember the bubble 4 years ago?
That’s exactly the answer, from years of prosperity and times of spending, traveling and investing in stocks and real estate, we are now experiencing another bubble but this time the bubble is going in a different direction and we are wondering what to do.
So real estate was going down and it’s still going down, some economists say that it will get stable in 2 years from now.
The sellers market became a buyers market, and today we all know it by now.
Investors and renters that saved their money for better days to buy to make money are in the market today, that’s making the real estate market busy.
Real estate agents that learn how to change with the market also learned how to make money from the changes, these real estate professionals are making lots of money and while we are all struggling for business they’re making the business.
Today you can get a home directly from the banks for almost half the price.
I’ve seen homeowners that are so desperate that they’re willing to give their homes for free, just come and take their loan and continue their payments.
On the other hand, investors are looking to buy homes in bulk, they can get homes $.50 on the dollar.
Some banks like bank of america and countrywide are selling hundreds of homes in bulk to investors at a discount prices.
So real estate agents are busy getting hundreds of listings and reo’s from banks, then they’re selling these homes at a low price to future homeowners and investors.
It’s definitely a buyer’s market like we had in the early 90’s, so if you’re an investor or a homeowner.
This is your time!