In an effort to ease the saturation on the MLS, lenders have slowed the rate at which they are filing default notices and moving on foreclosures. The result is more shadow inventory, more delinquent mortgage squatting, and another delay for the hoped-for housing market recovery.

Irvine Home Address … 14951 GROVEVIEW Ln Irvine, CA 92604

Resale Home Price …… $419,900

I fought it for a long time now

While drowning in a river of denial

I washed up, fixed up, picked up all my broken things

'Cause you left me, police tape, chalk line

Tequila shots in the dark scene of the crime

Suburban living with a feeling that I'm giving up

everything for you

Oh, oh, oh, how was I supposed to know

That you were oh, oh, over me

I think that I should go (GO!)

Something's telling me to leave but I won't

'Cause I'm damned if I do ya, damned if I don't

All Time Low — Damned If I Do Ya (Damned If I Don't)

Since mid 2008, foreclosure statistics have been largely meaningless. Prior to 2008, defaults were tethered to delinquencies, and foreclosures promptly followed defaults. Since the amend-extend-pretend dance got started, delinquencies rose for another two years while default notices and foreclosure auctions happened at whatever rate the banks felt was appropriate at any given time. Right now, with prices falling in nearly every market, lenders are turning off the flow of properties in an effort to manage MLS inventories and stop prices from falling any further.

In the short term, it is probably the right policy for the lending cartel to operate under. If the price drops continue unabated, more borrowers will strategically default. Of course, as banks stop issuing notices of default and stop foreclosing on delinquent borrowers, they add to their shadow inventory and encourage strategic default because borrowers know they can get years of free housing. Lenders really are between a rock and a hard place.

Since this is a cartel, and since the GSEs are not playing along, each lender that delays foreclosure will ultimately recover less from the property than if they foreclose now. Lenders still seem to be suffering from the delusion that prices will come back and they will get more if they wait. It isn't going to happen that way. The overhang of inventory will be with us for years, and each disposition will prevent any meaningful appreciation. For each cartel member the choice is to sell now or sell later and get less. Under those circumstances, the incentive to cheat is strong, and the reward for withholding inventory is only more denial.

The number of Californians entering foreclosure is at lowest level since 2007

Notices of default against California homes dropped 17% in the second quarter from the first quarter and 19.2% from the second quarter of 2010. Banks repossessed 10.9% fewer homes than a year ago and 1.4% fewer than in the first quarter.

July 20, 2011 — By Alejandro Lazo, Los Angeles Times

The number of Californians entering foreclosure dropped steeply in the second quarter to the lowest level since 2007, a sign the foreclosure crisis in the Golden State could be easing as the housing market stabilizes and regulators increase scrutiny of lenders.

No, it is not a sign the foreclosure crisis is easing. First, there is no foreclosure crisis. There is the foreclosure cure which ailing lenders are avoiding. Second, a decline in foreclosures is not a sign lenders are running out of people to foreclose on. It isn't until the shadow inventory is gone that we can talk reasonably about the foreclosure cure having taken its effect.

Notices of default filed against California homes dropped 17% from the previous quarter and 19.2% from the same period last year, according to San Diego research firm DataQuick. A total of 56,633 homes received a notice of default, which is the first formal step in the foreclosure process.

DataQuick President John Walsh attributed the second-quarter declines to a steadier housing market.

The more I read John Walsh's statements, the less credibility he has. He is a data provider not a data analyst. In short, he is a clueless shill who really shouldn't be quoted for stories like this.

“Homeowner distress spreads fastest when home price declines are steepest,” Walsh said in a statement. “And it now appears likely that, barring some new economic shock, the worst of the price declines are behind us.”

Walsh is calling the bottom? Again? One of these times he will be right, depending on how many times he makes this prediction in the next two or three years before we finally reach a durable bottom.

The number of homes taken back by banks also fell in the second quarter. A total of 42,465 homes were repossessed during those three months, a 10.9% decline from a year earlier and a 1.4% drop from the first quarter. On average, California homes took 10 months to wind their way through foreclosure, up from 9.1 months in the previous quarter and the year-earlier period.

Foreclosures have slowed nationally partly because homeowners are challenging them in court and the nation's biggest banks are negotiating a settlement with regulators over faulty repossession practices.

Some experts believe that if a settlement is reached, foreclosures could surge again once banks overhaul their practices and compensate borrowers. But unlike states where the foreclosure system is overseen by the court system, California has seen a steady decline in default notice filings for more than two years with the housing market recovering faster than other hard-hit regions.

Since we do have non-judicial foreclosures, our system has the potential to process foreclosures quicker; however, that has nothing whatsoever to do with the decline in default filings. Banks are managing inventory, pure and simple.

Still, a steady flow of distressed properties could continue for years, said Robert Hooker, executive director of the Inland Empire Economic Recovery Corp., a San Bernardino nonprofit that buys, rehabilitates and sells foreclosed homes.

“This current decline is probably short-lived because the banks are readjusting themselves,” Hooker said. “They still have a tremendous amount of shadow inventory, and they don't want to saturate the market.“

Finally, half way through the article we hear from someone who knows what they are talking about.

And Bruce Mirken, a spokesman for the Greenlining Institute in Berkeley, said many troubled homeowners still remain in serious need of government assistance.

“It's way too early to pop the champagne corks,” he said. “Dropping back to 2007 levels is a positive trend, but foreclosures in 2007 were quite high by historical standards — more than double the rate in preceding years. There are many reasons to doubt whether the housing market has really turned the corner, and the need for serious foreclosure relief and principal reduction has absolutely not gone away.“

No, there is no need for “serious foreclosure relief and principal reduction.”

I have an idea. For everyone who thinks loan owners need principal reduction, why don't they go knock on doors on their own street until they find an underwater loan owner not making their payments. It shouldn't take more than ten attempts to find one. Once a delinquent mortgage squatter in need of principal reduction is found, they should write them a personal check and tell them to send it to the bank. It's grass-roots political activism at its best. I can support that initiative because I don't have to see any of my tax money going to support someone else's entitlements.

The second quarter marked the lowest level of default notices received by California homeowners since the second quarter of 2007. That was when the subprime mortgage crisis was pushing the nation into the throes of a credit crunch that would end in financial crisis and the most severe recession since the Great Depression.

Last quarter's numbers were also well below the record 133,431 default notices filed in the first quarter of 2009, when home prices were still dropping sharply.

Homeowners in more affluent, coastal counties were less likely to enter foreclosure than those in other parts of the state. Mortgages on properties in San Francisco, Marin and San Mateo counties were the least likely to go into default, while those in Kings, Sutter and Yuba counties were the most likely, DataQuick reported.

Loan owners in coastal California are much more likely to be admitted to shadow inventory than borrowers in other parts of the state. Lenders don't want to take the losses that are still forthcoming. From the article, one could surmise that coastal California is more prosperous and less subject to mortgage delinquency. Nothing could be further from the truth.

In one sign that the most beaten-down areas of the state might be getting some relief, the default-notice decline was greatest in the state's least expensive communities, where foreclosures had been the most prevalent, DataQuick said.

Most loans receiving default notices last quarter were made in 2005 through 2007, the tail end of the bubble, indicating that the most distressed homeowners in the state bought their properties during the run-up in home prices and during the height of the shoddy lending practices that pervaded the mortgage industry.

The most active lending institutions foreclosing on Californians were JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. Although 56,633 default notices were filed in the second quarter, they involved 55,153 homes because some borrowers were in default on multiple loans.

alejandro.lazo@latimes.com

Lender filings are down everywhere. Someday, not today, lender filings will be down because borrowers are not delinquent on their loans. Then, and only then, will the housing market's supply problems be solved. Unfortunately, we won't reach the point of zero shadow inventory and low delinquency rates for several more years.

$419,900 for 800 square feet

Being a flipper of auction properties, I was intrigued by today's featured property. A forty year old 800SF property in Las Vegas would probably sell for $31,000 at auction. Here in Irvine, it fetches $311,000.

The flippers did a very tasteful job on the renovation, and they likely spent a large sum of money on their 800SF gem. It isn't 40 years old inside anymore.

What do you think? Was this flip a good idea? Will they get $419,900 for this?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 14951 GROVEVIEW Ln Irvine, CA 92604

Resale House Price …… $419,900

Beds: 2

Baths: 1

Sq. Ft.: 800

$525/SF

Property Type: Residential, Single Family

Style: One Level, Traditional

Year Built: 1971

Community: El Camino Real

County: Orange

MLS#: S666630

Source: SoCalMLS

Status: Active

On Redfin: 7 days

——————————————————————————

IF SPECIAL IS IMPORTANT, YOU SHOULD TAKE THE TIME TO VIEW THIS TOTALLY REFRESHED LOVELY SINGLE STORY FAMILY HOME. No Mello Roos, No Association Dues, just a short walk to a distinguished elementary school, a blue ribbon middle school, a high school and a community park with basketball court. This fantastic remodeled home is complete with new kitchen cabinets including a large island and buffet counter with beautiful granite counter tops, all new stainless steel appliances, nice distressed look flooring thruout with new carpet in the bedrooms. Also included is a serene outdoor living area that flows right into the house thru french doors. Last but not least a beautiful relaxing bathroom that you wont want to every come out of. All of the beautiful decorator touches will be well beyond your expectations. Dont forget to take a alook at the clubhouse for the kids in the backyard.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

thruout? alook? IF SPECIAL IS IMPORTANT? WTF? No, I want a house that isn't special. Special is not important to me.

a beautiful relaxing bathroom that you wont want to every come out of… Sorry, but I will always want to get out of the bathroom.

Did they count the clubhouse in order to ge to 800SF? This house puts a new meaning to cozy.

Resale Home Price …… $419,900

House Purchase Price … $311,000

House Purchase Date …. 5/20/2011

Net Gain (Loss) ………. $83,706

Percent Change ………. 26.9%

Annual Appreciation … 126.3%

Cost of Home Ownership

————————————————-

$419,900 ………. Asking Price

$14,697 ………. 3.5% Down FHA Financing

4.48% …………… Mortgage Interest Rate

$405,204 ………. 30-Year Mortgage

$87,784 ………. Income Requirement

$2,048 ………. Monthly Mortgage Payment

$364 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$87 ………. Homeowners Insurance (@ 0.25%)

$466 ………. Private Mortgage Insurance

$0 ………. Homeowners Association Fees

============================================

$2,966 ………. Monthly Cash Outlays

-$328 ………. Tax Savings (% of Interest and Property Tax)

-$536 ………. Equity Hidden in Payment (Amortization)

$24 ………. Lost Income to Down Payment (net of taxes)

$125 ………. Maintenance and Replacement Reserves

============================================

$2,251 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,199 ………. Furnishing and Move In @1%

$4,199 ………. Closing Costs @1%

$4,052 ………… Interest Points @1% of Loan

$14,697 ………. Down Payment

============================================

$27,147 ………. Total Cash Costs

$34,500 ………… Emergency Cash Reserves

============================================

$61,647 ………. Total Savings Needed

——————————————————————————————————————————————————-

With down payment requirements going up, many Americans do not have the required savings to make a down payment on a house. Where will this money come from?

Irvine Home Address … 35 WONDERLAND Irvine, CA 92620

Resale Home Price …… $559,800

I'm comin' up for air so I can

Check myself again and I stand

Proven to the man but sheltered

Confidence we tend to (shove in)

Unexpected hunger traps me

Tantric — Down and Out

When the housing market finally bottoms, many will look at the pieces of their shattered lives and wonder how they will ever own a home again. Gone are the days of easy financing and zero money down mortgages.

Lenders are now requiring 20% down. First mortgages with lower down payments are still available, but between the higher interest rate and the private mortgage insurance, the costs of these nonconforming products is prohibitively high. To make matters worse, lenders who lost billions on second mortgages are unwilling to extend bridge financing for those who need it to buy a home.

Many people still hunger for home ownership, particularly those who still mistakenly see it as a path to riches or unlimited HELOC spending money. However, desire is not demand, and despite the longing for home ownership, those who do not have the necessary savings or a sufficient credit score do not contribute to demand. Many will abandon their dreams of home ownership, but many more will carry on.

Down Payment on Home Out of Reach for Half of U.S., Poll Finds

Jun. 3 2010 – 1:13 pm — Posted by Gail Cunningham

Buying a home usually represents the largest investment most people will ever make. According to the National Foundation for Credit Counseling’s (NFCC) May online survey, that investment could now be out of reach for many.

The NFCC recently asked consumers about their ability to meet the down-payment requirements associated with buying a home in today’s market. Of the more than 2,000 respondents, almost half (49 percent) admitted that they’d never be able to save enough money for a down-payment on a home. This is discouraging news for the housing market in general, lenders, potential buyers, as well as existing homeowners.

How many of you would be able to save the $120,000 down payment on a $600,000 Irvine home? Most American's don't save much, and with the pressures to look prosperous here in Orange County, the ability to save such prodigious sums is largely out of reach. Anyone living paycheck-to-paycheck has the odds stacked against them.

Owning a home has traditionally been considered a significant part of a person’s wealth-building strategy. With almost half of the poll respondents indicating that they would never be able to save enough money for a down-payment on a home, the implication is that they feel that buying a house is, and may always be, out of reach for them.

Historically, finding the money for a down-payment was only a problem for first-time home-buyers. After buying the first home, between the equity growing due to making monthly house payments and the value of the house appreciating, buyers could satisfy the down-payment requirement on the new home from the proceeds of the sale of the former house. This is often no longer the case.

Realistically, unless our system changes, FHA loans are the only way first-time homebuyers and former homeowners with insufficient equity will be buying homes. First-time homebuyers have traditionally used the FHA or subprime, but now with so many former owners who lost everything in the aftermath of the housing bubble, many more people will find themselves in need of down payment assistance.

Due to today’s turbulent housing market, the problem has now spread to those who currently own a home. Many mortgages are underwater. Thus, even if the homeowner is able to sell their current house, there may be no profit available to satisfy the down-payment on the next home. Exacerbating the problem is that as home prices have decreased, many lenders have increased the down-payment amount required to obtain a mortgage loan.

Equity has evaporated at a time when equity is most needed to buy a home. Some of it due to falling prices, and some of it do to irresponsible HELOC borrowing and dependancy. As is always the case at the bottom of a recession, cash is king.

With the average home price in America just below $200,000, a 20 percent down-payment is near $40,000, a nice chunk of change by any standard. Some may still be able to obtain an FHA loan with a low down-payment requirement, but those with poor credit will likely have to put a larger amount down. Even with the economy improving, considering the staggering number of people who are out of work and those whose retirement plans have been decimated, buying a home may no longer be a part of the American dream, at least not in the near future.

Many people who didn't lose their net worth in the housing bust may have had to spend their savings to survive the recession making the buyer pool with 20% down that much more depleted.

Others responding to the survey indicated that their mortgage loan would either have to require a much lower down-payment (20 percent), or they would have to borrow the down-payment regardless of how much it was (18 percent). Further bad news for anyone associated with housing is that the lowest number of respondents indicated that they’d have no trouble coming up with a 20 percent down-payment (12 percent).

Very few people have the 20% down. Only 12% of those polled said they could comfortably come up with the money. This is a serious problem for housing demand going forward.

Where will the down payment money come from?

Realistically, there are only two sources: savings and borrowing. Some may receive gifts, but those who don't have wealthy family members to give them money, they will either need to save it or borrow it.

Even in a booming economy, it takes years to save the necessary 20% down payment on a house. Most people are either unable or unwilling to endure the austerity such a sacrifice requires. Many will save their money and follow this path to home ownership. Kudos to those who succeed.

Most people will only save the minimum necessary and instead borrow the money. Those that follow this path will get less home than those who save because the borrowers will face much higher costs than the savers. For instance, the current FHA insurance premium is over 1% of the sales price. Its like paying double taxes. This extra expense comes out of qualifying income and thereby reduces the loan balance available to borrow.

In the future, demand for second mortgages will prompt some adventurous lenders to try this market again. Currently, lenders hold billions of worthless second mortgages on their books, so originating new ones is not in their business plan. To make these loans today would be to light more money on fire as falling house prices will quickly put these second mortgages underwater. It won't be until well after the market bottoms that second mortgages will be made available to the masses again.

For the foreseeable future, mortgage demand will remain weak. At first it will be due to continuing unemployment and weak earnings, but as the economy recovers, the reasons will not be income qualification, it will be the lack of a suitable down payment.

More than 25% off it's new 2004 price

i remember watching with amazement as people paid outrageous prices for these Northwood II homes back in 2004 and 2005. Most of these buyers put 20% down as there was so much demand that builders on the Ranch could be choosy. Nearly all of those buyers have lost their down payments, and any who refinanced are underwater.

Many of these properties were bought as investments, after all, prices only go up in Irvine — except when they don't.

At the current price, the low interest rates are making this place payment affordable even with the sky-high HOA and Mello Roos.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 35 WONDERLAND Irvine, CA 92620

Resale House Price …… $559,800

Beds: 3

Baths: 3

Sq. Ft.: 2146

$261/SF

Property Type: Residential, Condominium

Style: Two Level, Mediterranean

View: Faces Northwest

Year Built: 2004

Community: Northwood

County: Orange

MLS#: S643218

Source: SoCalMLS

On Redfin: 198 days

——————————————————————————

DOUBLE MASTER BEDROOMS: ONE DOWN STAIRS, ONE UPSTAIRS! The third bedroom is downstairs, too, large and with a private bath. Very spacious, clean and well maintained home. Upgraded cabinetry, computer niches (more than one), corian counters in two full baths, double sink vanities. UPSTAIRS MASTER HAS LARGE COUNTER WITH SIT DOWN LADY'S VANITY! Lots of living space and room for a family. Desirable interior facing location, super quiet and private. Lots of windows, direct garage access. Kitchen has stainless steel appliances, including refrigerator, granite counter tops, five burner stovetop, built in oven and microwave. Kitchen counter sits four people, room for a large dining table. Enclosed patio, accessed by french doors. Upstairs, in front of master, large loft, a second living room or multi-use area. Very open and bright. Behind the gates, beautiful common pool and recreation area.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Resale Home Price …… $559,800

House Purchase Price … $712,000

House Purchase Date …. 9/30/2004

Net Gain (Loss) ………. ($185,788)

Percent Change ………. -26.1%

Annual Appreciation … -3.4%

Cost of Home Ownership

————————————————-

$559,800 ………. Asking Price

$111,960 ………. 20% Down Conventional

4.48% …………… Mortgage Interest Rate

$447,840 ………. 30-Year Mortgage

$97,021 ………. Income Requirement

$2,264 ………. Monthly Mortgage Payment

$485 ………. Property Tax (@1.04%)

$200 ………. Special Taxes and Levies (Mello Roos)

$117 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$292 ………. Homeowners Association Fees

============================================

$3,358 ………. Monthly Cash Outlays

-$377 ………. Tax Savings (% of Interest and Property Tax)

-$592 ………. Equity Hidden in Payment (Amortization)

$185 ………. Lost Income to Down Payment (net of taxes)

$90 ………. Maintenance and Replacement Reserves

============================================

$2,664 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,598 ………. Furnishing and Move In @1%

$5,598 ………. Closing Costs @1%

$4,478 ………… Interest Points @1% of Loan

$111,960 ………. Down Payment

============================================

$127,634 ………. Total Cash Costs

$40,800 ………… Emergency Cash Reserves

============================================

$168,434 ………. Total Savings Needed

——————————————————————————————————————————————————-

Lenders have been concentrating shadow inventory in communities like Irvine with larger loan balances and numerous second mortgages. They foreclose only on rare occassions, and they do so in a capricious manner to combat strategic default and avoid large losses.

Irvine Home Address … 57 SNOWDROP TREE Irvine, CA 92606

Resale Home Price …… $845,000

Keeping my eyes open

I cannot afford to sleep

Giving away promises

I know that I can't keep

I would stand inside my hell

And hold the hand of death

You don't know how far I'd go

To ease this precious ache

You don't know how much I'd give

Or how much I can take

Melissa Etheridge — Come To My Window

As a renter it's hard not to feel a twinge of jealousy for delinquent mortgage squatters. While many of us pay outrageously high rents to live in Irvine, squatters get to occupy their houses for nothing. With a typical single family home renting for $2,500 here, delinquent mortgage squatters are saving $30,000 per year compared to their renting counterparts. Plus, the government is doing everything possible to give them more free money so they can continue to occupy houses they have no business being in.

It must be difficult for many of them to sleep at night. They have made promises they can't keep, and unless their lender forgives their debts, most are going to be forcibly removed from what they consider to be their family homes. How much would they give to relieve that ache? How much more can they take?

To make matters worse for stressed out borrowers, lenders use terrorist tactics to keep more struggling borrowers from defaulting. Each month lenders randomly single out a few squatters to push through the foreclosure process. If they didn't do this, borrowers would know they had several years of free lodging waiting for them if they default. If borrowers knew they could save $50,000 to $100,000 in housing costs through several years of squatting, most struggling borrowers would default. Lenders know this, so they must randomly execute a few to keep the herd fearful and guessing.

This practice is not as random as it would seem. The selection process is first divided up into buckets. One bucket contains small loans with no second mortgages. This bucket is the one getting the most activity as lenders and the GSEs are competing to empty this bucket as quickly as possible.

The second bucket contains large loans on the balance sheets of large lenders and in private securitizations. Lenders randomly select a moderate number from this bucket each month. Since the big lenders (which are also the big servicers) do not have second mortgages on these homes, they are somewhat more eager to process them, although since the loan losses are still quite large, they aren't in any particular hurry.

The third bucket contains large loans with second mortgages on them. These are the most irresponsible borrowers, and the most likely to be distressed. Lenders only select a very small number of these each month to process because they will lose much more money. If the lender is losing on the first mortgage, the second mortgage is a complete loss.

In fact, bucket number three can be subcategorized by whether or not the lender-servicer holds both the first and the second or if the second is with another lender. If the lender-servicer holds the first and the second, this is the group least likely to be foreclosed on. If the lender-servicer only has the first mortgage, they will ruthlessly blow out the second mortgage of their competitors. This partitioning of the third bucket is so brazen that many servicers are risking lawsuits from the asset-backed securities pools waiting for the foreclosure to take place.

In short, lenders are giving the most irresponsible borrowers the greatest squatting benefits because these are the borrowers on which lenders stand to lose the most.

Foreclosure Roulette Revisited

By Sean O'Toole | Jul 7, 2011

Nearly a year ago I opined that banks were engaged in a game of Foreclosure Roulette — a game by which they randomly foreclosed on a few homeowners, while delaying most foreclosures for longer and longer periods of time. The primary aim of the bank’s random foreclosures being that they can’t let word get out that you can stop making mortgage payments and live in your home for free for years on end, as is increasingly the case. Otherwise, millions of underwater, but paying, homeowners might also stop making payments, spelling disaster for the banks.

At first glance current foreclosure sales do seem completely random. Vacant homes sit for months or even years waiting to be foreclosed on, while a family working hard to short sale their home has the rug pulled out from under them. But looking for patterns by focusing on the borrower or even the property assumes lenders care about people, and neighborhoods. That’s not the role of financial institutions. These are corporations, and their focus is on profit and loss. By focusing on where the losses really are, clearer patterns begin to emerge and we now see that this game of chance isn’t completely random. Like in Vegas, the odds are stacked in favor of the house — not your house, the banks.

This behavior may be completely logical, but it is still reprehensible. They are resorting to terrorist tactics, and they are rewarding the most irresponsible. No matter how they go about resolving these bad loans, moral hazard will inevitably result.

First lets look at time to foreclose based on the size of the potential loss. We did this by analyzing 153,956 foreclosure sales on first mortgages from January 2008 through July 2011 for which we had all the necessary data. This includes properties that were sold back to the bank and became REO, as well as properties purchased by investors on the courthouse steps at foreclosure auction. We divided all the loans into two groups: those with balances over $417,000 (the conforming loan limit) and those below. Specifically we were wondering if banks took longer to foreclose on larger loans, where there tend to be larger losses, than on smaller loans. The answer is clear: yes, the size of the potential loss absolutely matters. Not only that, but time to foreclose doesn’t diverge until the government intervened in the foreclosure market in early 2009, with, for example, changes to the Federal Accounting Standards Board rules on mark-to-market.

Amend-extend-pretend began in earnest in mid 2008, and the results became apparent in early 2009 as Mr. O'Toole's data shows. This also corresponds to the buildup of shadow inventory.

In July 2011, the average loan balance on foreclosures with a loan balance greater than $417,000 (the red line) was $616,000, and the average current market value was $404,000, resulting in an average loss of more than $250,000 per loan after sales costs.

Compare that to loans with a balance less than or equal to $417,000 (the blue line). On those loans the average loss was closer to $115,000 on an average loan balance of $274,000 and with an average current market value of $176,000.

The truth is that the larger the loan balance you have, the more upside down you are in the home, and the bigger the loss for the lender, the better your chances are of not being foreclosed on for a very long time.

This nuance is important for anyone considering strategic default. If someone is considering defaulting on a $100,000 loan, I wouldn't count on much squatting time. Perhaps they will get a year or two, but the GSEs are processing their bad loans at a relatively rapid pace. However, if someone is considering defaulting on a $1,000,000 loan — and we have a lot of those in Orange County — chances are those borrowers will get to squat in their McMansions for the foreseeable future.

In other words, for all of you renting and waiting for prices to drop, lenders are allowing the deadbeat borrowers to stay in the house you want to buy without making any payments. You are stuck renting while they are getting to live in what should be your house for nothing.

Next lets look at the time to foreclose based on the number of outstanding loans. Some have suggested that many servicers have a conflict of interest in that they service first mortgages on properties on which they directly hold the second mortgage in their own portfolio. In fact, Representative Bradley Miller D-NC, introduced a bill, H.R. 4953, to specifically eliminate this conflict of interest; saying at the time “Their stance does seem largely driven by accounting concerns — they are trying to maintain the fiction that the mortgages are worth the value they are carrying them at on their books.” It turns out that there is a dramatic difference in the amount of time it takes servicers to foreclose on first mortgages when there is also a second mortgage on the property, as shown below.

The blue line indicates the average time to foreclose for properties that only had one loan; and the red line indicates the average time to foreclose for properties that had two loans. While there is a notification requirement when foreclosing on a property with a junior lien (a second mortgage for example), this is easily accomplished within the standard foreclosure timeframe, and first mortgage holders have no other duties to protect second mortgage holders, so there is really no other reasonable explanation that we can think of for this significant difference in timing outside of the conflict of interest issue that some have suggested. Note that like time to foreclose by loan balance above, the lines don’t start to diverge until early 2009, when mark-to-market rules were loosened.

The evidence is clear. Lender-servicers are not foreclosing on loans where they would be wiping out their second mortgage. This is also an important nuance for those considering strategic default. If someone has a first mortgage and a second from the same lender, they are much more likely to be allowed to squat indefinitely than if their second is through a different lender.

The basic idea behind mark-to-market accounting rules is that if an asset that you have on your books drops in value, you should recognize that loss on your books and write down the value of the asset on your books. When Treasury Secretary Paulson announced TARP in September 2008, he made it clear that he didn’t think banks should have to write down these assets to or be forced to sell them at what he believed were distressed prices.

This merely underscores the complete lack of understanding of the problem in our government. Prices were not distressed in 2008, and they are only distressed now in a few markets. Prices were in fact quite elevated and needed to come down. Allowing banks to pretend merely delayed the inevitable. It did not fend off a write down that did not need to occur.

After that announcement, considerable pressure was put on the supposedly independent Federal Accounting Standards Board (which writes the accounting rules these companies must follow) to ease the rules that require companies to mark assets to current market values. It occurred to me at the time that it was a ridiculous notion as properties weren’t selling at distressed prices, they had instead returned to normal prices after being artificially inflated in a major credit bubble. Regardless, I think there is little doubt that the changes to these rules were necessary in order for the banks to pass the stress tests that were undertaken shortly after this accounting change was pushed through.

So while we still think foreclosure roulette is the bank’s game of choice, we now also believe that the number of chambers in their gun, and your likelihood of being quickly foreclosed on, is directly tied to the size of the potential loss that the bank might face. Perversely, this means those who took the biggest loans, on the nicest houses, with the largest lines of credit to buy lots of shiny new toys will also get the most free rent when they strategically default.

And we will also probably allow many of those people to get loans again without much waiting because lenders need warm bodies to buy their REO.

It's a great system we have, isn't it?

A squatter's paradise

The bank currently owns this empty property, but the former owners tried to sell it for almost four years prior to their foreclosure. Do you think they were making any payment during that time?

Date	Event		Price	Source
Jul 05, 2011	Listed (Active)		$845,000	SoCalMLS #S665221
Jun 29, 2011	Sold (Public Records) REO		$668,126	Public Records
Jan 02, 2009	– Delisted		—	Inactive SoCalMLS #3
Sep 26, 2008	– Relisted		—	Inactive SoCalMLS #3
Sep 25, 2008	– Delisted		—	Inactive SoCalMLS #3
Aug 27, 2008	– Relisted		—	Inactive SoCalMLS #3
Aug 26, 2008	– Delisted		—	Inactive SoCalMLS #3
Jun 13, 2008	– Price Changed		*	Inactive SoCalMLS #3
May 14, 2008	– Listed		*	Inactive SoCalMLS #3
May 05, 2008	– Delisted		—	Inactive SoCalMLS #2
Jan 05, 2008	– Listed		*	Inactive SoCalMLS #2
Nov 16, 2007	– Delisted		—	Inactive SoCalMLS #1
Oct 10, 2007	– Price Changed		*	Inactive SoCalMLS #1
Aug 30, 2007	– Price Changed		*	Inactive SoCalMLS #1
Aug 12, 2007	– Listed		*	Inactive SoCalMLS #1
Sep 20, 2006	Sold (Public Records)		$1,024,500	Public Records

My records show the first notice of sale in April of 2009. If a lender is prompt in their filing — and in the deflation of the housing bubble, they haven't been — the borrower stopped making payments at least 6 months earlier. That puts his last payment back in November of 2008 at the latest.

Foreclosure Record

Recording Date: 08/25/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 04/21/2009

Document Type: Notice of Default

The foreclosure auction took place on June 29, 2011, nearly three years after he quit paying. When this property was purchased for $1,024,500, the borrower used a $716,850 first mortgage and put $307,650 down. In this instance the lender gave the borrower ample time to sell the house to recover some of his down payment. It didn't happen, so now the lender has the property and is trying to sell it for an amount that will make them a profit. They need to make it when they can.

If the lender gets this price, the former owner would feel like a fool leaving any equity in the property. Of course with a $4,000+ per month cost of ownership, this owner recovered $120,000 in savings during his 30 months of squatting. I guess that makes it a win-win.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 57 SNOWDROP TREE Irvine, CA 92606

Resale House Price …… $845,000

Beds: 4

Baths: 2

Sq. Ft.: 2803

$301/SF

Property Type: Residential, Single Family

Style: Two Level, Traditional

View: Reservoir

Year Built: 2006

Community: Columbus Grove

County: Orange

MLS#: S665221

Source: SoCalMLS

On Redfin: 17 days

——————————————————————————

Welcome to Lantana at Columbus Grove in Irvine!!! Enjoy the several amenities including association barbeque, club house, recreational facility, parks, association pool, greenbelts and more. Walk, drive or bike over to the District at Tustin Legacy which is Orange County's newest shopping, dining and entertainment destination. After a long day, return to your own sanctuary; park inside your 3 car attached tandem garage, relax in your spacious 4 bedroom, 3 bath home. Start up the fireplace, enjoy a cup of coffee or soak in your master bedroom tub. The gourmet kitchen includes stainless steel appliances, granite counters, breakfast bar and a walk-in-pantry; this kitchen will keep all chefs wanting to try new recipes! Valuted ceilings, recessed lights, mirrored closets, upstairs laundry, and plenty of linen space. Carpet, hardwood floors and a big back yard makes this house truly a BEAUTIFUL HOME, ALL THAT IS MISSING IS YOU!!!

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Valuted? I have concluded that three exclamation points are the surest sign of a realtor's writing. Nobody else feels the need to express that much excitement in their sales spiel.

Resale Home Price …… $845,000

House Purchase Price … $668,126

House Purchase Date …. 6/29/2011

Net Gain (Loss) ………. $126,174

Percent Change ………. 18.9%

Annual Appreciation … 317.7%

Cost of Home Ownership

————————————————-

$845,000 ………. Asking Price

$169,000 ………. 20% Down Conventional

4.48% …………… Mortgage Interest Rate

$676,000 ………. 30-Year Mortgage

$146,450 ………. Income Requirement

$3,417 ………. Monthly Mortgage Payment

$732 ………. Property Tax (@1.04%)

$517 ………. Special Taxes and Levies (Mello Roos)

$176 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$175 ………. Homeowners Association Fees

============================================

$5,017 ………. Monthly Cash Outlays

-$814 ………. Tax Savings (% of Interest and Property Tax)

-$893 ………. Equity Hidden in Payment (Amortization)

$280 ………. Lost Income to Down Payment (net of taxes)

$126 ………. Maintenance and Replacement Reserves

============================================

$3,715 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$8,450 ………. Furnishing and Move In @1%

$8,450 ………. Closing Costs @1%

$6,760 ………… Interest Points @1% of Loan

$169,000 ………. Down Payment

============================================

$192,660 ………. Total Cash Costs

$56,900 ………… Emergency Cash Reserves

============================================

$249,560 ………. Total Savings Needed

——————————————————————————————————————————————————-

In an unexpected move, OCAr has dismissed it's grievance against IrvineRenter without reason or apology. This action can only be interpreted as complete vindication and total victory for the forces of free speech and champions of due process.

Irvine Home Address … 46 ECHO Gln Irvine, CA 92603

Resale Home Price …… $3,399,000

Buddy you're an old man poor man

Pleadin' with your eyes gonna make you some peace some day

You got mud on your face

Big disgrace-

Somebody better put you back into your place

Queen — We Will Rock You

Back in early June, the story broke about how OC realtors seek to silence free speech by accusing IrvineRenter of lying. It set in motion a chain of events which ended in OCAr's dismissing the accusations last week.

Events that shape your life

Certain events and experiences in life can greatly alter your thinking, your actions, and your destiny. When I was in my first year of junior high, I used to walk over with my friends to a nearby restaurant in the morning before school. One day, a punk two years older than me sent a message that he was going to punch me out when I stepped out the door. His little clique was eagerly standing with him outside waiting for me to leave.

I had a decision to make. It would be a decision that impacted my life for years thereafter. I had to chose between standing my ground and likely getting pummeled or running like a coward.

I ran.

I ran hard and fast frightened like a school girl. I lived in fear for years thereafter.

It wasn't until I got to college that I decided to change my life. I got into powerlifting, and I studied Taekwondo for two and a half years prior to graduating. It was sparring in Taekwondo that really taught me the virtue of facing my fears. One day, it just clicked, and I lost my fear of confrontation. In retrospect, taking a beating in seventh grade would have been far less painful than running. As William Shakespeare said in Julius Caesar:

Cowards die many times before their deaths; The valiant never taste of death but once. Of all the wonders that I yet have heard, it seems to me most strange that men should fear; Seeing that death, a necessary end, will come when it will come.

When OCAr filed their grievance, I had a similar choice to make. I could kowtow to the schoolyard bully, or I could punch him in the nose and take my chances. For me, surrendering my power was never an option.

Realtors dismiss complaint against blogger

July 22nd, 2011, 6:00 am — posted by Marilyn Kalfus, real estate reporter

A formal grievance complaint filed by the Orange County Association of Realtors against an Irvine real estate blogger has been dismissed, the attorney for the blogger says.

.

The lawyer, Scott Sims, had accused OCAR of being at odds with laws governing free speech in filing its complaint against Larry Roberts of irvinehousingblog.com. But Sims says he was given no reason the case was stopped.

“The bottom line is that OCAR has completely backed down and dismissed the complaint, without any settlement agreement or anything of the sort,” Sims said. “This is a clear and total victory for Mr. Roberts. He looks forward to continuing to provide readers of irvinehousingblog.com with high quality analysis and insight into the housing market.”

Roberts has taken on the real estate industry and accused agents of being dishonest. But while he’s been hard on real estate agents in general, he said in a recent interview, ”I have never singled any Realtor out and called them a liar.”

The grievance didn’t say specifically what Roberts — who is not a Realtor –or anyone else did, according to Roberts, who showed a copy of it to The Orange County Register. …

An OCAR grievance committee representative previously declined to discuss the case with a reporter, saying grievances are confidential.

The letter that Sims, a partner at Manderson, Schafer & McKinlay of Newport Beach, sent to OCAR had stated: “If OCAR does not immediately serve notices of dismissal of all charges, we will take the appropriate actions to protect Roberts’ constitutionally protected rights.”

Related:

• Realtors go after blogger who says they lie
• Attorney: Realtor group violates law on speech

Related on IHB:

OC realtors seek to silence free speech by accusing IrvineRenter of lying

OCAr fails to explain charges, demands IrvineRenter’s silence

Alas, this will be the last installment in the series. Dismissing the case was the wisest choice for OCAr. The negative publicity was not helping their image, and they had nothing to gain by pushing on. I'm relieved they stopped as I was running out of good communist images for making cool cartoons.

I want to thank all my supporters to commented on the posts above and the posts over at the OC Register. And I want to give special thanks to my legal team, Scott Sims, Chris Manderson, and John Schafer, who did a wonderful job defending free speech and the right to due process in America. They are the A-Team.

As you can see from the story below, it's much more difficult to shut down a real estate website than realtors would like it to be.

Battle Waged Over Real Estate Gossip on the Web

By DIANE CARDWELL

Published: June 20, 2011

A Web site, now defunct, that claimed to expose “the underbelly of the Manhattan real estate market” by reporting on bad broker behavior, abusive landlords and run-down apartments quickly became a forum for bitter accusations against landlords, brokers, real estate industry co-workers and even roommates.

One entry, from February 2007, described a building in the East Village where the super “breaks into the apartments and steals food and money.”

Another, posted that August, complained of an agent who had arranged for someone to pose as a prospective renter and “pretend to be super-excited” about a subpar apartment to make it seem attractive.

Open house shills are a common practice. Prospective buyers are always more anxious when they believe they have competition.

Another entry, posted in January 2008, reported on a fight — rebutted in the comments section — that had broken out between agents for Prudential Douglas Elliman at a holiday party.

But when the Web site (its name is too scatological to be published here) began posting items accusing Christakis Shiamili, the founder of Ardor New York Real Estate, of anti-Semitism, domestic violence and mistreatment of his employees, it did not sit well with him. In a case that eventually went to the state’s highest court, he sued the operator of the site, Ryan McCann, who as it turned out was a competitor from the Real Estate Group of New York, now part of MNS.

In OCAr's initial complaint, they accused me of “knowingly telling lies about competitors.” That is exactly what the realtor Ryan McCann was doing. He was knowingly making false accusations against a specific person. I have never done anything of the sort. I have only made factual accusations or offered supported opinions of the activities of the organization. The difference between the two is enormous.

“I was never subject to such an attack on a personal level,” Mr. Shiamili said last week in his Midtown Manhattan office. “They seemed to be very vindictive people. And they were putting stuff not only on me but my managers. A lot of my managers were freaking out.”

Mr. Shiamili’s lawsuit was dismissed, in a close decision handed down last week by the Court of Appeals, which held that Mr. McCann and his co-defendant, Daniel Baum, were protected under the Communications Decency Act, which shields Web site operators from liability when they publish and edit material that they did not create.

Through a lawyer, Mr. McCann and Mr. Baum declined to speak about the case. But it throws open a window on the cutthroat world of residential real estate as it exists on the Internet, where the cloak of anonymity can help harsh commentary escalate.

There was much discussion in the comments on the OCAr posts about what constitutes free speech. I was accused of being a hypocrite because I sometimes censure comments here on the blog. First, I would like to point out that free speech is not an absolute. People can't yell “fire” in a crowded theater, nor can they make false accusations that could be libelous.

Second, although I run an open forum, I have the right to censure any speech I feel is inappropriate in the astute observations on my posts. People can write or say whatever they want somewhere else. I have no desire to inhibit anyone's right to speak their mind on their own blog or another forum. But this blog is like visiting my house. If people don't like the rules here, they don't need to come visit.

“Certainly in residential real estate it’s very gossipy — people want to know what’s going on in each building,” said Steven D. Sladkus, a lawyer at Wolf Haldenstein Adler Freeman & Herz. “People want to know if someone sneezes differently.”

The court decision, he said, “could certainly open the doors for a lot of people to say a lot of nasty things.”

So what? People who say nasty things only reveal how nasty they are. It's the price we all pay in an free society. Sometimes buried in the nastiness is an uncomfortable truth. People need exposure to the truth.

Recently, he said, he asked Curbed, a neighborhoods and real estate blog, to take down negative comments about a real estate board president that he said were untrue; the site’s operators agreed but made it clear they were not required to do so.

Wimps. They should never have acquiesced. It will only embolden their critics in the future.

According to Mr. Shiamili’s complaint, filed about a week after the contentious comments went up, the Web site published “false and defamatory statements of fact” that were “intended to injure Shiamili’s reputation and destroy Ardor.”

The comments, from an individual who used an anti-Ardor pseudonym and claimed to be an Ardor agent, accused Mr. Shiamili of terrorizing agents, keeping too much of their commissions, and referring to blacks, Hispanics and Jews as “those people.”

The crux of Mr. Shiamili’s argument is that Mr. McCann took the comments and repackaged them as a post, prefacing them with the statement, “and now it’s time for your weekly dose of hate,” and the challenge, “We are so. not. afraid.”

It should also be pointed out that any comments made on this blog are the property of the IHB, and we can use them as we see fit. I occasionally quote from the astute observations because often the comments are very astute and should be shared with others.

Mr. McCann also put up a picture portraying Mr. Shiamili as Jesus Christ, with a headline calling him, “King of the Token Jews,” according to the complaint. That, in turn, set off a round of accusations from other posters, including one accusing Mr. Shiamili of cheating on his wife. He says all the accusations are untrue.

I like being edgy. Sometimes I go over the top. It's unavoidable when you dance on the edge. However, the shades of grey only exist on the margins. There are comments and images that are simply out-of-bounds. The examples described above are out-of-bounds. How can you tell over-the-top from out-of-bounds? Justice Potter Stewart once said of pornography, “I know it when I see it.” Out-of-bounds is obvious when you see it.

What's interesting about this case is that the judges were willing to permit out-of-bounds expression because they so valued freedom of speech. If the realtor in this case lost, what chance did OCAr have of shutting me down?

Mr. McCann and Mr. Baum filed a motion to dismiss the case, arguing that the Web site dealt in matters of opinion, not fact, and was clearly satiric in nature, given the frequent trading of inane insults. In addition, they said, the case should be dismissed because the defendants did not write the comments, but only published them, exempting them from liability under the Communications Decency Act.

In 2009, Justice Marcy S. Friedman of State Supreme Court in Manhattan dismissed their motion, ruling that the case could proceed. That decision was overturned by an Appellate Division panel, which dismissed Mr. Shiamili’s complaint. Last week, the Court of Appeals affirmed that ruling, 4 to 3.

“We follow what may fairly be called the national consensus,” wrote Judge Carmen Beauchamp Ciparick, adding that the Court of Appeals saw the Decency Act “as generally immunizing Internet service providers from liability for third-party content wherever such liability depends on characterizing the provider as a ‘publisher or speaker’ of objectionable material.”

Judge Ciparick noted that the comments about Mr. Shiamili were “unquestionably offensive and obnoxious,” but added that the site’s operators had “not become ‘content providers’ by virtue of moving one of the comments to its own post.”

Chief Judge Jonathan Lippman, in a dissenting statement, struck a note of caution, suggesting that the Web site was more than “a passive conduit of this defamatory material,” and adding, “An interpretation that immunizes a business’s complicity in defaming a direct competitor takes us so far afield from the purpose of the CDA as to make it unrecognizable.”

Mr. Shiamili has not decided what steps, if any, to take next, but he said his business had suffered because of the comments on the site.

“They weren’t only attacking me, they were attacking other companies,” he said. “It was a means to diminish their market share,” he added, referring to the companies the site criticized.

OCAr could make the argument that I am defaming their business except for one small detail. The opinions I express are not defamatory; they are truthful. If I have negative things to say about realtors, it's because they've earned it.

Not to worry, all's well that ends well.

Some people never capitulate

The owner of today's featured property paid cash for the lot, and borrowed about $2,000,000 to build the property. He is not a distressed seller, but he clearly wants to sell. But he isn't ready to “give it away.” Notice the series of price reductions followed by a price hike then another series of price reductions. Who is he kidding? Why would anyone offer more than the lowest number in that range?

Date	Event		Price	Source
Jul 21, 2011	Price Changed		$3,399,000	SoCalMLS #S613556
May 10, 2011	Price Changed		$3,599,000	SoCalMLS #S613556
Apr 06, 2011	Price Changed		$3,499,999	SoCalMLS #S613556
Feb 28, 2011	Price Changed		$3,750,000	SoCalMLS #S613556
Jan 26, 2011	Price Changed		$3,695,000	SoCalMLS #S613556
Nov 05, 2010	Price Changed		$3,798,000	SoCalMLS #S613556
Oct 18, 2010	Price Changed		$3,498,000	SoCalMLS #S613556
Oct 05, 2010	Price Changed		$3,489,000	SoCalMLS #S613556
Aug 29, 2010	Price Changed		$3,689,000	SoCalMLS #S613556
Jul 30, 2010	Price Changed		$3,499,000	SoCalMLS #S613556
Jul 22, 2010	Price Changed		$3,599,000	SoCalMLS #S613556
Jul 15, 2010	Price Changed		$3,699,000	SoCalMLS #S613556
May 24, 2010	Price Changed		$3,869,000	SoCalMLS #S613556
Apr 17, 2010	Listed (Active)		$4,149,000	SoCalMLS #S613556
Apr 17, 2010	– Delisted (Expired)		—	Inactive SoCalMLS #7
Apr 05, 2010	– Price Changed		*	Inactive SoCalMLS #7
Mar 21, 2010	– Price Changed		*	Inactive SoCalMLS #7
Mar 08, 2010	– Price Changed		*	Inactive SoCalMLS #7
Feb 12, 2010	– Price Changed		*	Inactive SoCalMLS #7
Feb 05, 2010	– Price Changed		*	Inactive SoCalMLS #7
Feb 01, 2010	– Price Changed		*	Inactive SoCalMLS #7
Jan 11, 2010	– Price Changed		*	Inactive SoCalMLS #7
Dec 02, 2009	– Listed (Active)		*	Inactive SoCalMLS #7
Dec 01, 2009	– Delisted (Expired)		—	Inactive SoCalMLS #6
Nov 03, 2009	– Price Changed		*	Inactive SoCalMLS #6
Aug 18, 2009	– Relisted (Active)		—	Inactive SoCalMLS #6
May 20, 2009	– Listed		*	Inactive SoCalMLS #6
May 19, 2009	– Delisted		—	Inactive SoCalMLS #5
Mar 08, 2009	– Price Changed		*	Inactive SoCalMLS #5
Feb 26, 2009	– Price Changed		*	Inactive SoCalMLS #5
Jan 20, 2009	– Listed		*	Inactive SoCalMLS #5
Jan 19, 2009	– Delisted		—	Inactive SoCalMLS #4
Jan 15, 2009	– Price Changed		*	Inactive SoCalMLS #4
Nov 26, 2008	– Listed		*	Inactive SoCalMLS #4
Nov 18, 2008	– Delisted		—	Inactive SoCalMLS #3
Nov 05, 2008	– Price Changed		*	Inactive SoCalMLS #3
Oct 26, 2008	– Price Changed		*	Inactive SoCalMLS #3
Jul 29, 2008	– Price Changed		*	Inactive SoCalMLS #3
Jun 30, 2008	– Price Changed		*	Inactive SoCalMLS #3
Jun 25, 2008	– Price Changed		*	Inactive SoCalMLS #3
Oct 27, 2007	– Listed		*	Inactive SoCalMLS #3
Aug 25, 2007	– Delisted		—	Inactive SoCalMLS #2
Aug 02, 2007	– Listed		*	Inactive SoCalMLS #2
Jul 24, 2007	– Delisted		—	Inactive SoCalMLS #1
Apr 22, 2007	– Listed		*	Inactive SoCalMLS #1

This property has been on and off the market for as long as I have been writing the IHB. He is on listing #8 and has been for the last year. If he is waiting for price appreciation at the high end to catch up to him, he may have this listed for a very, very long time.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 46 ECHO Gln Irvine, CA 92603

Resale House Price …… $3,399,000

Beds: 4

Baths: 4

Sq. Ft.: 6000

$566/SF

Property Type: Residential, Single Family

Style: Two Level, Tuscan

View: Canyon, City Lights, Hills

Year Built: 2007

Community: Turtle Rock

County: Orange

MLS#: S613556

Source: SoCalMLS

On Redfin: 461 days

——————————————————————————

On Redfin:

Maybe the lightest, brighest home in Shady Canyon. No dark, heavy feel. Ground floor has 2 bedroom suites, and 2nd floor has 2 bedroom suites including the lavish master suite. Plans available to modify 2nd floor to add 5th bedroom with no exterior changes. Two-story tower room can be office or coverted into bedroom suite, or loft. Master bedroom has 2 huge closets, sitting room w/ fireplace, plus exercise room with private entrance. Tuscany country exterior with sophisticated light, bright interior. Lots of French Doors and Windows looking South out over the Irvine Nature Preserve that will never be developed. Large yard with room for pool (easy access from yet to be built home next door). Very rustic, natural landscaping for a true country feel and privacy. Quiet, private location on low traffic street with high value homes. Use your smaller home, custom lot, or investment properties as down payment.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

I think this realtor has taken the light and bright meme as far as it can go.

Resale Home Price …… $3,399,000

House Purchase Price … $3,000,000

House Purchase Date …. 5/12/2006

Net Gain (Loss) ………. $195,060

Percent Change ………. 6.5%

Annual Appreciation … 2.4%

Cost of Home Ownership

————————————————-

$3,399,000 ………. Asking Price

$679,800 ………. 20% Down Conventional

4.48% …………… Mortgage Interest Rate

$2,719,200 ………. 30-Year Mortgage

$589,093 ………. Income Requirement

$13,745 ………. Monthly Mortgage Payment

$2946 ………. Property Tax (@1.04%)

$833 ………. Special Taxes and Levies (Mello Roos)

$708 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$500 ………. Homeowners Association Fees

============================================

$18,733 ………. Monthly Cash Outlays

-$1870 ………. Tax Savings (% of Interest and Property Tax)

-$3594 ………. Equity Hidden in Payment (Amortization)

$1125 ………. Lost Income to Down Payment (net of taxes)

$445 ………. Maintenance and Replacement Reserves

============================================

$14,839 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$33,990 ………. Furnishing and Move In @1%

$33,990 ………. Closing Costs @1%

$27,192 ………… Interest Points @1% of Loan

$679,800 ………. Down Payment

============================================

$774,972 ………. Total Cash Costs

$227,400 ………… Emergency Cash Reserves

============================================

$1,002,372 ………. Total Savings Needed

——————————————————————————————————————————————————-

In a recent housing market analysis, PIMCO's Rod S. Dubitsky concludes long-term drags on housing demand will persist beyond the current crisis with distressed supply.

Irvine Home Address … 1703 ELK Grv Irvine, CA 92618

Resale Home Price …… $385,000

Coming over the airwaves

The man says I'm overdue

Sing along, send some money

Join the chosen few

Well mister I'm not in a hurry

And I don't want to be like you

And all I want from tomorrow

Is to get it better than today

Step by step, one by one, higher and higher

Step by step, rung by rung climbing Jacob's ladder

Huey Lewis & The News — Jacob's Ladder

Yesterday I lampooned a writer who didn't want to understand the problems with housing. Today, I am featuring an article from someone who does understand what ails the housing market.

Are There Any Rungs Left on the Housing Ladder?

Rod S. Dubitsky — PIMCP — July 2011

• It appears that limited mortgage availability and vulnerable consumer health are restraining demand.
• Also weighing on the market is regulatory uncertainty over the future structure of mortgage finance and the resolution of foreclosure overhang.
• We believe the housing market, considered to be a key driver of the economic recovery, will generally remain weak for the foreseeable future.

While the housing market is well off its bubble-era peak, the pending distressed supply has been frequently mentioned as creating additional headwinds, thereby preventing the housing market from mounting a meaningful recovery. Perhaps less discussed, we believe demand-side drivers are just as important.

Additional headwinds contributing to what we see as a dramatic cyclical and secular decline in housing demand will likely continue to weigh on the housing market for the foreseeable future. In spite of what may be considered good affordability (driven by dramatically reduced prices and low interest rates), it appears that limited mortgage availability and vulnerable consumer health across the income and age spectrum are restraining demand and may continue to do so. Also weighing on the market is regulatory uncertainty over the future structure of mortgage finance and the resolution of foreclosure overhang. For all of these reasons, we believe the housing market, considered to be a key driver of the economic recovery, will generally remain weak for the foreseeable future.

Demand will remain weak. It will take time for the armies of the foreclosed to regain their credit. If the standards for a qualified residential mortgage make people save for 20% down payments, it will take a very, very long time for demand to return. It's difficult to save 20%, and with the debt loads most people carry with student loans and credit cards, saving 20% of the price of a house is practically unreachable.

The down payment barrier will create significant demand for non-conforming products and second mortgages, but these will carry a stiff price tag. Private mortgage insurance is very expensive, and in today's market second mortgages are not available. It will take many years before the cost of these down payment proxies come down. In the meantime, the amount people will be able to borrow will be significantly reduced.

We may see real dollar-backed demand once people's FICO scores improve and the are eligible for loans, but the amounts these recycled borrowers will be offered will be paltry, and house prices will need to reflect that for sales to occur.

Affordability vs. Availability

Housing affordability in many markets may be considered compelling relative to historical levels, but it appears to be increasingly difficult to get a mortgage. We believe tighter mortgage underwriting criteria and the generally weakened financial state of the average consumer is reducing demand. For example, the Federal Housing Administration (FHA), which allows a 3.5% down payment for the best borrowers, has significantly increased its annual mortgage insurance premiums and halved the closing costs that can be financed in the loan balance (which effectively means more cash up front to cover closing costs). Recently it was reported that the FHA is considering tightening its debt to income ratio standards. This, plus general credit tightening by the FHA, suggests that what once was considered the nation’s affordability loan product may no longer be as widely available or as affordable as it once was.

FHA loans will continue to become more expensive because the FHA is losing money. Risk will be appropriately priced or the government will be pouring money down a rathole forever.

For conventional mortgages, Government-Sponsored Enterprises (GSEs) such as Fannie Mae and Freddie Mac have imposed Loan Level Pricing Adjustments requiring a 25% down payment in order for the most qualified borrowers to get advertised rates. Those with credit blemishes and/or less cash to put down could face up to 3.25 additional points in fees (or an additional 65 basis point annual cost assuming a five-year life), according to Fannie Mae.

In addition to GSE and FHA tightening, lenders and mortgage insurers often have even tighter criteria imposing more stringent underwriting, additional fees and rate adjustments on top of the GSEs (FHA lenders in particular are generally requiring stricter underwriting than FHA’s guidelines).

The GSEs are tightening for the same reason the FHA is: losses. We will eventually plug that hole as well, but it will require continued tightening of credit standards.

For those expecting private mortgage money and the jumbo market to save the day, those lenders don't want to lose money either. Jumbo standards are already very tight, and as GSE loans become more scarce, portfolio loans will increasingly become the standard. This is good for the market in the long term, but the transition will be painful for those who want to see higher prices.

Saving for the traditional 20% down payment may increasingly become an insurmountable hurdle. To help gauge how much of a hurdle the 20% down payment can be (which outside of FHA loans is becoming the de facto standard), we estimated how long it would take the typical consumer to save for a down payment on a median-priced home, which was $158,700 as of 1Q 2011, according to the National Association of Realtors. Liquid assets held by consumers under 45 years old available for a housing down payment average $22,600, according to the Federal Reserve Board’s Survey of Consumer Finances. In order to cover a 20% down payment and 5% closing costs for the median-priced home, consumers need $39,667. Therefore the amount needed for a 20% down payment on the median home (and likely a modest home at that) was nearly two times the average savings rate.

Think about how much more difficult it is in Orange County. With a median home price north of $400,000, a buyer here needs to save $80,000. Orange County residents are not famous for high savings rates. Realistically, the only way an Orange County resident is going to come up with enough money is if they first buy a home with an FHA mortgage of 3.5%, and that house goes up enough that they can sell and obtain the 20% equity for the next house. It will take a long time before the move-up property ladder provides that kind of equity.

Looked at another way, factoring in the personal savings rate from after-tax income as reported by the Bureau of Economic Analysis, we can arrive at a “saving duration rate” expressed in years. We have applied this methodology to calculate the saving duration on a 20% down payment mortgage, which seems to be what the country is migrating towards as the standard mortgage down payment. Based on the current savings rate of 5.1% and after-tax income of $48,300 (as of 1Q 2011), it would take 16 years for buyers to save the 20% down payment based on the national median–priced home and well over 20 years in many coastal cities where prices are higher. This metric assumes a complete depletion of savings and no retirement savings and other simplifying assumptions. The dramatic spike in sales that occurred as a result of the recently expired housing tax credit shows that relatively nominal assistance in purchasing a home can have an impact on home purchases and affordability. This is a direct reflection of the sparse savings most potential homeowners have available.

People jumped on the tax credit because without it, they feared they would never be able to save enough to buy a house. For many this was probably true. Of course, most didn't realize prices would drop to the new level of affordability, but all those underwater bear rally buyers are very aware of that fact now.

Next Generation Balance Sheets

The hypothetical balance sheet of the next generation of would-be homebuyers looks grim. Average student debt for a bachelor’s degree reached $23,118 in 2008 [and it is projected to go higher (see Figure 1)]…

This younger age group will likely constitute the bulk of potential new entrants to the housing market, and whether a corresponding demand in housing will materialize hinges largely on their ability to save. Although some of these grim statistics can be considered a function of recent economic weakness, we believe that some amount of the reduction in graduate earnings power and rise in debt is a longer-term phenomenon that could serve to limit college graduate home purchasing power for the foreseeable future.

With the enormous debt loans students now have coming out of college. how are they supposed to pay off their student loans and save for the down payment on a house? The generation that came before them was handed the keys to any house they wanted without any sacrifice whatsoever. The current generation is being asked to endure an austerity never before witnessed. How many of them will endure a decade of austerity to own a home?

Retirement Budget Housing Ramifications

A growing percentage of the population appears to be approaching a limited resource retirement, whether due to inadequate retirement resources or doubts about whether “promised” resources will materialize (e.g. state and municipal retirement plans are under threat).

… We expect most will be hesitant to spend these precious savings on a home, given the destruction in housing net worth and potentially limited income generated from DC plans. This could continue to curtail demand for trade-ups, retirement homes, etc.

My parents recently retired. Their financial plan does not include buying a new primary residence as the one they have now is paid off. They are not alone.

The days of buying a house to retire on the Ponzi borrowing are over.

Regulatory Headwinds Abound

In addition to these affordability constraints, a number of legislative and regulatory developments could potentially squeeze availability of mortgage loans:

• Mortgages: Though it is highly uncertain what the future structure of the mortgage market will look like, one thing is probable: The mortgage market of the future will have less government and more private sector involvement, though this may take several years. This will likely result in rising mortgage rates in general and more risk-based pricing in particular as the private sector increases rates to weaker GSE-eligible borrowers.

Borrowing costs for houses cannot get any lower relative to incomes. We are at 4.5% interest rates. The only way house prices can go up is if income rise, and with 9% unemployment and grim prospects for an employment recovery, Bernanke will need to print a lot of money to get wages to rise.

• Basel III: Among other changes potentially impacting the mortgage market, Basel III imposes increased capital charges on retained mortgage servicing, which further increases the cost of securitization as servicers who retain the servicing will be subject to more onerous capital charges. Currently, 100% of the value of mortgage servicing rights is applied to Tier I capital. Under Basel III, the capital benefit of mortgage servicing rights will gradually be phased down to 15% of equity capital.

I had not heard of this. It's another issue that will increase the cost of lending and thereby drive up interest rates.

• Dodd-Frank: Among the elements of Dodd-Frank that could suppress mortgage supply are the risk retention rules that require securitizers to retain 5% of securitizations for loans not meeting Qualifying Residential Mortgages (QRM) criteria. Among other elements, QRM mortgages stipulate a minimum 20% down payment and a maximum mortgage debt ratio of 28%. The comment period has ended on these proposals and the rules are expected to become final within 60 days of the end of the comment period (e.g. 60 days from June 10, 2011).

With the uproar over 20% down payments, the more important 28% debt-to-income limitation has gone under the radar. If implemented, the restricted income requirement will greatly drive up lending costs on those who stretch the most.

This could further impair the use of securitization to help stimulate the supply of mortgages. Though the GSEs are exempt from the risk retention rules, given that the future mortgage market will likely be less reliant on the GSEs (and the degree of GSE involvement will be heavily dependent on the political landscape), the securitization market is considered critical to offsetting the dwindling capacity of the GSEs. With a potentially declining presence of the GSEs and a minimalist securitization market, there simply does not appear to be enough bank capital (and banks are the most likely source of alternatives to GSE and securitization funding) to adequately support mortgage lending. …

There will be no shortage of mortgage money, but it will become more scarce at high debt-to-income ratios. That is a good thing. It will drive up costs to the most foolish borrowers, and drive down prices on homes those borrowers would have otherwise purchased.

Conclusion: Appearances Can Be Deceiving

A basic concept of personal finance is that as long as borrowers have sufficient funds for a down payment and a stable source of income, the next rungs up on the housing ladder should be within reach. For the typical American homeowner, these requirements have traditionally been satisfied by solid employment for young graduates, reasonable pricing and availability of mortgage credit, accumulation of funds that allow trade-up purchases of larger homes and finally by the view of housing wealth as a potential income supplement during retirement.

However, we believe the challenging economic situation today has dramatically altered this progression. At the bottom of the ladder, dismal employment prospects and the debt situation of young graduates may be impeding their ability to save for a down payment. In the middle of the spectrum, negative equity is effectively preventing many homeowners from advancing (i.e., Core Logic estimates that over 23% of homeowners have negative equity in their homes preventing them from buying a new home). And at the top of the ladder, the erosion of retirement income could result in downscale housing investments and may push retirees to consign themselves to the status of lifetime renters.

Every rung on the property ladder is effected for different reasons, but they are all under siege.

Instead of serving as a potential wealth builder, housing has in some cases become a potential millstone that can drain limited remaining liquidity and retirement funds. Hence, even buyers who can climb on to the home ownership ladder may opt out of home ownership in favor of what is often times the more flexible, available rental option.

The change in buyer psychology resulting from a multi-year price decline will be difficult to overcome. In fact, I believe this will be the worst problem created by the false rally of 2009-2010. Because the government meddling sent a false buy signal and burned a group of cautious buyers, many will question the real bottom when it materializes. This uncertainty will make the ensuing recovery tepid for all but the most undervalued markets.

Tight mortgage lending standards, pending GSE reform and weak economic conditions across the demographic spectrum render the prospects for housing demand increasingly grim. Though there will be some rebound in demand as the economy finally achieves escape velocity and income and employment growth return to normal levels, we are arguing that post-recovery demand will be more tempered than it has been in the past. Further, people need to live somewhere, and investors will likely step into the breach (and have already, as a large percentage of today’s home sales are all-cash sales to investors) as more housing becomes rental housing. The implication is that we could see further home price declines as we move from a nation of owner occupants to a nation of renters/investors.

Though much has been made of the distressed supply overhang, we believe the demand side of the housing equation could more than overwhelm the impact of distressed housing supply. Absent a significant economic rebound or more dramatic policy response, housing demand will likely remain a drag on the housing market for the foreseeable future.

There is no reasonable policy response to jack up house prices. Everything attempted so far has been a dismal failure. There is neither the political will nor a viable plan to counter the economic drag created by falling home prices. With banks weakened by balance sheets full of toxic assets they cannot sell without becoming insolvent, new debt is not likely going to provide a strong economic stimulus that could boost housing.

Let's hope Bernanke prints enough money to make everything better… not.

2003 Rollback

The low end of the Irvine housing market continues to tumble. We are firmly back in 2003 pricing, and these owners are in danger of losing money on their purchase from eight years ago.

The owners of today's featured property used 100% financing back in early 2003, but they were restrained in their borrowing thereafter. They only added $14,000 to their mortgage debt during a time when everyone around them was going nuts. Good for them.

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 1703 ELK Grv Irvine, CA 92618

Resale House Price …… $385,000

Beds: 2

Baths: 2

Sq. Ft.: 1200

$321/SF

Property Type: Residential, Condominium

Style: Two Level, Contemporary

Year Built: 2000

Community: Oak Creek

County: Orange

MLS#: S666332

Source: SoCalMLS

Status: Active

On Redfin: 2 days

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IMMACULATE MEDITERRANEAN-STYLE TOWNHOME with PREMIUM QUIET LOCATION in upscale gated Oak Creek featuring two bedrooms, two & one-half baths, private patio, and two-car garage! IMPECCABLE THROUGHOUT this beautiful residence with ceramic tile entry, upgraded hardwood laminate flooring on both levels, cozy fireplace with custom tile surround, mirrored wardrobe in secondary bedroom, convenient inside laundry room, dramatic archways and niches! SPARKLING KITCHEN features Honey Maple cabinetry, dishwasher, gas oven, and stainless steel refrigerator! SPACIOUS MASTER SUITE with romantic balcony, dual vanities, oval bath, and walk-in closet. ENJOY AWARD-WINNING SCHOOLS and RESORT-STYLE pools, spas, tennis, sport courts, tot-lots, private Oak Park gym, upscale shopping, dining, and more!

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Proprietary IHB commentary and analysis

hardwood laminate? Is that a genuine imitation?

Resale Home Price …… $385,000

House Purchase Price … $356,000

House Purchase Date …. 5/30/2003

Net Gain (Loss) ………. $5,900

Percent Change ………. 1.7%

Annual Appreciation … 1.0%

Cost of Home Ownership

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$385,000 ………. Asking Price

$13,475 ………. 3.5% Down FHA Financing

4.48% …………… Mortgage Interest Rate

$371,525 ………. 30-Year Mortgage

$80,488 ………. Income Requirement

$1,878 ………. Monthly Mortgage Payment

$334 ………. Property Tax (@1.04%)

$90 ………. Special Taxes and Levies (Mello Roos)

$80 ………. Homeowners Insurance (@ 0.25%)

$427 ………. Private Mortgage Insurance

$283 ………. Homeowners Association Fees

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$3,092 ………. Monthly Cash Outlays

-$301 ………. Tax Savings (% of Interest and Property Tax)

-$491 ………. Equity Hidden in Payment (Amortization)

$22 ………. Lost Income to Down Payment (net of taxes)

$68 ………. Maintenance and Replacement Reserves

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$2,390 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$3,850 ………. Furnishing and Move In @1%

$3,850 ………. Closing Costs @1%

$3,715 ………… Interest Points @1% of Loan

$13,475 ………. Down Payment

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$24,890 ………. Total Cash Costs

$36,600 ………… Emergency Cash Reserves

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$61,490 ………. Total Savings Needed

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Have a great weekend,

IrvineRenter