The limit on the size of the loan the GSEs will insure falls from $729,750 to $625,500 on October 1, 2011. The increased mortgage costs coupled with large inventories will lower house prices in that range and above.

Irvine Home Address … 9 SHADE TREE Irvine, CA 92603

Resale Home Price …… $987,000

Oh my God

Becky, look at her butt

It is so big

I mean her butt

It's just so big

Sir Mix-A-Lot — I Like Big Butts

Irvine borrowers like big loans, perhaps not with the same zeal as Sir Mix-A-Lot likes big butts, but borrowers here do like big loans. The cost of those loans is going up. This should be good news for squatters. If the banks are willing to wait until prices come back, delinquent mortgage squatters should get several more years of free housing.

Home buyers try to beat “jumbo” loans squeeze

By Linda Stern — WASHINGTON — Wed Apr 20, 2011 5:52pm EDT

(Reuters) – Bethany and Karl Schreiber are hunting for a nice big house in the pricey Washington, D.C., suburbs and they are facing a deadline: In just a few months their third child will be born, and the tiny two-bedroom they've been inhabiting will officially get too small.

So the story begins with a sympathetic couple who's burgeoning entitlements demand larger housing, reality be damned.

But there's a second deadline looming for them as well. Beginning on October 1, the government will dial back on the size of mortgages it guarantees in high-cost areas like San Francisco, New York and Washington.

After that, the maximum loan amount that Fannie Mae and Freddie Mac will back is scheduled to drop from $729,750 to $625,500. And that may make mortgages more expensive or harder to get for buyers like the Schreibers, who are shopping in the $700,000 range and would prefer to make a downpayment of 10 percent or less.

And Irvine. This change strikes at the heart of the Irvine single-family detached market. Many Irvine properties have loans between $729,750 and $625,500. Every buyer contemplating a loan in that range will face an interest rate half a percent higher. As a result, buyers will either need to come up with 10% more income to afford the same mortgage, or the loan they will qualify for will be 10% smaller. Since most Irvine borrowers are maxed out, loan balances in this price range will likely decline by 10%, and the houses they were intended to finance will similarly drop in price.

A lower conforming loan limit will seriously erode the upper-middle tier of the Irvine market. The already precarious high end will see continued pricing pressure as lenders continue to deflate loan balances.

“If we wait a year, we may not be able to afford as big a house,” Bethany said in an interview. “Rates and housing prices are probably going to go up.”

Either these people have been brainwashed by their realtor, or they don't understand the problems with supply which are more likely to see motivated sellers pushing prices down. In the long run, house prices will go up, but it may be a while.

The Schreibers concede their timing is mainly inspired by their own family circumstances. But others may be motivated to act now because of reduced government-backed loan assistance, housing experts say. Those programs were put in force as part of the stimulus package after the housing collapse.

“For people planning on exiting the market altogether (such as retirees), that is a compelling proposition,” says Stan Humphries, chief economist at Zillow. Home sellers may have to be patient to get the price they want. The curbs on government-backed loans could, at the margin, reduce the available pool of buyers, he said.

With prices going down, sellers will have to be patient, very patient. Many accepted facts of real estate become untrue when prices decline.

MILLION-DOLLAR DWELLINGS

Anybody who wants a government-backed mortgage for a $1-million home after October 1 may have to come up with a $370,000 downpayment instead of $270,000, says Rob Chrisman, an independent mortgage banking consultant from San Rafael, California.

It won't be quite that dramatic, but the already strained down payment levels on high end properties may get stretched once again. Sales volumes will fall from their already anemic levels.

The deadline will mean most to upper-middle-class buyers and sellers in costly real estate markets where $1 million buys a nice house, but not a mansion.

To be sure, that part of the market is picking up. Real estate agents operating in tonier neighborhoods are reporting brisker business this spring than in recent years.

Bullshit. Every word of those last two sentences was spin and bullshit. SoCal March home sales plummet 5.2% YOY, now 21.4% below average.

Sotheby's, which specializes in luxury homes, reports sales making double-digit gains for the first quarter of this year over last year. The National Association of Realtors reported that the sale of homes over $1 million were up 5.1 percent in March over the same month last year.

More spin and bullshit.

“We are seeing a normal recovery,” said Jed Smith, managing director of quantitative research. “I'm sure somebody will accelerate their activity (because of the expected drop in government-backed loan limits), but I doubt you'll see a lot of acceleration because of that.”

“That really isn't on anybody's radar,” agreed Linda Chaletzky, the Schreiber's agent, and a specialist on Washington's tonier suburbs. “But things are hopping.”

She said she is not worried about the loan clampdown,

“The mortgage industry will find a way around it, because they will have to. If they don't, they will go out of business,” Chaletzky said. She expects private mortgage lenders to step in and fill that space when the government backs down.

The level of ignorance among industry professionals is truly astounding. Financial innovation is an oxymoron. The industry doesn't have to find a way around anything. Underwriting stable 30-year fixed-rate mortgages can supply all the money the housing market needs to provide everyone who can afford to own the opportunity.

What puts mortgage lenders out of business is underwriting stupid loans to people who can't or won't pay them back. Unfortunately, that is usually the result of financial innovation. That plus a large government bailout.

BIG MORTGAGES

It was only in recent years that the loan limits went so high. Mortgages that are too big to be sold to Fannie and Freddie are termed jumbo loans and are backed privately. Until 2008, all home loans over $418,000 were considered jumbo loans. In that year, a stimulus-focused Congress twice raised the limit on loans the government would back in high cost areas, first to $625,500 permanently, and then to $729,750, temporarily.

Since then, Fannie and Freddie have backed an increasing share of that market. In 2010, so-called “jumbo conforming” loans, those over $417,000 and government-backed, made up 6.73 percent of loan originations, according to CoreLogic.

That top temporary limit was extended twice, but is expected to expire at the end of September.

It's an outrage this limit was ever extended above $417,000. Private lending market made incredibly irresponsible jumbo loans, and in order to bail out the banks, we needed to increase this limit to have the federal government guarantee the loans underwritten during the decline. It was the only way to shift much of the losses from private industry to the public sector.

When that happens, lenders who want to make loans over $625,500 will have to hold onto the mortgage themselves or find private investors to buy them. And while an active and hungry secondary market for these jumbo loans has yet to materialize in the post-crash world, there's some evidence that lenders are preparing to move into that space and pick up any slack that the government leaves.

“There's plenty of money out there,” said Steve Hopps, chairman of the California Mortgage Bankers Association.

Private lenders are preparing to step in, according to Guy Cecala of Inside Mortgage Finance, a research firm. In the last quarter of 2010, private lenders originated more loans over $417,000 (the traditional jumbo market) than did government agencies, he said.

Nice spin. He has compared apples to oranges and made the situation sound better. The fact is that government backing on loans over $417,000 is limited to a few high-price areas like Irvine, and it is capped at $729,750. The everything else market should be larger, much larger.

The lower loan limits will leave about $10 billion more in loans for private lenders to handle, reckons Cecala, and he expects lenders to go after the market aggressively.

Lenders are eager to throw away more money to support a declining market, right? Give me a break.

BIGGER DOWN PAYMENTS

Investors like the fact that jumbo loans tend to be safer and more profitable than smaller ones. The privately-backed mortgages require bigger downpayments (currently about 30 percent of the home's value, instead of the 20 percent more typical in less expensive loans), which adds security.

Also adding to their allure, the loans carry higher interest payments; the spread between the so-called conforming loans backed by Freddie and Fannie and jumbo loans is running about 0.5 percentage points higher, said Cecala. Furthermore, a higher proportion of jumbo loans are made on a variable rate basis, which is less of burden for holders, Cecala said.

Going still higher in the homes market, there will be less impact from the shrinking jumbo. Many buyers of multi-million dollar homes do all-cash deals and are relying on cash more than ever before, according to Stan Smith, a real estate agent who works in Beverly Hills area.

The biggest impact might be limited to that space and those neighborhoods occupied by people like the Schreibers — folks who see themselves as middle class but in very expensive areas.

“I see borrowers, if they want that kind of loan, paying a little more,” says Chrisman. “But it's not going to be a life changing event for a couple of orthopedic surgeons in Beverly Hills.”

(Reporting by Linda Stern; Editing by Richard Satran)

If the entire housing market were composed of orthopedic surgeons, then local house prices might not fall. Since that isn't the case, the upper-middle-class borrower is going to be impacted by the increased costs, loan balances will go down, and prices will go down with them. This fall and winter should see the end of any spring rally and another leg down in pricing for above-median properties.

It was a bear rally, not the bottom

Apparently, the owner of today's featured property did not see the recent post on the IHB demonstrating the double-dip in local home prices. This owner believes the resale value of this house has appreciated 15% while the market has gone down.

It delusional enough when sellers price their underwater properties at breakeven, but this owner actually believes profits are available. Recent comps paint a different picture.

$775,000 52 SHADE TREE Sold on Apr 14, 2011

0.1 miles 2 bd / 2 ba 2,000 Sq. Ft.

Each seller usually tries to indulge their fantasies of what their house is worth.The ones that sell their properties are the ones who abandon their dreams and take what the market will bear. The rest hold their properties forever waiting for the profit they are entitled to.

Irvine House Address … 9 SHADE TREE Irvine, CA 92603

Resale House Price …… $987,000

House Purchase Price … $850,000

House Purchase Date …. 8/28/2009

Net Gain (Loss) ………. $77,780

Percent Change ………. 9.2%

Annual Appreciation … 9.0%

Cost of House Ownership

————————————————-

$987,000 ………. Asking Price

$197,400 ………. 20% Down Conventional

4.78% …………… Mortgage Interest Rate

$789,600 ………. 30-Year Mortgage

$177,138 ………. Income Requirement

$4,133 ………. Monthly Mortgage Payment

$855 ………. Property Tax (@1.04%)

$300 ………. Special Taxes and Levies (Mello Roos)

$206 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$248 ………. Homeowners Association Fees

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

$5,742 ………. Monthly Cash Outlays

-$1000 ………. Tax Savings (% of Interest and Property Tax)

-$988 ………. Equity Hidden in Payment (Amortization)

$360 ………. Lost Income to Down Payment (net of taxes)

$143 ………. Maintenance and Replacement Reserves

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

$4,257 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,870 ………. Furnishing and Move In @1%

$9,870 ………. Closing Costs @1%

$7,896 ………… Interest Points @1% of Loan

$197,400 ………. Down Payment

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

$225,036 ………. Total Cash Costs

$65,200 ………… Emergency Cash Reserves

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

$290,236 ………. Total Savings Needed

Property Details for 9 SHADE TREE Irvine, CA 92603

——————————————————————————

Beds: 2

Baths: 2

Sq. Ft.: 2330

$424/SF

Property Type: Residential, Condominium

Style: Two Level, Mediterranean

View: Mountain

Year Built: 2003

Community: Turtle Ridge

County: Orange

MLS#: U11001594

Source: SoCalMLS

Status: Active

——————————————————————————

Gorgeous 2 bedroom, plus den in beautiful gated community of Canyon s Edge in Turtle Ridge. This premium location is surrounded by rolling hills. This totally detached home is beautifully upgraded with custom cabinetry, dark wood flooring, and large marble kitchen. Den can be a 3rd bedroom or 2nd master on ground floor. Formal dining room, family room with fireplace and master bedroom with retreat, walk in closet, large bathroom with huge tub. Very private and custom designed yard with built in BBQ with refrigerator. A Fabulous fireplace with a separate lounge area with fountain. This elegant home has wonderful trails. Just minutes to beach and easy access to 73 & 405. Built in 2003 with over 2330 sq. feet. Located within the Irvine Unified School District.

The Real Housewives of Orange County who lives in Irvine recently received a NOD. Apparently, she underwent plastic surgery while not paying her mortgage.

Irvine Home Address … 79 OXFORD #49 Irvine, CA 92612

Resale Home Price …… $250,000

Money changes everything

Money, money changes everything

We think we know what we're doin'

That don't mean a thing

It's all in the past now

Money changes everything

Cyndi Lauper — Money Changes Everything

I saw a recent headline on another Nicolas Cage foreclosure, and it inspired me to do a little research into our local celebrities to see who is posing and who is for real. I didn't find anyone who was for real.

Graphrix, formerly of the IHB, discussed the Real Housewives of OC in A Real Housedebtor of OC.

Having grown up and lived most of my life in OC I have come to the conclusion that the people here who seem to have money can be broken down to three types of people. The first is the person who actually has money and accumulated wealth. They may be a business owner or they may have a decent paying job. They may not have the most glamorous job but they live within their means and have saved and invested well. They don't really ever mention money or talk much about material items. They also are the most humble and happiest people I meet. The second is the person with a very well paying job but they live paycheck to paycheck. They always have a newer car, nice high end clothes and the latest gadgets like a plasma TV. They are the one who will have the IPhone before everyone else. I know too many people who lived like this in the RE industry. The third is the person who lives beyond their means. These are the people who you would never know that they are dead broke but appear rich and are best exemplified by Irvinerenter's post on Cultural Pathology. The third is in the worst situation today if they own a home because they no longer have the appreciation to bail them out. They are the type that always talk about money and material things. They think this will make people like them and they believe that really one day they will be rich. The only problem is they never seem to catch up or the reality is no matter how much they believe in reality it never happens.

In the post The Grand Illusion, I discussed the pursuit of status posers engage in this way:

Status is an internal perception about what people believe other people think about them. It has nothing to do with what other people actually do think about them (as if that mattered anyway).

For instance, I think the women on the The Real Housewives of Orange County are soulless gold-diggers. My derision is only eclipsed by my disrespect for the way they live, what they believe, and what they represent. However, they think I, and everyone else who knows them through the show, believes they are something special, something to envy as if they really have it “going on.” They have status. Not because people regard them highly, but because they think people do. But I digress…

For people who don't have the internal strength to base their self worth on what they believe about themselves, they end up basing their self worth on their perceptions of what other people think about them. Once they have given their power away to others in this manner, people will expend tremendous amounts of time, energy and money in a vain attempt to influence other people — hence we have fancy cars, opulent houses, designer clothing, and all the other trappings of conspicuous consumption. In my opinion, this is a sickness (their mind control fails on me.) It is a consuming disease which fed on the borrowed money made available during the housing/credit bubble.

Most watch The Real Housewives of Orange County and feel superior — how could you not — but some actually watch looking for role models or a how-to manual for being pretentious — a ghastly side effect our sons and daughters pay with their souls.

Newest ‘Housewife’ defaults on Irvine home loan

February 8th, 2011, 12:15 pm — posted by Marilyn Kalfus, real estate reporter

Peggy Tanous, who will make her debut on the Real Housewives of Orange County when the new season airs on March 6, has something in common with a few of the other housewives, in addition to her looks: Real estate woes.

Tanous has received a notice of default on her Irvine house, public records show.

The house, below, was purchased in 2006 for $1,379,000 from Lennar Homes of California. The default notice is dated Nov. 16, 2010. Records show the amount in default at $190,713. The loan was for $1 million.

She purchased this home on 2/17/2006 for $1,379,000 using a $965,300 first mortgage, a $344,750 HELOC and a $69,250 of her wealth in a down payment. It's possible she put over $400,000 down if she didn't use the HELOC, but evidence is to the contrary.

On 10/24/2006 she refinanced with a $1,000,000 Option ARM with a 1.5% teaser rate, and she obtained a stand-alone second for $312,540. If she didn't use the HELOC at the purchase, she pulled the money at this refinance. It seems pretty obvious she couldn't afford the house.

To be in default for $190,713, she hasn't been making any payments for quite a while. Loan servicing usually adds 1.5% to the loan balance each month for missed payments, fees, and so on. On a $1,000,000 loan, that comes to about $15,000 per month. To be $190,715 in arrears, the mortgage payment must have been missed for at least 12 months, and probably longer.

Since she began the show last season, she has undergone some cosmetic surgery. A surgery that took place while she wasn't paying her mortgage.

“Orange County women are very big on up-keep. Some people go in for boob jobs has much has they go in for oil changes.” – Peggy Tanous commenting on her third boob job. “The Real Housewives of Orange County” Episode Five.

Back when she was contemplating the boob job, did her and her husband look at their income and their obligations and decide it was better to have big tits than pay a mortgage? Lenders must love that kind of decision making. Entitlements trump financial obligations every time.

She is a delinquent mortgage squatter behaving like a woman of wealth and means. Some option ARM lender or MBS investor figured enabling this lifestyle was a good idea. They deserve the losses they will endure. Unfortunately, our tax dollars may bail everyone out.

Tanous could not be reached for comment, but we’re seeing if someone from Bravo TV might want to give us an update.

The 41-year-old former bikini model and stay-at-home mom is “an odd mix between a holistic, new age woman and a wealthy Orange County party girl,” according to a Bravo news release.

Wealthy? She didn't have any wealth when she bought this house at the peak, and she is currently so far underwater that any real estate “wealth” she once had is long gone. The ability to look wealthy with enormous amounts of debt doesn't make her wealthy, it makes her a poser.

She is married to an entrepreneur who has fallen on hard times. I can appreciate the ups and downs of entrepreneurship. My own burn rate is too high, but then again, I didn't go borrow $1.3M with an Option ARM either. Perhaps an entrepreneur shouldn't take on enormous debt service payments. Unless the house is going to pay for it all….

As our TV bloggers have reported,Peggy is married to Micah Tanous, an Internet marketing entrepreneur. The couple are friends with Jim and Alexis Bellino, current cast members of the show.

The Bellinos are facing foreclosure on their 6,400-square foot Newport Beach house, which is on the market as a short sale for $3,395,000.

Several ’Real Housewives of Orange County‘ have had real estate headaches:

Lynne Curtin:

• O.C. Housewife Lynne avoids eviction
• O.C. Housewife Lynne to bankruptcy court?

Jeana Keough:

• ‘Real Housewives’ Coto home in default
• Real Housewife saves Coto home from foreclosure
• ‘Housewives’ Coto home listed for $5.5 million
• ‘Housewife’ gets loan modification for Coto home

Tamra Barney:

• Real Housewife takes O.C. house off market
• ‘O.C. Housewives’ Ladera short sale in escrow
• ‘Housewife’s’ short sale has bank’s approval
• ‘Housewife’ foreclosure postponed to March
• Housewife sells Ladera home as short sale

Perhaps I should do a follow up on the Ponzi activities of the posers above? Do you think their mortgage history would be interesting?

And in other celebrity news, the losses keep mounting for Nicolas Cage.

Nicolas Cage sells Middletown mansion for $6.2 million to Massachusetts couple

By Chris Barrett

PBN Staff Writer

Twitter: @CBarrettRI

MIDDLETOWN – Actor Nicolas Cage has finally sold his Middletown mansion. The 27-acre estate sold for $6.2 million on Friday, according to town records and Lila Delman Real Estate.

The Hollywood actor has been trying to sell the so-called Gray Craig Manor House since 2008, shortly after he ran into personal financial problems. Land records say Pamela and Andrew Constantine of Forestdale, Mass., purchased the property.

Cage’s Hancock Park Real Estate Trust had most recently listed the property for $7.75 million. The trust had purchased the property for $15.7 million in July 2007.

“This is a significant sale in the context of the realities of today’s market,” Lila Delman President Melanie Delman said. “Rhode Island is positively impacted in that, as a previously somewhat undiscovered treasure, our high-end properties present as a significant value relative to other Northeast destinations.”

In a news release, the real estate company said that the Constantines planned to rent the coastal property “while not enjoying the property themselves.” The release added that the two planned to continue work to preserve the home.

The brick and stone mansion built in 1924 offers sweeping views of Nelson Pond and the Atlantic Ocean. The listing boasted that the home includes a “library with a soaring barrel-vaulted ceiling, a formal living room with sweeping water views, a spacious dining room, a vintage conservatory, a handsome billiard room, and a gourmet kitchen with stone fireplace, custom hickory ceilings and antique terra cotta floor tiles.”

At least Nicolas Cage wasn't a poser. He was a fool, but he could back up his debts with $20,000,000 a movie earnings. He will earn his way out of this disaster. It still has to suck to be him right now.

Actor Nicholas Cage was so heavily intoxicated at the time of his arrest this weekend that he didn’t know where he lived, Radar Online.com reports.

Cage was arrested in New Orleans Saturday morning, where he is currently filming the movie “Medallion.”

Onlookers complained that Cage was “very drunk” and arguing loudly with his wife Alice Kim on the street about a home he mistakenly believed was his own. According to a statement released to Radar by the NOPD, Kim tried to correct him, at which time Cage allegedly pulled Kim by the arm to the home he believed was their rental.

Apparently, he is not adjusting well to being a renter.

Sold to the bank at the peak

The owner of today's featured property demonstrates there are two ways to profit from a transaction at the peak. The best way is to sell and rent. This property would have fetched $315,000 at the peak. However, since most people don't sell and chose to rent, the other way to sell at the peak becomes much more common — people sell the house to the bank by cashing out all their equity.

The drawback of this approach is that it ruins the credit of the borrower, but the windfall is so large, that many borrowers benefit more than it costs them. The owner of today's featured property borrowed $315,000 on 10/30/2006. That is more than three times their original $101,250 mortgage when they purchased in May of 2000.

Irvine House Address … 79 OXFORD #49 Irvine, CA 92612

Resale House Price …… $250,000

House Purchase Price … $135,000

House Purchase Date …. 5/16/2000

Net Gain (Loss) ………. $100,000

Percent Change ………. 74.1%

Annual Appreciation … 5.6%

Cost of House Ownership

————————————————-

$250,000 ………. Asking Price

$8,750 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$241,250 ………. 30-Year Mortgage

$54,685 ………. Income Requirement

$1,276 ………. Monthly Mortgage Payment

$217 ………. Property Tax (@1.04%)

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

$52 ………. Homeowners Insurance (@ 0.25%)

$277 ………. Private Mortgage Insurance

$271 ………. Homeowners Association Fees

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

$2,093 ………. Monthly Cash Outlays

-$120 ………. Tax Savings (% of Interest and Property Tax)

-$297 ………. Equity Hidden in Payment (Amortization)

$16 ………. Lost Income to Down Payment (net of taxes)

$51 ………. Maintenance and Replacement Reserves

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

$1,744 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,500 ………. Furnishing and Move In @1%

$2,500 ………. Closing Costs @1%

$2,412 ………… Interest Points @1% of Loan

$8,750 ………. Down Payment

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

$16,162 ………. Total Cash Costs

$26,700 ………… Emergency Cash Reserves

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

$42,862 ………. Total Savings Needed

Property Details for 79 OXFORD #49 Irvine, CA 92612

——————————————————————————

Beds: 1

Baths: 1

Sq. Ft.: 768

$326/SF

Property Type: Residential, Condominium

Style: One Level, Contemporary

View: Trees/Woods

Year Built: 1981

Community: University Town Center

County: Orange

MLS#: S654022

Source: SoCalMLS

Status: Active

——————————————————————————

This is a short sale subject to lender/lien holder approval. Commissions are subject to lender/lien holder approval. Any reductions in commission to be split equally between brokers.

BTW, the British really get it….

One of the biggest drags on the economy at every scale is unemployment among real estate agents, mortgage brokers, appraisers, home builders, engineers, architects, and a number of related fields.

Irvine Home Address … 6 BUTTERFLY Irvine, CA 92604

Resale Home Price …… $470,000

I'm tellin' you it's got to be the end,

Don't bring me down,no no no no no,

I'll tell you once more before I get off the floor

Don't bring me down.

Electric Light Orchestra — Don't Bring Me Down

Our current economic woes were caused by the real estate sector. Lenders emboldened by sophisticated risk-shifting and securitization pumped trillions of dollars into real estate loans — loans that ultimately went bad because incomes were not sufficient to support them.

The resulting collapse in real estate prices has caused residential investment to fall to record lows.

That plunging blue line is just another statistical measure. The human toll in suffering among everyone involved in the real estate industrial complex can't be captured by a graph.

Mortgage industry workforce plunges by more than 50% in five years

April 11, 2011 — E. Scott Reckard, Los Angeles Times

Here are some hard numbers for the downturn in mortgage employment I wrote about last week — and they show a reduction of more than 50% in home-lending jobs since the peak of the housing and commercial real estate bubble.

The news peg for the story was mortgage goliath Wells Fargo & Co. saying it had eliminated 1,900 home-lending jobs, mostly workers hired temporarily to deal with last year's mini-boom in refinancings.

But that's nothing compared with the industry's overall decline from more than 500,000 employees in late 2005 and early 2006 to 248,000 in February, according to Bureau of Labor Statistics data compiled by the Mortgage Bankers Assn.

The latest numbers are the lowest for the industry since August 1997, according to the mortgage bankers group. The data, which arrived too late to be included in last week's story, showed that employment peaked at 505,000 in February 2006.

The numbers probably overstate mortgage employment slightly, because the trade group combined the BLS categories “real estate credit” and “mortgage and nonmortgage loan brokers.” But the lion's share of the jobs are related to mortgages and the downturn is dramatic.

Following up on the story, Calculated Risk posted an interesting chart showing the correlation between 30-year fixed mortgage rates and refinancings. One notable detail is how round numbers catch the attention of homeowners. Check out the giant spike in refis when the rate dipped below 6% in 2003 and the also pronounced but smaller spike when it fell below 5% in 2009.

Mortgage employment also may have been affected by new licensing requirements for employees of nonbank lenders, adopted as part of regulations cleaning up the mess from the financial crisis. The licensing has made it more expensive for these independent brokers and mortgage bankers to maintain their payrolls, people in the industry say.

Chicago Bancorp, a large mortgage-banking firm, completed its purchase of Generations Bank, a Kansas City, Kan., savings and loan, last week to gain access to a nationwide lending market without the added licensing costs, Chicago Bancorp founder Stephen Calk told the Kansas City Star.

A spark from the outside

The economy will not fully recover until the real estate sector is put back to work. No, it doesn't have to attain the unsustainable heights of the housing bubble. A return to historic norms will feel like a boom compared to the last 4 years.

Real estate employment is an economic amplifier. Once people go back to work, new households begin to form, and demand for housing picks up, then and only then will residential investment pick up. Once residential investment improves, people working in real estate will add to demand for its own product, and the economy will gain a synergy from the real estate sector going back to work.

Unfortunately, it will require an outside economic stimulus to begin the chain reaction. In 2009, the federal reserve tried to prop up the housing market in hopes it would stimulate the economy and put the real estate sector back to work. Unfortunately, the policy was unsuccessful because the underlying problems with toxic mortgages was simply too big to be papered over by our central bank.

Until some other sector of the economy grows enough to put people back to work, the household formation necessary to stimulate real estate demand isn't going to happen. In the meantime, most of the real estate sector is unemployed, and the entire economy suffers along with it.

Severe HELOC abuse or mortgage fraud?

The owner of today's featured property weren't content to merely strip every penny from the walls the moment it appeared, she managed to process concurrent refinances at two different banks at the top of the real estate bubble. The timing certainly looks like mortgage fraud.

• Today's featured property was purchased on 3/30/1999 for $235,000. The owner used a $187,920 first mortgage and a $47,080 down payment. She waited four years before going Ponzi.
• On 3/18/2003 she refinanced with a $180,700 first mortgage and a $100,000 HELOC. At this point, she had been paying off his mortgage for four years, but the $100,000 HELOC was too tempting to resist.
• On 7/29/2003 she refinanced with a $273,000 first mortgage and a $78,000 stand-alone second.
• On 5/24/2004 she obtained a $154,000 HELOC.
• On 8/18/2005 she obtained a $238,000 HELOC.

This is where the mortgage activity looks like mortgage fraud. Ordinarily, people only process one loan at a time because each lender will want to be in first position. Lenders check the property records before funding a loan, but if a borrower can time the funding at both banks to happen within a few days of one another, the recording of the first loan will not show up before the second one funds. The lender on the second loan believes they are in first position because the other loan, the one that funded a few days earlier, has not shown up in the property records. It's only after a week or two that the lender who funded the second loan realizes they were ripped off.

• On 2/23/2006 they refinanced their first mortgage with Bank of America for $540,000. They recorded first, so they are in first position.
• On 2/28/2006 they obtained two loans from Hanmi Bank. The first was a $270,000 mortgage, and the second was a $129,000 mortgage. Hanmi Bank recorded second, so they are totally screwed.
• Between the three loans recorded within days of one another, the total property debt is $939,000.
• Total mortgage equity withdrawal is $751,080.

There is no telling when she quit paying, but one of the lenders finally recorded a NOD in March.

Foreclosure Record

Recording Date: 03/23/2011

Document Type: Notice of Default

With over $900,000 in debt and a recovery closer to $450,000, someone is going to lose a lot of money. Hamni Bank will have to go after this deadbeat for theft via mortgage fraud. I doubt they have any assets for the bank to recover.

Irvine House Address … 6 BUTTERFLY Irvine, CA 92604

Resale House Price …… $470,000

House Purchase Price … $235,000

House Purchase Date …. 3/30/1999

Net Gain (Loss) ………. $206,800

Percent Change ………. 88.0%

Annual Appreciation … 5.7%

Cost of House Ownership

————————————————-

$470,000 ………. Asking Price

$16,450 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$453,550 ………. 30-Year Mortgage

$102,808 ………. Income Requirement

$2,399 ………. Monthly Mortgage Payment

$407 ………. Property Tax (@1.04%)

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

$98 ………. Homeowners Insurance (@ 0.25%)

$522 ………. Private Mortgage Insurance

$215 ………. Homeowners Association Fees

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

$3,641 ………. Monthly Cash Outlays

-$393 ………. Tax Savings (% of Interest and Property Tax)

-$558 ………. Equity Hidden in Payment (Amortization)

$31 ………. Lost Income to Down Payment (net of taxes)

$79 ………. Maintenance and Replacement Reserves

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

$2,799 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,700 ………. Furnishing and Move In @1%

$4,700 ………. Closing Costs @1%

$4,536 ………… Interest Points @1% of Loan

$16,450 ………. Down Payment

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

$30,386 ………. Total Cash Costs

$42,900 ………… Emergency Cash Reserves

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

$73,286 ………. Total Savings Needed

Property Details for 6 BUTTERFLY Irvine, CA 92604

——————————————————————————

Beds: 3

Baths: 2

Sq. Ft.: 1950

$241/SF

Property Type: Residential, Single Family

Style: Two Level, Other

Year Built: 1977

Community: 0

County: Orange

MLS#: P776205

Source: SoCalMLS

Status: Active

On Redfin: 9 days

——————————————————————————

Beautiful hard wood floor with high ceiling, Granite counter top and Newer cabinet in Kitchen. Morrored Wardrobes, Custom added storage area in Master bedroom closet. Large lush backyard Backing to Greenbelt, Spacious and airy floorplan. Great location for shopping, park, and schools.

With house prices falling, particularly at the high end, many of the wealthy are choosing to rent and wait out the storm.

Irvine Home Address … 52 FANLIGHT Irvine, CA 92620

Resale Home Price …… $1,190,000

I am, I'm too fabulous

I'm so, fierce that it's so nuts

I live, to be model thin

Dress me, I'm your mannequin

Fashion put it all on me

Don't you want to see these clothes on me

Fashion put it all on me

I am anyone you want me to be

Lady Gaga — Fashion

Renting is the latest fad. The rich are dumping their high end real estate and renting instead. Without house price appreciation, even the rich don't like to waste their money owning real estate. Prices at the high end are falling, and with large inventories both visible and shadow, prices will continue to fall.

Orange County asking prices by price range

Leasing is in fashion among wealthy house hunters

Niche data and anecdotal evidence point to a surge in high-end rentals. Instability in housing prices is one reason the rich are shying away from purchases.

Real estate agents have been hustling lately but not necessarily to sell homes. Instead, leasing is in vogue, particularly at the top of the price spectrum.

If phone inquiries are an indication, interest in leasing luxury homes is intense, said Justin Mandile, an agent in the Sotheby's International Realty office in Beverly Hills.

He and partner Mary Swanson received 10 to 15 calls a day for two months on a five-bedroom house in the Sunset Strip area priced at $3.5 million for sale or $10,000 a month to rent. After initially holding out for a sale, the owner recently accepted a short-term lease.

“Surprisingly, there are that many people looking for a $10,000 lease,” Mandile said.

The cost of ownership with a big loan would be about $20,000 a month. Not exactly a great cashflow deal, but some properties truly are special enough to command huge ownership premiums — not single-family detached homes in suburbia (see: Irvine). Unfortunately for this seller, there are too many special properties and not enough buyers who think they are that special.

No single clearinghouse tracks such data for all of Southern California, and many top-dollar leases are handled privately, away from the prying eyes of the public. Still, niche data and anecdotal evidence point to an upswing in upscale rentals.

Lease offerings priced at more than $10,000 a month were up 15% through the first part of April over the same period last year on the Combined L.A./Westside Multiple Listing Service, while those in the $7,500-to-$10,000 price range saw a 7% increase. OCHouseRentals.com, which specializes in luxury leases, reports that business has been brisk in Orange County as well.

“We're seeing increased leasing across the board — both luxury and non-luxury properties,” said Cary Hoffman, manager of Rodeo Realty's Encino office, which has more than 70 agents and listings from the Westside to the south San Fernando Valley.

Are people wising up to the renter's subsidy? When real estate prices aren't rising, it's much cheaper to rent high-end real estate than it is to own it. Wise rich people will chose to rent and let someone else be an owner who is subsidising their housing, particularly when prices are falling.

For instance, let's say you own a million dollar home like today's featured property where the cost of ownership is nearly $7,000 per month. This house, or one similar to it, could be rented for $4,500. If the price of the $1,000,000 property does not change, the renter saved $30,000 just in cost of living. If the value of the house also declines — as is happening at the high end — then the owner loses two ways. When you also take into account the fact that the renter got beneficial use of the property while the owner made huge payments and lost equity. I'd rather be the renter — at least until the market turns.

Underlying the activity in leasing is consumer uncertainty about the direction of housing, said Paul Habibi, a UCLA lecturer on real estate, investment and development.

“People want to wait to buy when they are sure there is a floor underneath the housing market,” Habibi said. “When government intervention pulls back, then we will see where the housing market really is.”

We are seeing where the housing market really is. Sales are weak and prices are down. The market is falling again because a natural bottom was not allowed to form the first time. We delayed the bottom two years, perhaps raised the bottom 15% to 20% locally, but we prolonged our agony to adjust to the reality of the housing crash.

Beyond the usual remodelers and divorcees, those seeking leases include people who can no longer qualify for mortgages.

“The high end got hit last with the wave of foreclosures” and short sales, said Hoffman, who has been an agent for 29 years. “People coming out of those homes have to have a place to go.”

They may want to stay in the same school districts or close to familiar shops and businesses. For others, it's a matter of keeping up appearances.

“Some people who are losing $3-million homes are very happy, happy to lease for $10,000 a month because they want to still look like they are making it,” said broker Anita Rich, who oversees the Rich Group Keller Williams in Encino. “It's really important they still have an address that goes along with the lifestyle.”

Interesting that posers turn to renting when the housing ATM gets shut off. Perhaps that's a renter's buy signal? Be a poser contrarian.

Leasing still represents a relatively small segment of the market compared with sales, but it's not uncommon to see homes listed both for sale or lease these days, creating a safety net for the homeowner if the house doesn't sell right away.

Rich recently completed three leases for $8,000 a month and up. One was a Hollywood Hills three-bedroom listed for sale at $1.7 million or for lease at $12,000.

“They got a lease offer before an offer on a sale,” said Rich, who has 30 years of real estate experience.

Adding to the supply of lease houses are absentee owners and investors who haven't been able to sell and decide to take their for-sale homes off the market, put them up for lease and “sit out for six months or a year” or more, Rich said. “They don't want the perception that the property is getting stale or old.”

Other houses for lease are owned by people who purchased at the height of the market. The owners are keeping their homes and renting them out to cut costs.

Floplords are everywhere. The failed plan B of any speculator is to rent the property out. Only when they try this do they realize the ramifications of negative cashflow. If held long enough, the property may go up in value, but it may never recover the accumulate negative cashflow while the floplord waited for prices to go up.

“I know of several cases where people moved into other arrangements that cost them less,” UCLA's Habibi said.

Downsizing is the reason that restaurant owner Benny Borsakian gives for leasing out his primary residence.

He recently signed up a two-year tenant for his 4,400-square-foot home in Encino with the help of Rodeo Realty agent Carol Wolfe, who also represented the renter. His family grown, Borsakian no longer needs a house of that size.

“It's just me, my wife and a housekeeper,” he said.

Borsakian, whose house is nearly paid off, plans to re-evaluate the situation when the lease is up.

Although she doesn't agree with the thinking, Wolfe is seeing more potential sellers choose to be landlords rather than sell now. “They are going to hold on to the property longer and sell when the market is better,” she said.

Everyone's playing the housing market. It's a big casino where timing your position to flip from renter to owner and visa versa has a major impact on your financial well being.

It's a sentiment also being expressed on the part of tenants unsure that the housing market has hit bottom. Luc Vanhal, who is renting Borsakian's home, looked at four or five other places before settling on the Encino house.

The first-time leaser needed a place close to his children's schools but didn't want to buy another house. “Why make a huge commitment to something that's clearly not worth it right now?” said Vanhal, president of a direct marketing company.

In Orange County, Jay Gordon of OCHouseRentals.com recently leased out a house on Newport Beach's Lido Isle, where homes can cost from $3 million to $25 million, for $9,500 a month. “You'd spend twice that to live in the same exact area” if you bought, said Gordon, chief executive of the Laguna Beach company.

“Renters are not worrying about losing money,” he said. “Leasing takes the guesswork out of where the market is going.”

lauren.beale@latimes.com

Was it all a dream?

What if prices grind lower for a decade or more here like they did in Japan?

Californians have come to believe their real estate market is truly magic. Prices go up at rates that far exceed inflation or wage growth enriching every home owner. If you own a house you have the potential for unlimited wealth and HELOC buying power for doing absolutely nothing. It is free money from the housing market gods.

Like a child outgrows magical thinking in their pre-teens, will Californians let go of their fantasies about real estate? Would a slow grinding decline squeeze the kool aid out of the California dream? The generation burned by the California housing market may continue to shun real estate just as a generation after the stock market crash of the 1930s stayed away from the stock market.

If the house doesn't provide the HELOC money to support an upscale suburban lifestyle, what's the point in the high price and huge payment?

If interest rates go up, HELOC money goes from being free to being very expensive. Falling interest rates to permit larger debts to be serviced with the same payment. Rising interest rates cause larger payments on the same debt.

Those people who come of of this recession with large debts need to hope the upcoming monetary inflation translates to higher wages. For those in the right industries, rising wages will enable them to at least tread water with their old debts. Those who are in stagnant industries, like real estate, may not see rising wages, and the upcoming inflation may make their debt service payments untenable, and many may be pushed into bankruptcy.

Was it all a dream? Will Californians realize their delusions about housing were all wrong? Or will the gold rush mentality of California's past stay alive and prompt a new generation to chase free money in the housing market? The market is always right, no matter how irrational it is.

A multi-generational house in Irvine

This property a semi-private room or casita for long-term guest stay or running a home business. There aren't many houses like this in Irvine, which is probably a good thing: I see the lure of staying home in Irvine. Many would probably never leave.

Peak buyers iin Woodbury are taking big losses to get out. The owners of today's featured property borrowed nearly the current asking price. After nearly 5 years of ownership, if they sell the property, they lose all their equity, and if they don't have other resources, it may become a short sale.

That's got to hurt.

Irvine House Address … 52 FANLIGHT Irvine, CA 92620

Resale House Price …… $1,190,000

House Purchase Price … $1,476,500

House Purchase Date …. 11/17/2006

Net Gain (Loss) ………. ($357,900)

Percent Change ………. -24.2%

Annual Appreciation … -4.9%

Cost of House Ownership

————————————————-

$1,190,000 ………. Asking Price

$238,000 ………. 20% Down Conventional

4.87% …………… Mortgage Interest Rate

$952,000 ………. 30-Year Mortgage

$215,793 ………. Income Requirement

$5,035 ………. Monthly Mortgage Payment

$1031 ………. Property Tax (@1.04%)

$450 ………. Special Taxes and Levies (Mello Roos)

$248 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$105 ………. Homeowners Association Fees

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

$6,869 ………. Monthly Cash Outlays

-$1371 ………. Tax Savings (% of Interest and Property Tax)

-$1172 ………. Equity Hidden in Payment (Amortization)

$446 ………. Lost Income to Down Payment (net of taxes)

$169 ………. Maintenance and Replacement Reserves

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

$4,942 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$11,900 ………. Furnishing and Move In @1%

$11,900 ………. Closing Costs @1%

$9,520 ………… Interest Points @1% of Loan

$238,000 ………. Down Payment

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

$271,320 ………. Total Cash Costs

$75,700 ………… Emergency Cash Reserves

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

$347,020 ………. Total Savings Needed

Property Details for 52 FANLIGHT Irvine, CA 92620

——————————————————————————

Beds: 6

Baths: 6

Sq. Ft.: 3649

$326/SF

Property Type: Residential, Single Family

Style: Two Level, Contemporary

Year Built: 2006

Community: 0

County: Orange

MLS#: S648953

Source: SoCalMLS

Status: Active

On Redfin: 52 days

——————————————————————————

Fabulous Mille Fleur plan 3, majestically sitting on a Cul-de-sac, this beauty offers 6 bedrooms and 6 1/2 bathrooms. main house has 5 bedrooms, each bedroom with their own bath and independent Casita with its own bath, ideal for in-laws, Teenagers, .. .Professionally designed landscaped and hardscaped, gorgeous brick steps with light collumns invites you in, Beautiful back yard with built-in BBQ and Bar. Rediscover passion in cooking in this grand gourmet kitchen with kitchen Island, granite counter tops and stone back splash and SS appliances. Just walking distances to Woodbury elementary school and Woodbury Town Center and to the Common. This is a must see.

Buyers often ignore short sale properties because the approval process takes too long and many deals fall through.

Irvine Home Address … 15 SAGE #41 Irvine, CA 92604

Resale Home Price …… $309,900

Sometimes, I get so tense

But I can't speed up the time

But you know, love,

there's one more thing to consider

Said woman take it slow

And things will be just fine

You and I just used a little patience

Guns N' Roses — Patience

Lenders, sellers, buyers, all are playing the patient waiting game. Lenders and sellers are waiting for prices to go up — which isn't going to happen as long as they need prices to go up because each needy sale prevents prices from appreciating. Buyers are also forced to be patient as lenders withhold product from the market they are afraid to sell because they know it would lower prices.

With everyone involved being forced to be patient, sales are near all-time lows, and the housing market languishes under the weight of distressed inventory.

Delays in Short Sales Frustrate Home Buyers

Short sales could accelerate the resolution of the housing crisis—if the process is streamlined by the big federal mortgage lenders

By Kathleen M. Howley

Charles Wright of Henderson, Nev., fell behind on his mortgage last year after a divorce squeezed his finances. He twice arranged to sell his house for less than its loan balance, a so-called short sale, only to see the buyers walk away because it took too long to get approval from the holder of the mortgage. “I couldn't even get a call back, never mind a yes or no,” says Wright, 30, whose loan was owned by Fannie Mae, the government-run mortgage-finance company. “Why make it so hard to sell when the alternative, foreclosure, means an even bigger loss for lenders?”

Good question. Thomas Popik, research director for Campbell Surveys in Washington, which conducts national monthly surveys of 3,000 real estate brokers, says more short sales could stem steep home-price declines. Although the home is sold for less than the mortgage in a short sale, it stays out of foreclosure, where the holder of the loan seizes the house and auctions it off at a steep discount to current value. “Any time a short sale can be substituted for a foreclosure, it's extremely good for the housing market,” says Popik.

Mr. Popik is wrong. Short sales do more damage to the housing market than foreclosures do. Let me explain.

Short sales are more damaging

I buy and sell foreclosures. The biggest market risk and uncertainty I face is the presence of short sales.

When I buy a foreclosure, the sale at auction is not considered by appraisers in the resale market. Since my auction purchase is all-cash, it is not considered indicative of resale market value. In short, foreclosures do not hurt resale market value unless and until they are resold on the MLS for less than current comps. Since most flippers are trying to maximize profits, they are trying to sell for the highest price they can get, so reductions from current comps are minimal. Short sales don't work the same way.

Short sales are a pain for buyers. They take forever to close, and there is no guarantee that the deal will close even after waiting months for the lenders to approve the sale. The only reason buyers go through the effort is because they either can't find other properties, or they expect a good deal for their patience. Short sales reset market values far more often than foreclosure resales do.

I deal with this market reality every day. Short sales are like ticking bombs waiting to take down the market comps when they close. It is common to Las Vegas to see short sales sell for 10% to 15% below recent comps. Two or three of these in a neighborhood, and appraisers cannot ignore the comparable resales, and the entire neighborhood is brought down. When lenders won't provide the loan, it doesn't matter if the buyer is willing, the sale isn't going to happen unless the buyer backs their willingness with cash. Short sales are comp killers.

And now back to the article:

There were 243,000 short sales in the first 11 months of last year, according to CoreLogic, a research firm in Santa Ana, Calif. That compares with 1.2 million notices of pending auctions in the same period. A lengthy consent process by loan holders deters potential buyers from agreeing to a short sale. In a normal home sale, people make an offer and get a decision from its owners within days, if not hours. For a short sale, the average time between a price bid and response is three and a half months, according to Campbell. The California Association of Realtors estimates that delays kill about half the short-sale deals in the state.

Who wants to wait around for a capricious lender?

The biggest mortgage holders, Fannie Mae and Freddie Mac, completed 7,768 short sales in January, down from 9,373 in the prior month. “I get the sense that Freddie and Fannie have been trying harder to make things work, say, over the last 8 or 10 months, but it still is a fight to get these deals through,” says Ron Wilczek, owner of Metro Phoenix Homes, a real estate agency in Tempe, Ariz.

Fannie Mae approved a short sale for Wright, the Nevada homeowner, after he found a third buyer. A deal went through on Feb. 15, two weeks before the house's scheduled foreclosure auction. The price was $265,000, 37 percent less than what Wright paid in 2007 and about $125,000 short of what he owed Fannie Mae.

If Wright's property had ended up in foreclosure and got sold at the local auction venue—a parking lot near the casinos and wedding chapels of the Las Vegas Strip—Fannie Mae's loss might have been greater. Foreclosed properties typically sell at a 28 percent discount to current market value, according to RealtyTrac, a real estate data company in Irvine, Calif. At least Wright, in his short sale, sold his house for close to its current value.

Did the lender really obtain a greater recovery at short sale? If they had foreclosed in a timely manner months ago when the borrower first went delinquent, prices were higher, and the recovery would have been greater. Plus, the real estate commissions and other sales costs not paid at auction eat into recovery amounts. Further when you factor in the portfolio cost of lowering neighborhood values, and short sales aren't the magic elixir they are made out to be.

When it comes to approving short-sale offers, what seems like dawdling to buyers and sellers may be lightning speed to the mortgage industry, says Faith Schwartz, executive director for the HOPE NOW Alliance in Washington, a group of home-loan investors, lenders, and mortgage servicers including Bank of America and Wells Fargo. Before a short-sale offer can be approved, the holder of the home loan must agree to the price, she says. Other parties may have to assent as well. About half of troubled mortgages involve homes that have so-called second liens such as home equity loans, according to the Treasury Dept. Mortgage insurers may get involved, too.

“All those pieces have to fall together, and that takes time,” says Schwartz. Fannie Mae has set up a program that lets real estate agents talk directly with Fannie when they run into roadblocks during a short sale, says Marcel Bryar, a vice-president at the mortgage financier.

Remember, a short sale is an extended negotiation between the borrower and the subordinate mortgage holders. It isn't usually the first mortgage holder who objects to the sale. Since the second mortgage is generally a complete loss and most borrowers are insolvent, this negotiation can easily get bogged down.

The Federal Housing Finance Agency, which regulates Fannie and Freddie, wants short sales to be “consummated efficiently,” says Corinne Russell, a spokeswoman. Short sales can prevent neighborhood decay by limiting the number of vacant homes and can “ultimately help save taxpayer dollars,” she said in an e-mailed statement.

That's just stupid. Absentee owners generally don't bother with short sales. Most short sales are delinquent owners occupants squatting in the property. They have no incentive to move out until the short sale is completed because they will have to start paying for housing once they leave. Plus, what possible incentive does an short-sale occupant have to maintain the property? Any money they spend is not going to come back to them as equity.

Marie McDonnell, owner of Truth in Lending Auditing & Recovery Services in Orleans, Mass., says loan servicers may be responsible for the delays in short sales. Servicers earn fees by sending the monthly bills and collecting mortgage payments, though they typically don't own the mortgage. They also are in charge of communicating with the mortgage holder when the homeowner wants a short sale. That power gives the servicers the motivation to drag their feet as they rack up additional late fees. In Wright's case, Fannie Mae says it acted in a timely manner once it was told by the servicer of Wright's request.

Banks are in no hurry to recognize the losses on their second loan portfolio. With billions in bad debts on their books, the major banks — who are also major loan servicers — are not foreclosing on those homes where they hold the second mortgage. Those borrowers blessed with those circumstances will be allowed to squat indefinitely.

Chris Killian, a vice-president at the Securities Industry and Financial Markets Assn. in New York, says servicers dealing with an avalanche of defaulted mortgages generally don't have an interest in keeping loans in limbo. Says Wright: “Everyone could save a lot of headaches if the process could be speeded up.”

The bottom line: Short sales could accelerate the resolution of the housing crisis—if the process is streamlined by the big federal mortgage lenders.

The bottom line: short sales make the housing crisis worse by lowering neighborhood comparables. Until we stop messing around with short sales are begin expediting foreclosures, prices will continue to grind lower as each new short sale resets the comps to lower values.

When do we get our next HELOC?

The owner's of today's featured property have been bouncing along with the same maxed-out mortgage balance for the last 5 years. They must have gotten tired of waiting for the next HELOC cash infusion, and instead they are selling the property short. They don't want to hang around and pay off any debts. The house is supposed to do that.

• Today's featured property was purchased on 4/4/2000 for $160,000. The owners used a $127,920 first mortgage, a $23,985 second mortgage, and a $8,095 down payment. They waited two years before going Ponzi.
• On 4/30/2002 they refinanced with a $201,562 first mortgage and obtained a $21,500 HELOC.
• On 5/28/2003 they refinanced with a $206,000 first mortgage.
• On 12/2/2003 they refinanced with a $244,000 first mortgage.
• On 1/8/2004 they obtained a $30,000 HELOC.
• On 11/4/2004 they obtained a $100,000 HELOC.
• On 6/20/2006, right at the peak, they refinanced with a $378,000 first mortgage.
• On 3/28/2007 they refinanced with a $378,000 first mortgage.
• On 9/10/2007 they refinanced with a $377,000 first mortgage. They actually paid it down!
• On 6/19/2008 they refinanced with a $382,000 first mortgage.
• Total mortgage equity withdrawal is $230,095.

This property is being offered as a short sale. Perhaps the California Housing Finance Agency will provide them mortgage assistance. These borrowers seem worthy of a bailout, right?

Irvine House Address … 15 SAGE #41 Irvine, CA 92604

Resale House Price …… $309,900

House Purchase Price … $160,000

House Purchase Date …. 4/4/2000

Net Gain (Loss) ………. $131,306

Percent Change ………. 82.1%

Annual Appreciation … 5.9%

Cost of House Ownership

————————————————-

$309,900 ………. Asking Price

$10,847 ………. 3.5% Down FHA Financing

4.87% …………… Mortgage Interest Rate

$299,054 ………. 30-Year Mortgage

$67,787 ………. Income Requirement

$1,582 ………. Monthly Mortgage Payment

$269 ………. Property Tax (@1.04%)

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

$65 ………. Homeowners Insurance (@ 0.25%)

$344 ………. Private Mortgage Insurance

$377 ………. Homeowners Association Fees

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

$2,636 ………. Monthly Cash Outlays

-$148 ………. Tax Savings (% of Interest and Property Tax)

-$368 ………. Equity Hidden in Payment (Amortization)

$20 ………. Lost Income to Down Payment (net of taxes)

$59 ………. Maintenance and Replacement Reserves

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

$2,199 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$3,099 ………. Furnishing and Move In @1%

$3,099 ………. Closing Costs @1%

$2,991 ………… Interest Points @1% of Loan

$10,847 ………. Down Payment

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

$20,035 ………. Total Cash Costs

$33,700 ………… Emergency Cash Reserves

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

$53,735 ………. Total Savings Needed

Property Details for 15 SAGE #41 Irvine, CA 92604

——————————————————————————

Beds: 2

Baths: 2

Sq. Ft.: 1022

$303/SF

Property Type: Residential, Condominium

Style: Two Level, Traditional

View: Park/Green Belt

Year Built: 1976

Community: Woodbridge

County: Orange

MLS#: S654957

Source: SoCalMLS

Status: Active

——————————————————————————

Stylish and so sharp – 2-story END UNIT in Woodbridge located across from a large park with peaceful views. A sunny & bright remodeled kitchen has custom French doors leading out to your own large private patio with storage area and fountain. Offering 2 spacious bedrooms, 2 tastefully remodeled bathrooms, whirlpool tub, attractive wrought iron on staircase, 2 ceiling fans, inside laundry and cozy living room with crown molding. One of the best locations in the complex with all the amenities Woodbridge Village has to offer, including pools, tennis courts, lakes, parks and much more. Please visit www. wva. org for additional community photos and details. IMMACULATE HOME AND IN MOVE-IN CONDITION!