Sunday, March 18, 2007

'You Don't Want to Kill the Golden Goose'

From Reuters:

Amid the confusion, homeowners like Lupe Perez say they went neglected. Perez said she faces an imminent foreclosure on her Sacramento, California, home after falling behind on mortgage payments.

"I feel conned," Perez said, noting she agreed to the loan's adjustable rate only after her loan officer assured her she would be able refinance later. But with her neighborhood's home prices down, lenders will not refinance, she said.

The 28-year-old state worker said she cannot afford her mortgage because its interest rate is at 11 percent, up from a 5 percent rate that expired late last year. She said losing the three-bedroom house will mark a personal defeat as she put $40,000 from the sale of an inherited house as a down payment.

"I'm tapped out," Perez said. "There's no hope."
From the Sacramento Bee:
"It's shocking to see the foreclosures in the paper," said Sen. Mike Machado, D-Linden. Machado is chairman of the state Senate's Banking, Finance and Insurance Committee and represents a Central Valley straining under the weight of its home loans. According to LoanPerformance.com, five Valley locations -- Sacramento, Merced, Modesto, Stockton-Lodi and Yuba City -- are among the nation's top 10 metropolitan areas with the highest incidence of subprime loan delinquencies.

Machado said he's seeing "good, functioning communities" suffering because of foreclosures. Last month, 455 people lost their houses to foreclosure in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties compared with 59 in February 2006.

Following a recent committee hearing rife with horror stories -- about lenders inflating borrowers' incomes, not explaining what they were getting into and committing outright fraud -- Machado introduced a bill to crack down on the industry.
...
"I would frame it as legislatures are engaging in their traditional knee-jerk overreaction," said K&L Gates attorney Jonathan Jaffe, a San Francisco adviser to the mortgage business. "You don't want to kill the golden goose. Housing is something that helps this country. You don't want to overregulate and prevent people who deserve to own homes from owning them."

"Sometimes legislators don't understand the full ramifications of bills coming in," said Jack Williams, president of the California Association of Mortgage Brokers. "That may harm the first-time homebuyers, putting them into the permanent renter class."

16 comments:

Sippn said...

This is going to sound cold but ...I think she made up the story because she heard it before... loking for hte angle to make someone else responsible for her problems.

Also, how bad was her credit if she's looking at an 11% loan after making a $40K down payment? And the equity is gone also?

Max said...

"I'm tapped out," Perez said. "There's no hope."

Brutal, if true.

I think we should take up the "sob story" gauntlet that ocrenter has thrown down. His expose on that LA Times anecdote was classic.

Anybody out there want to search recent transactions for "Lupe Perez"?

Cmyst said...

"This is going to sound cold but ...I think she made up the story because she heard it before... loking for hte angle to make someone else responsible for her problems."

An unfortunate habit of very many people, in all aspects of their lives. It prevents one from growth, because in order to grow you have to be able to learn from your mistakes, which means you have to admit that they are YOUR mistakes. Another reason why bailing people out can be more harmful than helpful.

"Also, how bad was her credit if she's looking at an 11% loan after making a $40K down payment? And the equity is gone also?"

My daughter visited some friends in Roseville this past weekend who told her that homes on their block have lost 80K in value since they purchased about a year ago.
If Perez purchased in a similar "trade up" neighborhood (remember, she had a home which she inherited)then it's possible.

Lander said...

I think we should take up the "sob story" gauntlet that ocrenter has thrown down.

Thank You, Los Angeles Times
Team BMIT
subprime victims right here

Luis said...

I believe her.. My wife and I heard the "you can refinance in a year and get rid of that ARM" line many times. And most folks trust their bank/loan officers, I guess they have to learn the hard way. We didn't buy into that, especially with the insane prices. We were considering moving out of state. But now we're in a wait and see mode. Maybe I can buy a house in Davis...

Gwynster said...

How many of us are waiting for Davis to crash? I wish they'd really screw up the schools here so all the transplants would leave.

Luis said...

I've been waiting for a while. It's been frustrating. I've been working in Davis for over 10 years and the only year I lived here was when I was a student (long ago - dorms). As soon as a somewhat affordable house is on the market, it gets snatched up in a day. We might get into a rental there in April and see what happens.

Gwynster said...

Both my husband and I work for UCD. We were about to leave for NC, TN, or KY when UCD offered my DH a promotion. I just got an promotion in Jan. I can tell you that UCD has big employee retention problems.

We rent here now and bike into work everyday. We want something small - 1000 sqft 3/2 ish and could care less about schools.
We've been saving since 98' for a house here almost bought in 99' when the prices started to get really out of wack. We have a sizeable downpayment but just aren't willing to risk it in an ARM or go stated income to get to a PITI that makes sense.

I think Fishtaco is waiting to buy in Davis too.

The funny part is the homes in Woodland that are trying to get Davis prices. Those are really in for a world of hurt.

paranoid renter said...

>>>>>
I wish they'd really screw up the schools here so all the transplants would leave.
>>>>>>>>>

Transplants aren't going away any time soon. World population is on the rise and you'll see density go up _everywhere_! The US population is probably rising at an even faster rate because of huge amounts of legal/illegal immigration.

drwende said...

My guess on Ms. Perez's sob story is that her current 11% rate got that high because she did something that lifted the usual annual lid on increases -- either there was a late payment before the interest skyrocketed, or she reached the limit for negative amortization.

Everyone was claiming that it would be possible to refi out of both option-ARMs and piggybacks -- I believe that part of the story. Heck, Ditech is still telling people that it'll be easy to refi their nasty ARMs to a "low fixed rate."

REhobbyist said...

I hope that prices come down enough so that that all of you get your Davis homes. What percent drop would you need for that to happen?

I think it would be hard to "screw up " Davis' schools, since college towns tend to have good students.

Jeff said...

What's a 28-year old state worker doing in this RE market anyway? I thought they didn't get paid much? Well, at least that's what her union would lead you to believe. Guess not, but I'm sure she'll have a better pension then the rest of us in the private sector. Not sure why she didn't run the numbers herself before signing on the dotted line instead of listening to a 21 year old mortgage broker for her biggest purchase in life. But she's probably a high level manager within the Dept of Finance. Unreal.

Sittin' Out This One said...

Max,

You may have called the "real(tor) deal" when looking deeper into the Lupe Perez transaction. It appears Lupe owns three properties:

300 Oberlin Way, Galt, with Maria Perez (1178 SF house, which could be the inherited house)

12997 Ivie Road with Salvador Lupe (1885 SF on 5 acres in Galt, which she bought for $270,000 on 10/23/2000)

and .....

7300 Stanwood Way, with Salvador (A Duplex purchased 6/13/2005 for $490,000)

Something is not passing the sniff test here. Perhaps Agent Bubble can pull some financing records on these properties and fill in some blanks? Can anyone run a Zip Realty profile?

By the way, the home on five acres she purchased in Galt in 2000 previously sold for $245,000 in 1992. The prior seller held it 8 years and sold the property to Lupe for 10% more than he paid. That seller probably lost money after 8 years of ownership costs, including the selling expenses. Lupe knows real estate does not always go up in value. She benefitted from that fact as a buyer on that property.

The Bee should do a follow up article and ask Lupe if there is really no hope, or if the house on the 5 acre parcel in Galt may offer a glimmer of salvation for her.

Risa said...

doesn't anyone read the fine print before signing these loans? If you can read, then you are the responsible party for the bind you are in. If the lender didn't include verbiage about not being able to refinance, take them to court...

Risa said...

"Sometimes legislators don't understand the full ramifications of bills coming in," said Jack Williams, president of the California Association of Mortgage Brokers. "That may harm the first-time homebuyers, putting them into the permanent renter class."

Hmmmm, I have been a member of the "renting class" for the past six years of this bubble and am still waiting patiently. Nothing harms a first-time buyer more than buying a house at these absurd prices. If you can't handle the mortgage and your bills, do not purchase a house at this time!

skipintro said...

Problem for bubblemeisters: Prices have gone up, say, 150%, over the last 6 years, and there're not really going down that much. I know, what until next year...

Not a flame; just an observation.