Friday, November 30, 2007

"A lot of people are scared"

Jim Wasserman in the Sacramento Bee:

Throughout 2007, borrowers in trouble with lenders have called here, written for help and cried in conversations about their desperate straits. For a newspaper, it's become a gut reality check, a window into this tough time of reckoning.
...
For some it's been easy, in e-mails or reader forums, to rip borrowers for overreaching, for not reading the fine print and for being completely irresponsible. Some were. But assigning blame can't mask the hurt out there. What we know for sure is what we hear on the phone, almost daily now. Well over two years after the housing boom ran out of steam, a lot of people are scared. People are fighting over money and horrified at how unutterably wrong their decisions to buy turned out to be. Story after story tells about their inability to sell or refinance to escape the nightmare.
From the Sacramento Bee:
Assembly Speaker Fabian Núñez said Thursday that the crisis in subprime mortgages has become so grave that Gov. Arnold Schwarzenegger should call a special session to deal with it.
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In an illustration of the complexity of the crisis, though, one of the homeowners presented at the press conference as a victim said the house he lost was actually one of two that he owned. While many owners have lost homes they occupied, others were investors who saw the real estate run-up of the past decade as an investment opportunity.

Sacramento resident Carlos Villegas said he was forced into foreclosure when monthly payments on the house he bought in 2005 shot up from $2,200 to $3,550. "They gave me three days to move," he said. "I feel frustrated with the system.

In response to questions from reporters, Villegas said after the foreclosure, he moved back to a smaller house he had purchased 10 years earlier, which he had been renting out. Villegas took out an adjustable rate equity loan on his first house shortly before he bought the second, more expensive one for $385,000 in 2005, according to property records.

Afterward, Núñez's office pointed out that Villegas lost a substantial amount because of the foreclosure, including college savings for his children, and had to displace tenants who had been living in his first house.
From the Sacramento Bee:
Not everyone believes that Gov. Arnold Schwarzenegger's pact with mortgage lenders to help troubled subprime borrowers will dampen the impact of California's foreclosure crisis.
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[S]ome doubt that freezing subprime loan rates for those who can't afford higher payments will make a dent. Thousands of 2006's subprime borrowers are already defaulting before their loans reset, said economist Chris Thornberg, head of Los Angeles-based Beacon Economics. "It's not the mortgage that's the problem," he said. "A lot of people bought houses they just can't afford."

Thornberg said there really isn't much anyone can do. Falling home values are aggravating a foreclosure problem that's likely to worsen, he said. Values will fall, he said, until most people can afford homes again.

Jeff Tarbell, managing partner of Sacramento-based Comstock Mortgage, also doesn't see much practical impact from the governor's announcement. Tarbell said it takes time to verify that a subprime borrower can't make higher payments – and lenders don't have the staff. Tarbell wants a freeze on rate resets – at least temporarily – across the country to allow the real estate market to stabilize. "We've got to stop the pricing decline," he said.
From the Sacramento Business Journal:
The Sacramento mortgage loan officer who purchased Dunmore Homes -- which in 2004 posted a quarter-billion dollars in revenue -- paid $500 for the troubled builder, according to Dunmore's bankruptcy case. That bargain-basement price has one of the company's major lenders crying fraud, and suing for payment of its outstanding loans and punitive damages.

16 comments:

AgentBubble said...

"They gave me three days to move," he said. "I feel frustrated with the system.

No, they gave you nearly 4 months. The sherriff gave you 3 days. And the system didn't do this to you...YOU did.

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In response to questions from reporters, Villegas said after the foreclosure, he moved back to a smaller house he had purchased 10 years earlier,


Couldn't care less for the guy after reading this part....

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"It's not the mortgage that's the problem," he (Thornberg) said. "A lot of people bought houses they just can't afford."

"We've got to stop the pricing decline," he (Tarbell) said.

Two very interesting sentiments...Fortunately, one understands basic economics.
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andnee said...

Amazing, a mortgage Broker is calling for pricing declines to cease. That moron should understand that the reason we are where we are is the prices, and no amount of lamenting or hand wringing will stop the bleeding until people can afford again.
So the price declines are exactly what the "system" has needed. We are getting pricing laxative finally to get the market "moving". Its a wonderful thing.

Diggin Deeper said...

andnee...

Really doesn't get much simpler does it...?

Diggin Deeper said...

I'm really surprised that we haven't had more lawsuits up to this point. There are so many "victims" and so many lawyers in this state, you'd think they'd find each other soon.

sacramentia said...

"he moved back to a smaller house he had purchased 10 years earlier," ... but was able to keep the Escalade with 26" rims.

I made that up - but COME ON - everyone pulled all this equity out and not one story talks about where the money went?

It would be a much more balanced story to hear:

"Mr. Homeowner making 35k/yr. refinanced for $350k. He bought a great boat, enjoyed it for 2 years, drove a Mercedes and took his wife to a nice dinner 3x/week for 2 years. He was even able to take the family on a vacation they will never forget. Unfortunately when the music stopped, he lost everything and must start from scratch. Mr. Homeowner is very thankful that the Hedge funds and Investment Bankers funded a lavish lifestyle for him and his family. The Bankers gave him some memories he'll have forever."

ralphk said...

I bought a GMC Yukon to haul around the kids, bikes and kayaks a few years ago. The current "value" has really taken a beating with gas prices.
I think the government needs to step in and "freeze" my depreciation and gas prices. I'm a victim, nobody told me the this would happen.....nobody told me gas prices would go up...

Patient Renter said...

agentbubble is dead on.

Cmyst said...

I'm the biggest bleeding heart in the world, and I've just had it with these people.
What about me, and MY family? I'm not fence-sitting, or trying to time the market. I can't afford anything worth buying! Prices were crazy, and now they're just ludicrous. Perhaps by spring they'll merely be laughable.

I'm in a foul mood. It just seems like the many, many people like me who made the more fiscally responsible choices are the losers. These other people got to live large, and now everyone wants to "help" them. Well, how about helping the rest of us? Or are we just supposed to shut up and pay for mistakes we DIDN'T make, and that many of us were actively trying to prevent others from making?

Gwynster said...

This is the description on a house I'm kinda sorta looking at (though still freakishly overpriced):

'This property has many great qualities. All offers must accompany copy of earnest money check minimum 1%, proof of funds for down payment, lender approval letter. Sold as is, no warranties expressed or implied. Seller chooses title co. Bank owned. This is not a short sale! Hurry, make an offer!'

LOL Think they are getting tired of unqualified bidders? If they want all that, they'd better reduce the price. And any time the seller demands choosing the title co., I get nervous.

Buying Time said...

G -

I swear I read that exact description on a property today in my neck of the woods. Guess they must be really pressed for time since they can't come up with anything original.

A description like that is rather memorable.

Buying Time said...

Its coming back to me...I think the description I read also offered to cover some of the closing costs.

aggiealum said...

If they must "bail out" these people, then at least place some "mark" on them. Like maybe some sort of modified bankruptcy? ie if they are bailed out with a freezing of their subprime, then they receive a credit rating of non-existant? But the gov't probably doesn't want that. It needs those people to spend, spend, spend, especially on credit.

G Spot1 said...

Can anyone explain this one to me?

5170 GROSVENOR CIR, Granite Bay, CA 95746
MLS #: 70115731

Price Reduced: 11/09/07 -- $899,500 to $864,500
Price Reduced: 11/29/07 -- $864,500 to $799,500
Price INCREASED: 11/30/07 -- $799,500 to $839,000

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A realtor trying to get attention for the property? Sellers change their mind on the price cut? Seems like game-playing to me....

Diggin Deeper said...
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Diggin Deeper said...
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Diggin Deeper said...

I'd bet there's plenty of qualified bidder's that got stopped out at the funding window.

From The Daily Reckoning:

“U.S. credit drying up, raising fear of recession,” reports the front page of the International Herald Tribune. “Financial arteries constrict at fastest pace ever recorded.”

“Credit flowing to American companies is drying up at a pace not seen in decades,” continues the report, “threatening the creation of new jobs and the expansion of businesses, while intensifying worries that the economy may be headed for a recession.

“The combined value of two major sources of credit – outstanding commercial and industrial bank loans, and short-term loans known as commercial paper – peaked at about $3.3 trillion in August... By mid-November, such credit was down to $3 trillion, a drop of nearly 9%. Not since the Fed began tracking such numbers in 1973 have these arteries of finance constricted so rapidly.”

“This is a very big deal,” said Andrew Tilton, a senior economist at Goldman Sachs.

When lenders won't loan, it really doesn't matter how high your credit score is. And if no one's loaning money at rates that people can afford to pay, real estate takes a direct hit.

So the Feds are going to step and become the savior to those who had no business borrowing money in the first place, while under the radar, they save the poor lender who's pockets are empty.

ralphk....you're in the credit business...what do you see?