Take the Money and Run - Morristown Edition

Today we have another example of people taking all of the equity plus out of their house or HELOC Heaven as I like to call it. This case takes place in Morristown. Let's take a look at the property -

Property Features
Single Family Property Status: Active County: Morris 3 total bedroom(s) 1.5 total bath(s) 1 total full bath(s) 1 total half bath(s) 5 total rooms Style: Ranch Master bedroom	Living room Kitchen Basement Bathroom(s) on main floor Bedroom(s) on main floor Master bedroom is 13x10 Living room is 21x13 Kitchen is 11x14 Basement is Partially Finished 1 car garage	Attached parking Heating features: Radiators - Hot Water,Gas-Natural Interior features: Range/Oven-Gas, Eat-In Kitchen, First Level Rooms: 3 Bedrooms, Bath Main, Kitchen, Living Room, Second Bedroom is: 10x10, Third Bedroom is: 9x9 Exterior construction: Aluminum Siding Roofing: Asphalt Shingle Approximate lot is 71X178 Approximately 0.29 acre(s) Lot size is less than 1/2 acre Utilities present: Public Sewer,Public Water,Gas In Street

Lets look at the financial history of the property -

• The home was purchased for $335,000 in June 2004

• The first mortgage in June 2004 was for $301,500 with an ARM from Coldwell Banker Mortgage

• In August 2004 a mortgage of $34,962.47 (yes that number is right) Beneficial Mortgage Corp

• A third mortgage was taken out in March 2005 for $80,000 with Irwin Mortgage Corp

• In Sept. 2006 Coldwell Banker started the foreclosure process.

• Currently the property is bank-owned and for sale at $299,900 - approx 10% less than the 2004 purchase price.
  

It looks like the owners walked away when the foreclosure process started because the tax records show an unpaid sewage bill for the end of 2006.

The owner of the home did pretty well putting down a 10% down payment on the property of $33,500. They either scrimped and saved or received a generous down-payment gift, my guess is the latter. Within 2 months of purchasing the home they took out the second mortgage - they got their down payment back plus some of the closing costs back with this loan. The number looks strange - the first time I have run across with anything in the cents column. At this time they were ahead $1,492.67 - not much, but nice little pocket change for owning a home for two months. With the 2005 mortgage the owners were now ahead $81.492.67 - averaging a payout of $9,054 per month of owning the house. Their equity made an excellent second income, especially for such a modest property.

The losses for the house will be pretty substantial. The second and third mortgages will have a combined total loss of $114,962.47. After the standard 6% realtor's commission Coldwell will lose the least of the three lenders - $19,594. But the total loss of this property will be at least $134,556.47 which turns out to be approximately 40% of the original 2004 purchase price. Remember legal costs for the foreclosure process are not factored in the 40%, they could easily run this property to a total loss of 50% of the original purchase price.

As for the current status of the mortgage companies involved - Irwin Mortgage has shut its doors, Beneficial and Coldwell are still going strong - but with losses like these how long they will survive.