Saturday, May 31, 2008

Loss in Lincoln Park

This is the first of a double weekend HELOC Heaven example post. Our profile is a buyer who bought at the end of the Great Housing Bubble. The price was higher than it really was and they ended up losing everything - well everything but money since they were 100% financed. So lets look at the property -

Here is the property info -

BedroomsStyleLotYear BuiltBathroomsGarageSquare FeetPrice
4 Single Family Home 7450 1945 1
1200 $185,000

Here are the financials -
  • The property was purchased in June 2006 for $325,000.
  • The first mortgage in June 2006 was for $260,000 using an ARM with Eastern American Mortgage Co.
  • The same day second mortgage, also June 2006, was for $65,000 also with Eastern American Mortgage Co.
  • The foreclosure process started Feb. 2007.
  • The REO property was previously listed at $185,000 and has been reduced to the current price of $175,000.
As stated above, the property was 100% financed at purchased. The previous owners held the property for almost a decade so this was not a scam on their end. The lender, Eastern American Mortgage Corp has gone out of business - it looks like they closed up shop in January 2008.

So back to the example, 100% financing on a property and within 8 months the foreclosure process started. Counting back 90 days to the first missed payment - that means within 5 months of purchasing the property the new owner was in trouble. Now whoever purchased the loan from Eastern American Mortgage is going to lose $150,000 outright plus the foreclosure expenses. The property financials do not look good anymore but packaged in an SIV or some other cool acronym this really must have looked like a winner.


Anonymous said...

You made the top ten in the FHA blog contest. Congratulations!

NJHH said...


And Thanks for stopping by!