People did not realizing that home equity loans were based on the asset not on the ability to pay. People with low credit and no money were able to purchase properties. The old belief that banks only lent money to those who could pay it back was long gone - lenders were playing fast and loose with traditional lending standards and we are paying the price. So lets take a look at todays house through the Great Housing Bubble Standards. Here is the house -
Here is the property info -
Here is the financials -
- The property was purchased in December 1998 for $539,000.
- The first mortgage from December 1998 is not available on online database, but the Mortgage was with Fleet National Bank.
- A HELOC was opened in January 2000 for $50,000 with Fleet National Bank.
- Another HELOC was opened in December 2001 this time for $150,000 with Fleet National Bank closed June 2005.
- The first mortgage was refinanced in May 2003 for $592,500 with World Savings Bank with a maximum aggregate balance to be 125% of original note ($740,625).
- A stand alone second mortgage was taken May 2003 for $79,900 with Commerce Bank.
- Another stand alone Second Mortgage was taken the following July of 2004 for $45,348.43 with Household Finance Corp.
- The property was refinanced again in March 2005 this time for $750,000 with an Interest Only ARM. The lender was Impac Lending Group for 5 years at 3.875 rate.
- A second stand alone mortgage was taken same day in March 2005 for $240,000 also with Impac Lending Group.
- A HELOC was opened the following July 2005 for $245,000 with Wells Fargo Bank.
- The foreclosure process started in April 2007 with Countrywide filing for Wells Fargo Loan.
- The Sheriff Sale sold the property back to Countrywide in April 2008.
- The property is currently for sale with realtor for $798,900.
The property was purchased before the Great Housing Bubble. Unfortunately the records are not available to let us know how much was put down. This was before 100% financing became common so chances are very high that there was a down payment. What we do know is that whatever the down payment was that was fully extracted with another $53,500 taken out add the $79,900 for a total extraction (without the HELOCs for $133,400). And note that the HELOCs were still open at this time.
- By July 2004 if all of the HELOCs were utilized the full extraction would be $378,748.43 with the total debt being $917,748.43. But this was in the middle of the Great Housing Bubble - prices were rising in some places in the double digits. Lenders were allowing 125% of the equity to be extracted.
- So that brings us to the present. Since Countrywide foreclosed on the HELOC we know that money was used. Since the property is being sold through a lender, assuming a standard 6% Realtor fees, the property will net $750,966. However the various lenders will lose a whopping $484,034 on the property. This loss is comparable to those found over at our inspiration - Irvine Housing Blog.