Sunday, June 29, 2008

Mountain Lakes was HELOC Heaven

Mountain Lakes was HELOC heaven for the previous owners of today's featured property. As the value of the property rose steadily so did the mortgage equity withdrawal. One of the most unfortunate aspects of the Great Housing Bubble was that one could get rich through debt. The more debt the more you goods one could accumulate and have the illusion of wealth. A new Hummer meant that you had money - not debt.

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 -

Property Features

  • Single Family Property
  • Status: Active
  • County: Morris
  • Year Built: 1912
  • 6 total bedroom(s)
  • 2.5 total bath(s)
  • 2 total full bath(s)
  • 1 total half bath(s)
  • 11 total rooms
  • Style: Colonial
  • Master bedroom
  • Living room
  • Dining room
  • Kitchen
  • Den
  • Basement
  • Bathroom(s) on main floor
  • Master bedroom is 14x14
  • Living room is 28x14
  • Dining room is 14x13,Formal Dining Room
  • Kitchen is 14x13
  • Den is 23x10
  • Basement is Full
  • Hardwood floors
  • Fireplace(s)
  • Fireplace features: Living Room, Wood Burning
  • Parking space(s): 4
  • 1 car garage
  • Parking features: Detached Garage
  • Heating features: Radiators - Steam,Electric Water Heater,Oil
  • Cooling features: Wall A/C Unit(s)
  • Interior features: Range/Oven-Electric, Center Island, Tile Floor, Wood Floor, Basement Level Rooms: Utility Room, First Level Rooms: Bath(s) Other, Den, Kitchen, Living Room, Second Level Rooms: 4 Or More Bedrooms, Bath Main, Third Level Rooms: 2 Bedrooms, Bath(s) Other, Second Bedroom is: 14x13, Third Bedroom is: 14x13, Fourth Bedroom is: 13x10
  • Exterior features: Deck, Open Porch(es)
  • Exterior construction: Stone, Stucco
  • Roofing: Asphalt Shingle
  • Approximate lot is 100X150
  • Lot features: Level Lot, Open Lot
  • Approximately 0.34 acre(s)

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.
It looks like in March 2005 all of the previous mortgages were rolled up into two new ones for a total of $990,000. This was not enough for the owners so four months later with another HELOC the total debt for the house was $1,235,000. The also means the total equity extracted rose to $696,000. That totals an average of $69,600 of equity extracted per year. This house provided the owners a very nice second income.
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.
Almost half a million lost and almost three-quarters of a million extracted and spent. This property was HELOC heaven during the Great Housing Bubble and has become mortgage hell at the bust.

1 comment:

Anonymous said...

Wow - what a find!