Sunday, July 20, 2008

Serial Refinancing in Lake Hopatcong

Times were interesting during the Great Housing Bubble. Home prices were going up, interest rates were going down, and exotic loans became the norm. It was easy to take more and more equity out of a property while paying the same or even lower monthly payments. To most people that magic monthly number was the only number they needed to hear. What if the monthly payment doubled in 3 years - well just refinance and you will be all set. Common sense evolved into - there was so much more important things to do with your money than pay off your home. Everyone felt they were financial geniuses. But were we really investing our money wisely? Was that Hummer a wise investment? What about those ubiquitous Coach tote bags? How are those paying off now?

Most people like to view people who have face foreclosure in 2 ways - either 1) they are victims of health problems, divorce, death or shady lenders or 2) they are manipulators taking out more money then they could ever repay and have caused problems for the rest of us. There is probably a little of both to most stories - but will we ever know the truth? Does the truth even matter at this point? Owners have properties foreclosed. Home values are declining. The economy is hurting. Are we really going to spend the time and money to find and prosecute all of the guilty parties?

Maybe we can glean a little knowledge and understanding by looking at a serial refinanced property in the Beautiful Lake Hopatcong area. Here is the Property -

Here is the property info -
Single Family Property, County: Morris, Approximately 0.34 acre(s), Year Built: 1950, Parking space(s): 1, Basement

Property Features

  • Single Family Property
  • Status: Active
  • County: Morris
  • Year Built: 1950
  • 2 total bedroom(s)
  • 1 total bath(s)
  • 1 total full bath(s)
  • 5 total rooms
  • Style: Colonial

Here is the financials -
  • The property was purchased for $103,200 in Dec., 1999.
  • The original mortgage from Dec. 1999 is not available on the internet database.
  • A the mortgage was refinanced in October 2001 for $103,530 with Allied Mortgage Capital Corp.
  • The property was refinanced with cash-out in May 2003 for $170,000 with Chase Manhattan Mortgage Corp.
  • A cash-out refi with First Interstate Financial was taken in April 2004 for $196,000.
  • A HELOC was opened in June 2005 for $34,000 with Countrywide.
  • A Lis Pendens started the foreclosure process in May 2007.
  • Currently for sale from a realtor for $185,900.

First thing we know is that the property was purchased before the bubble. It was also a time before 100% financing and exotic loans were easy to be found. So it is safe to assume that some percentage (maybe as low as 3%) was invested in the property at the time of purchase. We do know that 2 years later any down payment had been pulled out. We also can see that pulling equity out became a ritual - first $66,800 followed by another $26,000 then $34,000.

The owner pulled out a grand total of $126,800 during the 8 plus years of ownership. That totals a second income the house provided of approximately $15,850.
Not bad for a second income. Remember not only is this money not taxed but the interest is tax deductible. During the bubble the owner did pretty well. Maybe not so much now - no house and bad credit.

So how did the lenders do? It looks like the various lenders will lose a total of approximately $54,454 if the property sells for the full asking price. Plus of course the other related costs that lenders lose during the foreclosure process. Not a huge loss, but still a loss none-the-less. Do we need to know why the losses occurred? It would probably make us feel better if we had a villain to blame. But what would that solve or rectify? Anything?


Anonymous said...

this shack is a knock down worth zilch.

The banks should take a full loss in this sewage dump.

it is funny how bad these shacks look when things are bad. some indebted dope with a pulse would have paid 250k with the banks money for this dump!
Now it is worthless.

Anonymous said...

Do you think I could get Tangelo to give me $34,000 for a piece of garbage?