During the bubble financing was commonly given on the value of the property not the ability for the owner to repay. Whatever the reason for grabbing their equity today's example was not able to keep up on the payments. Lets take a look -
Here is the property -
Here is the property info -
Here are the financials -
- The property was purchased in October 1993 for $164,500.
- There are no mortgages available on the database until April 2005 for a mortgage for $500,000 with New Century Corp.
- In January 2006 a new mortgage was taken for $128,000 with WMC Mortgage.
- Another mortgage was also obtained in January 2006 for $512,000 using an ARM with WMC Mortgage.
- The foreclosure process started with Lis Pendens filed in April 2007.
- The property is currently an REO listed through a realtor with a listing price of $485,000.
Assuming that the 2006 refinance payed off the 2005 refi - the total cash out was $640,000. The lenders stand to lose at least $184,100 if the property sells for the full asking price through a realtor.
The huge equity withdrawal 0f $640,000 with all of the purchase money pulled out plus $475,500. This happened late in the ownership timeline and gave the owner averaged a second income of $42,667 for each of the 15 years of ownership. Nice when the house pays you, especially a second income that is better than most first ones.
Maybe the large withdrawal was for a new place or a nice financial cushion for the owner. Is the trade of a hit to ones credit worth just over half a million dollars? Most of us would think it is. The featured homeowner had great timing at pulling out all the money at the peak of the market.