The lending practices have changed so dramatically that sometimes it does not even seem that these practices could have ever existed. Until we hear about another person in trouble, losing their property to foreclosure since they can not afford their house or refinance their property with a new, more affordable mortgage.
Speaking of affordable mortgages, that was another bubble phenomenon - the Option ARMs (AKA pick-a-payment loans) or the neg am loans that would give the original appearance of affordability then - bang - the reset or recast occurred and the house would inevitably find themselves in foreclosure. Which is just what happened to our home owners today - a mortgage for well over the property value, ending in foreclosure. Lets take a look -
Here is the property -
Here is the property info -
Here are the financials -
- The property was purchased in March 2005 for $489,000.
- The original mortgage at time of purchase was for $389,600 using an ARM with Ivy Mortgage.
- At the time of purchase a piggy back (or secondary mortgage) for $97,400 using a balloon payment also with Ivy Mortgage.
- A new second mortgage opened the following June for $98,961.41 with Fleet National Bank.
- The property was refinanced for $517,500 using an ARM with New Century Mortgage in May 2006.
- In November 2007 the foreclosure process started with the filing of a Lis Pendens.
- The property is currently an REO listed with a realtor for $395,900.
- The real estate taxes for 2008 were $9141.98.
At time of purchase the property owner put a hefty $2,000 down payment which equated to about 0.4% of the purchase price. That was due to the original mortgage that was just under 80% of the purchase price and the piggyback mortgage which accounted for the rest.
That little bit of equity was not going to last, since just 3 months after purchase a HEL, which after the original $2 grand was pulled out another $96,961.41 was extracted. Funny, even during the peak of the bubble house prices were not increasing by 20% within 3 months, but some things did not matter.
For those interested in purchasing the property, purchasing at full price with 20% down would have a monthly payment for a 5.03% fixed 30-year (today's BankRate rate) would have a monthly payment of $1706.03. Add in the property taxes and the monthly payments are $2467.86. May be worth it depending on the lake views and flooding issues.