The Luxury of Plywood in Randolph

Is this the upgrade? Or a foreclosure special? Boy the neighbors must love this - how to drive the neighborhood properties down with one visit to Home Depot. Maybe we can get some cinder blocks for the car next door and really enhance the areas value.

We have not done an example in a while - thought one was due. And what better way to make a comeback then with example that illustrates everything that was wrong with the housing bubble. Renting from the bank through no money down and using a piggy back loan - check. Serial refinancing to cash out an accumulated equity - check. Using more and more exotic loans - starting with a fixed 30, moving to an ARM with a balloon payment and ending up Interest Only ARM - check kind. This homeowner never got the to the Option ARM, foreclosure happened first. But, unlike previous examples this time we are left with a plywood door - wonder what the interior looks like. Well, let's take a look at today's example -

Here is the property -

Front of the property complete with a brand new plywood entrance! All the luxuries

Here is the property info -

Status: Active County: Morris Year Built: 1951 3 total bedroom(s) 2 total bath(s) 2 total full bath(s)

7 total rooms Style: CapeCod Basement Basement is Finished, Walkout 2 car garage Attached parking Heating features: Radiators - Steam,Oil

Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Approximate lot is 75X150 Approximately 0.26 acre(s) Lot size is less than 1/2 acre Utilities present: Septic, Well Water, Electric Service

Here are the financials -

• The property was purchased in January 2006 for $335,000.

• The original mortgage at time of purchase was for $251,250 with Lancaster Mortgage Bankers.

• On the same day a second mortgage was opened for $83,750 also with Lancaster Mortgage Bankers.

• In July 2006 the property was refinanced with cash out for $380,000 using an ARM with a balloon payment with Long Beach Mortgage.

• In February 2007 the property was refinanced again with a cash-out for $391,000 using an Interest Only ARM with American Wholesale Lender.

• The foreclosure process started in March 2008 with the filing of a Lis Pendens.

• The property is currently an REO listed with a realtor for $307,900.

• The property taxes for 2008 were $5314.17.
  

The perfect bubble buyer - no money down AKA renting from the bank. Then we have the wonderful piggy back loans to remove that unwanted PMI surcharge. Oh the bubble was grand! Within 6 months of purchasing the property $45,000 was extracted through a refinance with a cash out. Did the money go to fix up the property or did it go other places?

Where ever the money went it disappeared fast - since 7 months later another cash-out refi took place, this time extracting another $11,000. With this loan the owner realized that paying into the principal was just too expensive so they opted for an interest only payment. Now that is really just renting from the bank - no money invested, no equity building up other than through natural market forces (which happened to start going in the opposite direction at this time).

Within just over two years the owner refinanced 3 times, extracted $56,000 of equity of out the property and then lost the property. Not bad to live in a house for a couple of years while generating an income of approximately $28,000 of income per year in the process.

The property owner probably made about 9 payments until the mortgage (rent money) was delinquent and a lis pendens was filed, which ended up in foreclosure. Now the property is for sale for $83,100 then the last refi and $27,100 less than the 2006 purchase price. Adding in the standard realtor's commission and the lender will lose at least $101,574 if the property sells for the full purchase price. Plus all of the other costs, which are numerous.

For those interested in purchasing today's plywood special, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate for Randolph, NJ averaging 5.875% the monthly payments would be $1563.55. Adding in the property taxes and the monthly payments would be about $2006.40 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using the GoodMortgage.com that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $15,395. The monthly mortgage payment would be $1730.28, plus a PMI of $190.13, and the taxes of $442.85 totaling $2363.26. And for a buyer who puts only 3% down - the mortgage would be $1766.70, PMI now $258.84 the taxes stay at $442.85 for a total monthly payment of $2468.39. Plus utilities and insurance of course.

Note - Our summer schedule is very unpredictable right now, so we will post these when we can. Enjoy them when they come!

Update to December Example

Today with the holiday and warm weather we will just doing an update of an example post from December. The property finally sold - but the owner took a very heavy loss. Let's revisit a snippet of the post -

Here is the property -

Front of the house.

Here are the financials -

• The property was purchased for $675,332.32 in September 2004 directly from the builder.

• The original mortgage at time of purchase was for $440,000 using an ARM with K Hovnanian American Mortgage.
  

• A Lis Pendens was filed against the property in December 2006.

• After an apparent divorce one of the owners was deeded the property in July 2007.

• On the same day as the new deed a new mortgage was taken for $500,000 using a balloon payment with Nationstar Mortgage.

• A private mortgage with a 2-year term (which looks to be interest free) with an apparent family member was also taken in July 2007.

• The property is currently for sale with a realtor for $625,000.

A property with a messy history.

Well, the property finally sold - for $550,000. It looks like through a realtor. So the homeowner lost $158,332.32 on the property - as well as suffered credit damage from the Lis Pendens and whatever separation took place during ownership. Probably glad to be rid of the place and move on - just a shame that there was so much suffering on so many levels in order to leave the property.


Good luck to the old owner on their new ventures. And hopefully the new owner's time will be work out better...

Housing Bubbles Popping In Dover

Rarely do we get to see the bubble inflate and pop all in one property. Housing values that almost tripled during the bubble with eager buyers constantly popping up along the way. Values that we can see now were so off from the real values. Earlier in the week we illustrated this housing chart -

The chart illustrates how inflated the housing values were during the bubble. At the time we had no idea we would be illustrating an example property that illustrated the chart perfectly. For today's example first we will look at the latest owners follies than the rise and fall of a property value in Dover. Let's get to today's example property -

Here is the property -

The front of the "Single Family House" with two doors and visitor.

The show ready kitchen.
(Well at least we know there is a Dunkin Donuts nearby - but so does most of North Jersey).

Here is the property info -

Status: Active County: Morris Year Built: 1900 4 total bedroom(s) 2 total bath(s) 2 total full bath(s)

7 total rooms Style: Colonial Basement Basement is Finished 1 car garage Parking features: Detached Garage Heating features: Baseboard - Hotwater,Gas-Natural

Exterior construction: Aluminum Siding Roofing: Asphalt Shingle Pets allowed Approximate lot is 50X100 Approximately 0.11 acre(s) Lot size is less than 1/2 acre

Here are the financials -

• The property was purchased in June 2007 for $395,000.

• The mortgage at time of purchase was for $395,000 using an ARM from Lehman Brothers Bank.

• The foreclosure process started with the filing of a Lis Pendens in April 2008.

• A notice of settlement took place in March 2009 with a foreclosure specialist private real estate investment firm with locations in Hoboken and Little Falls.
  

• Tax rates for 2008 were $4340.98.
  

• The property is currently for sale with a realtor for $199,000.

The property was 100% financed - no money down, no piggy back loans. Just 100% financing while the bubble was popping. The property owner was trying to own the property - see the standard ARM without a teaser or an Option ARM.

The property was bought at a peak price that the property will not see again for at least a decade. A few things we do not understand - what happens to the mortgage after the "notice of settlement." With the realtor fees added in the total loss for the property will be $207,940. We know the real estate investment firm is making some type of profit on the property so the loss will be even larger. Who is taking the loss? How is this legal?

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.98% the monthly payments would be $852.68. Adding in the property taxes and the monthly payments would be about $1214.43 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using our favorite new calculator that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $9950. The monthly mortgage payment would be $1012.55, plus a PMI of $122.88, and the taxes of $361.75 totaling $1497.18. And for a buyer who puts only 3% down - the mortgage would be $1033.87, PMI now $167.29 the taxes stay the same for a total monthly payment of $1562.91. Plus utilities and insurance of course.

If the is a two family or has a rental unit that might take off a big chunk of the mortgage, making the living space smaller but much more affordable.

Something very interesting about this property that we do not often see is the rise and fall of the prices during the bubble. This property has had 4 owners since 2000 here are the sales dates the the prices -

• Purchased in February 2000 for $140,000.

• Purchased in March 2003 for $195,000.

• Purchased in October 2006 for $301,600.

• Purchased in June 2007 for $395,000.

• Selling in May 2009 for $199,000.

The property more than doubling in price from 2003 to 2006 is one thing. But the more unbelievable part is the more than 23% property increase in 8 months - 8 months when mortgage companies were shuttering and property values were starting to decline. This was well past peak. Unless significant improvements were made to the property this does not seem realistic at all.

Flip Flopping in Chatham

During the peak of the bubble almost anyone was a successful flipper. House prices were going up so fast that just purchasing the house and a few months added money into the investors pockets. Improvements and updating were paying off for even the most incompetent investors. And those that knew what they were doing made off really well. Money was everywhere and it seemed crazy not to be a part of it.

The unlucky flippers were the ones that jumped in at the end of the bubble - not realizing that they were at the end of the bubble. Paying top dollar for a property and making expensive improvements have not been making people rich - they are just leaving holes in the investor's pockets. Between the slow housing market and buyers not willing to pay for over-priced or unnecessary improvements many flips are now flops. Which brings us to today's featured example.

Here is the property -

The front of the property.

The stainless steel kitchen.

The informal great room.

Here is the property info -

Recently renovated colonial in sought after Wickham Woods. Spacious rooms, wonderful Family and Great rooms, 2 tier decking and level open yard. Great for entertaining.

Property Features
Status: Active County: Morris Subdivision: Wickham Woods Year Built: 1971 4 total bedroom(s) 2.5 total bath(s) 2 total full bath(s) 1 total half bath(s) 12 total rooms Style: Colonial Master bedroom Living room Dining room Family room Kitchen	Basement Laundry room Bathroom(s) on main floor Master bedroom is 17x13,Includes: Full Bath, Walk-In Closet Living room is 20x13 Dining room is 15x13,Formal Dining Room Family room is 20x14 Kitchen is 16x14 Basement is Finished Hardwood floors Fireplace(s) Fireplace features: Living Room Spa/hot tub(s) 2 car garage Attached parking	Parking features: Built-In Garage Heating features: 1 Unit,Gas Water Heater,Gas-Natural Forced air heat Central air conditioning Cooling features: 1 Unit Exterior construction: Vinyl Siding Roofing: Asphalt Shingle, Wood Shingle Pets allowed Lot features: Level Lot, Open Lot Approximately 0.52 acre(s) Lot size is between 1/2 and 1 acre

Here are the financials -

• The property was purchased in February 2007 for $1,190,000.

• The original mortgage at time of purchase was for $850,000 with an adjustable/fixed ARM with CitiMortgage.

• A HELOC was opened February 2009 for $145,000 with PNC Bank.

• The property is currently for sale with a realtor for $1,175,000.

• The current year's property taxes are $17,078.21.

The property was purchased just as the bubble was popping. The new owner invested at a most unfortunate time in the cycle. For each day the renovations went on the house's value was declining. A long-term renovation (this appears to have taken over 2 years) that may have paid off well during the boom years now is taking an expensive toll.

We do not know how costly the renovations were but just adding property taxes and the lower purchase price and the realtor pay this investor will lose at least $115,500 off of this investment - plus every penny put in the renovations. And on a property like this one would assume the renovations would have been expensive.

Update - It was just brought to our attention that what shows us as a realtor is a flat-rate listing service - costing about $500 not the 5 or 6 percent realtor fees. This owner is trying to save as much as possible - so the corrected loss will be approximately $45,500 plus renovations.

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.92% the monthly payments would be $5000.26. Adding in the property taxes and the monthly payments would be about $6423.44 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using our favorite new calculator that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $58,740. The monthly mortgage payment would be $5937.81, plus a PMI of $725.56, and the taxes of $1423.18 totaling $8086.55. And for a buyer who puts only 3% down - the mortgage would be $6062.82, PMI now $987.78 the taxes stay at $1423.18 for a total monthly payment of $8473.78. Plus utilities and insurance of course.

Option ARM and Underwater In Dover

Dover currently has one of the highest foreclosure rates in the state. We came across a house for sale that is not in foreclosure but definitely has foreclosure potential all over it. The homeowners are extremely underwater and have an Option ARM to boot. Hopefully the owner has negotiated a short sale to leave the property with the least amount of economic and credit score harm. The Lis Pendens on this property has not been filed, but it definitely will be a contender once the loan recasts. Now the owner may be playing beat the clock - sell the property with a loss before losing it too the bank in a town filled with foreclosures. It will be a nail-bitter and one to keep an eye on. Let's take a look at today's featured example -

Here is the property -

The Front of the House.

The non-updated kitchen.

A bedroom with Hard Wood Floors and Crown Molding.

The back yard with a large driveway.

Here is the property info -

Property Features
Single Family Property Status: Active County: Morris Year Built: 1957 4 total bedroom(s) 2 total bath(s) 2 total full bath(s) 7 total rooms Style: CapeCod Master bedroom Kitchen Basement Bathroom(s) on main floor	Bedroom(s) on main floor Master bedroom is 19x15 Living room is 16x11 Kitchen is 13x11 Basement is Finished Hardwood floors Fireplace(s) Fireplace features: Living Room, Wood Stove-Freestanding 1 car garage Attached parking Heating features: 1 Unit, Baseboard - Cast Iron, Multi-Zone,Gas Water Heater,Gas-Natural Cooling features: House Exhaust Fan	Inclusions: Home Warranty Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Pets allowed Approximate lot is 50X112 Corner lot Approximately 0.13 acre(s) Lot size is less than 1/2 acre Utilities present: Cable TV Available, Garbage Service Included, Public Sewer, Public Water, Gas-Natural Elementary School: Academy St Middle School: Dover M.S. High School: Dover H.S.

Here are the financials -

• The property was purchased just as the housing bubble in December 2005 for $370,800.

• The first mortgage at time of purchase was made using the wonderful Option Arm with First Magnus was for $296,640.

• At the same time a second mortgage (AKA piggyback mortgage) was also made with First Magnus for $74,160.

• The property is currently for sale with a realtor for $265,000.

• The property taxes were $5556.62 for 2008.
  

This property was bought at the height of the bubble with some of the best bubble products of the time - zero percent down, a piggy back mortgage and and an Option ARM. The only thing missing to make this purchase a perfect bubble purchase would be a no doc loan - which it may be but we can not tell from the public records.

Since it was an Option ARM chances are that the loan is now bigger than at the time of purchase so our projected losses may be on the low side - as much as 10% to 25% under due to recasts levels. Now the property is selling for $105,800 less than the purchase price. We are going to guess that the current owner will not be making up the difference between purchase price and amount due on their mortgages. So whoever is holding these notes will be losing at least $121,700 if the property sells for the full asking price and the realtor receives the standard commission.

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.90% the monthly payments would be $1125.14. Adding in the property taxes and the monthly payments would be about $1588.19 per month - plus utilities and insurance.

For the other interested in parties that are unable to put even close to 20% down lets look at some other numbers. Using our new calculator that includes the PMI charges and the new rate, a potential new buyer is only able to put down 5% or $13,250. The monthly mortgage payment would be $1336.10, plus a PMI of $163.64, and the taxes of $463.05 totaling $1962.79. And for a buyer who puts only 3% down - the mortgage would be $1364.23, PMI now $222.78, the taxes stay at $463.05 for a total monthly payment of $2050.06.

Leaving Behind Lake Hopatcong *Update Below

Last fall we embedded a devastating video about the things people leave behind after their properties are foreclosed. The lenders usually hire companies to then come in a do a trash out - in other words landfill everything the owners left behind. Some very valuable stuff ends up as garbage. And some of the former owners most valuable possessions are left behind. Take a look at the video here.

The trauma that people must be going through to leave a property with so many valuables is devastating. Things that could be yard-saled or craigslisted instead left behind. Very sad state of affairs.

Often when we featured foreclosed properties they are empty. So today when we came across a heavily HELOCed property with valuable furniture inside we knew we were seeing firsthand a local trash-out. A family so torn by losing the property that they left valuables for the bank. The realtor who posted these pictures works for the lender, so little is left to the imagination. Lets take a look -

Here is the property -

The front of the home.

The kitchen, with a little left behind.

The forgotten plants and decor from the family room.

A beautiful desk left behind in the office.

Matching wood furniture left in the bedroom.

The saddest trash out - where is the baby sleeping now?

Here is the property info -

Property Features
Single Family Property Status: Active County: Morris Year Built: 1955 3 total bedroom(s) 2 total bath(s) 2 total full bath(s) 8 total rooms Style: Ranch Master bedroom Living room Dining room Kitchen	Den Basement Laundry room Master bedroom is 27x11,Includes: Full Bath Living room is 21x11 Dining room is 13x11,Formal Dining Room Kitchen is 13x9 Den is 11x10 Basement is Full, Unfinished, Walkout Hardwood floors Fireplace(s) Fireplace features: Living Room, Wood Burning	Parking space(s): 6 Carport Attached parking Parking features: Carport-Attached Heating features: Baseboard - Hotwater, Multi-Zone,Oil Central air conditioning Cooling features: 1 Unit Exterior construction: Wood Roofing: Asphalt Shingle Approximate lot is 97x122 Lot features: Level Lot Utilities present: Septic, Public Water, Electric Service

Here are the financials -

• The property was purchased in May 2003 for $332,000.

• The original mortgage at time of purchase was for $265,600 using a 30-year fixed with Fleet National Bank.

• In September 2003 a HELOC was opened for $35,000 with Fleet National Bank.

• The following May the original HELOC was closed and a new one for $57,700 was opened again with Fleet.

• In June 2005 the previous HELOC was closed down and a new one was opened again, this time for $103,300 with Fleet of course.

• In May 2006 the HELOC line was closed and re-opened again, this time for $153,000 this time with Bank of America.

• The foreclosure process started with a Lis Pendens filed in May 2007 for the original mortgage with Fleet.

• 15 days later another Lis Pendens was filed for the last HELOC with Bank of America.

• The property is currently listed as an REO for sale a through a realtor for $259,900.

• The property taxes for 2008 were $7,385.54.

At time of purchase the owners were able to put a 20% down payment of $66,400 for the property. This was very hefty, especially since it was during the bubble.

The opening of the first HELOC was little suprise. As we saw in our last post financial advisers were telling clients to use their equity as an emergency fund. The owners had put down such a substantial down payment having some extra funds for repairs and fixing up the place. This was very normal and ordinary at the time.

When the owners refinanced the HELOC a year after purchase the potential was to available to extract the full down payment except for $8,700. But that would be most likely extracted the next year with a new HELOC that would allow for the full down-payment to be withdrawn as well as another $36,900 of equity that may have built up over time (or through improvements?). But just another year passed and another potential $49,700 was available to be extracted. The last HELOC allowed for the full extraction of the down payment (of $66,400) plus another $86,600.

So when the foreclosure process started the lenders had lent out $418,600 for the property. Thus, bring the loss to, at least, $174,576 if the property sells for the full asking price and the realtor gets the standard commission. Plus the expenses for the trash-out and other foreclosure costs.

For those interest in purchasing the property, if they are able to put 20% down and received a 30-year fixed at today's Bankrate rate of 4.86% the monthly payments would be $1098.44. Adding in the property taxes and the monthly payments would be about $1713.90 per month - plus utilities and insurance.

Unfortunately this is probably the saddest foreclosure we have featured so far...

------------------------------------------------------------------------------------------------

Update - Recently one of our readers noted that very few buyers can actually put down the 20%. So we found a new calculator that includes the PMI charges and the new rate. So let us suppose the potential new buyer is only able to put down 5% or $12,995. The monthly mortgage payment would be $1304.39, plus a PMI of $160.49, and the taxes of $615.46 totaling $2080.34.

Let's look at a buyer who puts only 3% down - the mortgage would be $1331.86, PMI now $218.49, the taxes stay at $615.46 for a total monthly payment of $2165.78.

What a difference a larger downpayment can make.

Worries in Wharton

Often we hear about troubles with ARMs when the resets take place. Driving up a monthly payment. Sometimes even doubling the original mortgage amount.

An example may be a $150,000 mortgage with an initial rate of 5% making monthly payments about $805.23. But when the interest rate ticks up to say 8% the payments jump to $1100,65. And if the property ever hits the rate cap of say 12% the monthly payments would be $1542.92. The potential for mortgage payments to rise $737 exists for ARM users. (Perhaps these hard numbers of what a 12% rate cap payment would be should be in the mortgage documents at signing.)

When housing values only went one way and refinancing always seemed to be an open option the risks may have been worth it. But values are declining and refinancing is coming with tighter restrictions so refinancing these ARMs may not be possible.

And while ARMs may be big problems for owners when they reset. There are many owners still with un-reset ARMs that they can not afford anymore (or perhaps ever). Not all the problems with ARMs are the resets. As we can see in today's example some owners can not afford their ARMs or properties well before any reset occurs. Let's take a look -

Here is the property -

The Front of the House.

The un-updated kitchen.

Dining room with Hardwood Floors

Park-like Backyard!

Here is the property info -

Status: Active County: Morris Year Built: 1973 4 total bedroom(s) 1.5 total bath(s) 1 total full bath(s) 1 total half bath(s) 9 total rooms Type: Bi-Level Master bedroom Living room Dining room

Family room Kitchen Laundry room Bathroom(s) on main floor Bedroom(s) on main floor Master bedroom is 12x11,Includes: Living room is 15x15 Dining room is 19x11,Formal Dining Room Family room is 24x01 Kitchen is 10x10 Hardwood floors Parking space(s): 4 1 car garage

Parking features: Built-In Garage Heating features: 1 Unit,Water Heater From Furnace,Oil Central air conditioning Exterior construction: Aluminum Siding, Brick Roofing: Asphalt Shingle Approximate lot is 75X100 Lot features: Level Lot, Open Lot Approximately 0.16 acre(s) Lot size is less than 1/2 acre Utilities present: Public Sewer, Public Water Elementary School: MarieDuffy Middle School: Mackinnon High School: MorrisHill

Here are the financials -

• The property was purchased for $405,000 in September 2005.

• The original mortgage at time of purchase was for $344,000 with Montgomery Mortgage Solutions using an ARM.
  

• In May 2006 the property was refinanced for $382,500 using an ARM with OMMB.

• In February 2007 the foreclosure process started with the filing of a Lis Pendens.

• The property is currently an REO for sale through a realtor for $319,900.

• Property taxes were $7,612.05 for 2008 but not yet listed for 2009.
  

The property was purchased at peak market price. But the owner seemed like a very serious buyer with a down payment of over 15% which was $61,000. This is a very respectable down payment - even pre and post bubble.

However the down payment did not stay as equity for too long. Since 8 months later $38,500 of the equity put down at time of purchase was extracted with a cash-out refi. But even with the withdrawal the owners still had over 5% of purchase price equity in their property.

But the refi did not work out so well since 9 months later the foreclosure process had started. This also tells us that probably only 5 or 6 mortgage payments were made after the refi.

This property was not lost to the reset of an ARM which we often hear about as a big culprit in the foreclosure process. This was an ARM where the original payments were no longer affordable for some reason. Maybe the reason was a true personal issue like illness or divorce. But often these cases look like mortgages given on asset values not ability to pay. Was this another case of that?

The owner will has already lost $22,500 during their ownership of this property, not to mention a hard hit to their credit score. The lender
will lost approximately $81,794 between the mortgage loss and standard realtor fees. Not a really bad hit compared to other properties, but this modest house in Wharton still lost various parties over $104,000 in less than 4 years.

Well, let's take a look at the purchase options for new owners. With a 20% down payment and today's 30 year fixed Bankrate of 5.06% a monthly payment would be $1383.23. Adding in the property taxes and the total monthly carrying costs - excluding utilities - would be about $2017 for this location.

We wonder what it will end up selling for...

Losing with an ARM in Jefferson

During the housing bubble some strange things occurred. Lenders would lender owners more than 100% of the value of their property. Mortgages for 125% of the property value were common. Now that the bubble has popped and home values are plummeting many are lucky if they can get a mortgage for just 80% of the property value.

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 -

Status: Active County: Morris Year Built: 1984 4 total bedroom(s) 3 total bath(s) 3 total full bath(s) 10 total rooms Style: Colonial Master bedroom Living room Dining room

Family room Kitchen Office Basement Laundry room Bathroom(s) on main floor Master bedroom is 21x12 Living room is 20x12 Dining room is 14x12,Formal Dining Room Family room is 20x14 Kitchen is 27x12 Basement is Partially Finished, Full

2 car garage Parking features: Built-In Garage, Loft Storage Heating features: Baseboard - Hotwater,Oil Exterior construction: Aluminum Siding Roofing: Asphalt Shingle Waterfront property Approximate lot is 130X150-129X115 Lot features: Lake Front, Lake On Lot Approximately 0.45 acre(s) Lot size is less than 1/2 acre Utilities present: Septic, Well Water, Electric Service

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.

When the property was refinanced again for $517,500 the rest of the mortgages were eventually paid off. The first two right away and the third a bit later. But in the end the owner extracted only $28,500 during the ownership of the property. However the loss, due to deflating housing values was much larger. If the property sells for the full asking price and the realtor receives their standard fees the lender stands to lose $146,200. A substantial loss on a modest property.

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.

Winning and Losing In Long Valley

We often think of losing money with the real estate crisis. We see some losers - people who put money down on their property, their property price subsequently bottomed out and they lost or must sell the property for a loss. Most often, even though the lenders are vilified here and other places, they take the brunt of the loss.

Then we do see winners. The Homer type that spends the money and sticks the house with the bill. Rarely do we see big winners - people who may have taken more than a half a million from their property. People who bought at the peak and still extracted every possible penny from the property that they could. Do you think over $500,000 is worth a hit to your credit score? Probably.

In today's featured example we see a big winner - the former homeowner. And we see some big losers - the lenders who inadvertently gave the homeowner more than $500,000. And all this happened in Long Valley during the bubble. Lets take a look -

Here is the property -
Here is the property info -

Single Family Property Status: Active County: Morris Year Built: 1965 3 total bedroom(s) 2 total bath(s) 2 total full bath(s) 6 total rooms Style: Ranch Master bedroom

Living room Kitchen Basement Bathroom(s) on main floor Bedroom(s) on main floor Master bedroom is 16x11 Living room is 23x15 Dining room is 15x11 Kitchen is 20x11

Basement is Partially Finished 2 car garage Attached parking Heating features: 1 Unit, Baseboard - Hotwater,Oil Exterior construction: Stone, Wood Roofing: Asphalt Shingle Approximately 2.46 acre(s) Lot size is between 2 and 5 acres Utilities present: Septic, Well Water, Electric Service

Here are the financials -

• The property was purchased in March 2005 for $410,000.

• The original mortgage at time of purchase was with an ARM for $369,000 with Long Beach Mortgage.

• In November 2005 the property was (re?)financed with cash-out for $499,500 using an ARM with Countrywide Mortgage.
  

• The foreclosure process started when a Lis Pendens was filed against the Long Beach Mortgage in August 2007.

• Meanwhile in December 2007 Countrywide Mortgage filed a Lis Pendens for a delinquency on their mortgage.

• The property, currently an REO is listed with a realtor for $299,900.

• The 2008 property taxes were $7712.54.
  

When the property was purchased a 10% down payment was made on the property. That was $41,000 which is a significant down payment even after the bubble. An ARM was taken but this was still at the time where those who took ARMS were viewed as fiscally prudent since the monthly payments were significantly lower than a fixed 30 year. Besides, at this point in time one could always refinance.

The following November, a mere 8 months later the property was mortgaged again. This time for an additional $89,500 on top of the purchase price. While it looks like the mortgage should have been a ReFi cash-out, the first mortgage was not paid off or closed down. So this new mortgage turned into a second mortgage.

At that point the house that was purchased for $410,000 the outstanding mortgages for the property amounted to $868,500. In the 8 months of home ownership the property had generated $458,500 for the owner. For the entire ownership period, the property generated approximately $183,400 per year for each year. That is an excellent second income, let alone first income! And remember this is a just a modest property in Long Valley.

Just 21 months after the second mortgage was opened the foreclosure process started for the first mortgage. So most likely 18 months after extracting that $458,500 the mortgage payments stopped. Then just 4 months later the second mortgage started foreclosure on the property as well.

Now the property is for sale with a realtor. If the property sells for full asking price, with the realtor receiving the standard commission, the lenders will lose about $586,594 on this property. Losing almost twice as much as the current sales price. Wow that is a huge loss for any lender to take.

Lets take a look at the monthly carrying costs for those looking to purchase this property. If the future owner buys the property for full asking price with 20% down payment $59,980, with today's 5.12% BankRate for a fixed 30 year mortgage the monthly payments would be $1305.60. Add in the real estate taxes and the monthly payment increases to $1948.31 plus insurance and utilities. Well, at least you are living on the lake.

Desperate Times in Denville

When properties fall into foreclosure almost immediately after purchase it is hard to tell if it is scam or something went very wrong for the buyer (job loss, death or medical hardships). Probably a very small percentage of buyers do run into these unfortunate circumstances just after closing. But when a property is purchased at peak, with no money down, and foreclosure happens almost immediately it seems more likely a case of fraud.

The lenders are left to pick up the pieces. Since so many warning signs were ignored during the bubble, and so many different people may be culpable, it is hard to know where the fault lies. Is it a case of a straw buyer? A broker allowing more in payments than could be ever made? No one was watching. Regulators were not regulating. Money was flowing so no one was looking at details that made no logical or business sense.

But the bubble has popped. People are desperate. Lenders are desperate. Unloading properties at bargain prices. Now lenders are trying to sell off properties for half the peak price. Losing hundreds of thousands of dollars - both lenders and buyers - is the new norm. Which brings us to today's featured property. A purchase of questionable terms. A lender desperate to dump a property. Money lost. Credit diminished. Well lets take a look -

Here is the property -




Here is the property info -

County: Morris Year Built: 1935 3 total bedroom(s) 1 total bath(s)

1 total full bath(s) 6 total rooms Style: Ranch Basement Heating features: Gas-Natural, Gas-Propane, Oil Forced air heat

Exterior construction: Wood,Crawl Space Foundation Roofing: Asphalt Shingle Approximately 0.18 acre(s) Lot size is less than 1/2 acre Utilities present: Public Sewer, Public Water

Here are the financials -

• The property was purchased for $267,800 in November 2006.

• The original mortgage at the time of purchase was for $214,240 using an ARM with a balloon payment with WMC Mortgage Corp.
  

• A piggyback loan was also taken at the time of purchase for $53,560 again with WMC Mortgage Corp.

• The foreclosure process started in June 2007 with the filing of a Lis Pendens.

• The property is currently an REO for sale with a realtor for $145,900.

• The property taxes for this property in 2008 were $3,546.62.

This property was destined to fail at time of purchase. The ARM with a bubble payment already spells trouble. Add the piggyback loan for 100% financing and things were destined to fail. The buyer had no investment other than their credit score - and that may be the only thing that was hurt.

But since the property fell into foreclosure 8 months after the purchase we wonder what the owners intent was. From the property records the first mortgage payment was not due until January. Since the Lis Pendens are usually filed after 3 months of non-payment, this owner at the most made 3 mortgage payments, at the most.

If the purchase was legitimate than the owner probably ran into trouble - job loss, death, or medical issues. If the purchase was not legitimate, no payments may have been made. The property is now selling for $121,900 less than the 2006 purchase price. This property is now listed at more than 45% of the peak price.

If the property actually sells for full asking price, with the realtor receiving the standard commission, the lender will lose $130,654 for this property. That is almost a 50% loss on the value of the property the lender will be eating.

So what is the cost to own such a property. Assuming a buyer has a 20% down payment (which would be $29,180) and mortgaged the rest with a 30 year fixed rate loan with today's 5.2% BankRate number, it would cost $640.92. Adding in the taxes and the monthly cost would be $936.47 plus property insurance and utilities. About the price to rent a Garden Apartment. If only we could see the inside to know if it was even worth it...

Over Extended in Oak Ridge

When we hear about foreclosures there are two groups that people think about. Prior to the big bubble burst, when someone was in foreclosure, people thought of medical problems or a death of a family member. Someone in foreclosure usually received sympathy from their fellow homeowners, thinking "but for a string of bad luck it could be me."

Now during after the great housing bubble burst and we see people buying mortgages with negative amortization and mortgages with one percent teaser rates that are the only affordable payments for the homeowners and zero percent downers with piggy back mortgages. The scrutiny against those in foreclosure are much more negative with a harsh judgment involved. The feelings of "you lost your house because of bad judgment and reckless spending" has permeated. Angry about the loss in their own home values, rather than sympathy a person in foreclosure can receive anger in its place.

There is anger at the system for allowing the financial system to get so out of whack. There is anger at the homeowners for buying properties they could never afford that were well, well beyond their means. There is anger at the government and regulators for not stepping in until well after the devastation has occurred. The anger of the current economic state is pretty much toward everyone that was involved in the financial transactions. Yes that includes the realtors and the mortgage brokers who worked within the system as well.

Now people are losing homes. People who put money down are underwater just due to the declines. The owners who used their properties as ATMs and got into the habit of withdrawing equity are in dire straights. The collapse is felt by all, but the over-extended are on the front lines of the economic meltdown. Financial mistakes and missteps are bringing people to foreclosure who never expected to be there. Getting caught up in the bubble spending might have been exhilarating at the time, but now it is depressing and life altering.

Which brings us to today's features property about a homeowner that bought their house with a solid financial plan, got caught up in the HELOC and ReFi fun. The property is now an REO, the bubble financing schemes aided in the property owners losing their home. Lets take look -

Here is the property -




Here is the property info -

Status: Active County: Morris Year Built: 1952 3 total bedroom(s) 2 total bath(s) 2 total full bath(s) 7 total rooms Style: CapeCod Master bedroom

Living room Kitchen Den Basement Bathroom(s) on main floor Master bedroom is 26x14 Living room is 18x14 Dining room is 13x11 Kitchen is 14x9 Den is 12x9

Basement is Partially Finished, Full 1 car garage Parking features: Built-In Garage Heating features: 1 Unit,Oil Water Heater,Oil Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Approximately 0.28 acre(s) Lot size is less than 1/2 acre Utilities present: Septic, Public Water, Electric Service

Here are the financials -

• The property was purchased in November 2003 for $310,000.

• The original mortgage at the time of purchase was for $248,000 using a 30 year fixed with Countrywide Home Loans.

• On the same day as the purchase a HELOC was also opened for $31,000 also with Countrywide Home Loans.

• In February 2005 the property was refinanced for $248,000 this time using an ARM with Countrywide Home Loans.

• In December 2005 the property was refinanced again, this time with a cash-out for a loan totaling $320,000 using an ARM with Wall Street Financial Corp.

• In November 2006 the property was refinanced with a cash-out total of $347,000 this time using a 40-year ARM with Village Capital and Investment.

• In October 2007 the foreclosure process started with the filing of a Lis Pendens.

• The property is currently an REO listed with a reator for $314,900.

• The 2008 property taxes for the property were $6,638.31.

The property was purchased with a hefty 20% down payment, which was $62,000. Notice at the time of purchase that a HELOC was opened for another 10% of the purchase price. This could easily have been pushed by the lender, the double mortgage signing were became quite common during the housing bubble. Remember this was a different time when lenders were comfortable with a business plan that allowed people to owe more on the property than it was worth. Back in the bubble lenders did not care if people took more than 100% equity out of the property. We guess they assumed that by the time the papers were signed and filed the equity would have increased enough to cover it. (Now the opposite is happening, lenders worried that the appraised price still covers enough of the loan at closing.)

The first ReFi looks to be the type that would lower and change the rates. Remember during the bubble when people could "save" money by getting an ARM rather than a conventional mortgage. The philosophy was not to worry because you could just ReFi again in another few years when the mortgages reset. That's not working out as planned either.

So equity was not taken until after 2 years of ownership with the owner taking another $10,000 on top of their $62,000 down payment. That must have worked well since just 11 months later another $27,000 was extracted from the property. This made the total of equity extracted in less than a year $99,000 - with a withdrawal of $37,000 more than the purchase price. But this was bubble times when it was common for the house to pay you. With annual double digit appreciation rates, why not use your property like an ATM.

But notice that the last Cash Out Refi was with the more uncommon 40 year mortgage, so the loan was probably at the upper end of comfortable payments. And since Lis Pendens are usually not filed until after 2 months of non-payment, the property owner was unable to carry this new mortgage for more than 9 months without getting into trouble.

While it is difficult to distinguish the owners that run into trouble through no fault of their own - death or medical issues - this mortgage history would lead us to believe this foreclosure was probably due to bad financial planning. Taking loans on the amount of the asset not the ability to pay back the loan is a common problem from those that borrowed during the bubble.

So while the owner was able to extract an additional $37,000 of equity from the property prior to foreclosure, the lender will stand to lose about $50,994 if the property sells through the realtor (taking the standard commission) for full asking price.

For prospective buyers looking to own the Oak Ridge property, with a down payment of 20% and using today's Bankrate with a 30 year fixed the monthly payment would be about $1,391.11. Adding the taxes would bring monthly payments up to $1944.30 per month plus insurance and utilities.

Housing Bubble Pain in Mount Olive

During the bubble people often paid much more than houses were really worth. The prices were inflated and the bubble intoxication persuaded people to pay much more than the real value. After a few years of double digit increases lenders forgot that home prices do not increase perpetually. Post bubble we can see that house prices do not just stagnate like in late 80's they can actually fall.

After the bubble burst people found that they had bought houses they could not afford. Took out equity that they did not have or could never pay back. And lenders were stuck with much bigger loans than the property would ever be worth. The wealth illusion of the bubble was gone. People lost, and are still losing, unaffordable properties. Lenders are writing off hundreds of thousands of dollars per property. Financial pain that will be felt for a long, long time took the bubble's place.

Today's featured property fits all of these descriptions - an owner bought too much house, extracted everything they could, and the lender is forced to write off over a hundred thousand after foreclosing on the property. All the bad aspects of the bubble rolled into one featured property found in Mount Olive. Lets take a look -

Here is the property -



Here is the property info -

Status: Active County: Morris Year Built: 1953 4 total bedroom(s) 2.5 total bath(s) 2 total full bath(s) 1 total half bath(s) 9 total rooms Style: Colonial Master bedroom Living room Dining room Family room

Kitchen Den Basement Laundry room Master bedroom is 20x17,Includes: Walk-In Closet Living room is 15x14 Dining room is 14x10,Formal Dining Room Family room is 19x11 Kitchen is 16x15 Den is 18x09 Basement is Partial, Unfinished Hardwood floors Fireplace(s) Fireplace features: Family Room, Wood Burning

2 car garage Attached parking Parking features: Oversize Garage Heating features: 1 Unit, Baseboard - Hotwater,Oil Central air conditioning Cooling features: 1 Unit, Ceiling Fan Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Pets allowed Lot features: Open Lot Corner lot Approximately 0.27 acre(s) Lot size is less than 1/2 acre Utilities present: Public Sewer, Public Water, Electric Service

Here are the financials -

• The property was purchased in July 2005 for $405,000.

• The original mortgage at the time of purchase was for $359,000 with a 30 year fixed with Well Fargo.

• On the same day of purchase in July 2005 a HELOC was opened also with Wells Fargo for $11,000.

• In October of 2005 another HELOC was opened for $86,500 with Wachovia.

• The foreclosure process started in August 2007 with the filing of a Lis Pendens.

• The property is currently an REO and listed with a realtor for $370,000.

• The taxes for 2008 were $9,734.11.

The property was purchased at the peak of the bubble with what looks like over 11% down payment of $46,000. If the HELOC taken the same day was actually a piggyback loan the down payment would have been $35,000 or about 8.6% down. Notice that the amount taken at the time of purchase, $370,000, is the same as the current sale price.

After just three months the owners went elsewhere (Wachovia) to possibly extract all the equity from the down payment as well as any new accumulated in the property plus another $51,500. If all the HELOC was extracted in the two years of ownership before the foreclosure process started the property was paying the owner about $25,750 in equity, housing ATM, or second income. Not a bad second income. Actually since it was Wells that filed the foreclosure papers and Wells purchased Wachovia, and subsequently their loans, Wells may have been paying this owner over $25,000 per year to own the property.

Now the property is for sale with a realtor, if it sells for full asking price and the realtor receives their standard commission Wells stands to lose approximately $108,700 on this loan.

For those looking to pick up this property, paying full price with 20% down and today's Bankrate 5.26% with a fixed 30-year loan the payments with taxes would be about $2,447.54 per month. But future owners need to remember that the bubble has popped and the property will not be paying future owners any second income, let alone over $25,000 a year.

Serial Refiancing in Mount Olive Turns Homeowner into Homedebtor

This is the definition of the serial refinancer - a homedebtor relying on mortgage refinancing to maintain artificially low debt service payments or fuel a lifestyle of consumption. If you took cash out perpetually it was to fuel an unaffordable lifestyle. If you refinance to get lower rates or terms (with no money out) you are probably one of the few that were not buying into the bubble's equity fun.

One problem with the serial refinancer was that is was easy to go from a homeowner into a homedebtor. A homedebtor is a homeowner who is overextended with a mortgage they cannot afford often due to their own desires for more home or more spending money. Some homedebtors bought a house beyond their means and usually used a Option ARM AKA Pick-A-Payment AKA Suicide Loan to obtain their dream property. Other homedebtors had their properties within reach of realistically owning their property but chose to withdraw all equity and then some.

Any available funds the property could provide was spent with the owners constantly refinancing to withdraw any new equity that was available. If only $10,000 was available they would extract it, if $100,000 plus was available that would be gone immediately. Which brings us to today's featured property about a homeowner become a homedebtor using their property as an ATM and withdrawing, withdrawing, withdrawing. Lets take a look -

Here is the property -

The front of the house.

The living room or family room.

The master bedroom.

Here is the property info -

Status: Active County: Morris Year Built: 1948 4 total bedroom(s) 3 total bath(s) 3 total full bath(s) 10 total rooms Style: Colonial Master bedroom Living room Dining room

Family room Kitchen Den Office Basement Bathroom(s) on main floor Master bedroom is 18x14,Includes: Full Bath, Walk-In Closet Living room is 16x12 Dining room is 14x11,Formal Dining Room Kitchen is 12x09 Basement is Full, Unfinished, Walkout Parking space(s): 2

Heating features: 1 Unit, Baseboard - Hotwater, Multi-Zone,Oil Water Heater, Water Heater From Furnace,Oil Cooling features: 1 Unit, Ceiling Fan Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Pets allowed Approximate lot is 50X125 Lot features: Level Lot, Open Lot Approximately 0.14 acre(s) Lot size is less than 1/2 acre Utilities present: Cable TV Available, Public Sewer, Public Water, Electric Service High School: MT.Olive HS

Here are the financials -

• The property was purchased for $113,000 in April 2000.

• The first mortgage at the time of purchase was for $112,075 with Huntington Mortgage.

• The property owner took Refi with cash out the following October of 2000 for $144,576.58 with Household Financial Corp.

• One the same day as the Refi a HELOC was opened for $10,000 also with Household Financial Corp.

• In July 2002 the property underwent another Cash-Out ReFi, this time for $180,000 using an ARM with Long Beach Mortgage Co.

• Another Cash-Out Refi occurred in April 2004 for $200,000 also with an ARM from Alliance Mortgage Banking Corp.

• The following July of 2004 the property was refinanced again for $210,500 with Fleet National Bank.

• A Home Equity Loan for $25,000 was obtained in September 2004 with Domestic Bank.

• In January 2006 another ReFi with Cash-Out was taken for $388,000 using an ARM with First Interstate Financial Corp.

• The next May (2006) the property owners obtained another Cash-Out ReFi for $429,300 using an ARM with Balloon mortgage with WMC Mortgage.

• A HELOC was obtained for $20,000 in August 2007 through American General Financial Services.

• The foreclosure process started in August 2008 with the filing of a Les Pendens for the WMC mortgage.

• The property is currently for sale through a realtor for $299,000.

• Taxes for the 2008 were $6,397.12.
  

The owner may be our record for the most mortgages in the shortest amount of time. During 9 years of ownership they signed 10 different mortgages against their property, averaging more than once per year.

When the house was purchased at what was the beginning of the bubble, the homeowner put down a hefty $925 to purchase the property which was about 0.8% of the purchase price. After just 6 months of ownership the first venture into Refinancing with Cash-Out was utilized taking all of the original investment of $925 out of the property plus another $31,576.58 with the option of taking another $10,000. After another 9 months and another ReFi with Cash-Out and the equity withdrawal was $67,000.

That money must have lasted for some time since it was not for another 21 months until the next Cash-Out ReFi took place extracting another $20,000 totalling $87,000 withdrawn from the property so far. Probably before the ink was dry and just 3 months later another Cash-Out ReFi occurred withdrawing another $10,500 for a total withdrawal of $97,500 on top of the original down payment withdrawal. And another 2 months later a HEL withdrew another $25,000 for a total withdrawal of $122,500.

The HEL must have lasted for some time since the next equity withdrawal did not occur for another 17 months. But this Cash-Out ReFi was a hefty one adding another $152,500 for a total withdrawal at this point of $275,000. And 5 months after that a Cash-Out ReFi was taken yet again extracting another $41,300 for a total equity withdrawal of $316,300. Obviously that was not sufficient since 15 months later a HELOC for another $20,000 was taken. If this HELOC was utilized the homeowners, actually they were home debtors at this point, had withdrawn a total of $363,300 in less the 9 years of ownership. (Side note - somehow we do not think this money was spent on landscaping or furniture.)

The property provided the home debtor with a second income of approximately $40,000 per year. However that second income was not enough to pay the mortgage since the foreclosure process started a year after the last HELOC was opened.

Now that the house is for sale with a realtor someone, with the foreclosure and withdrawal history it is obviously the lender, will be losing about $168,240 on this property. That loss is based on the property selling for full asking price while the realtor receives the standard commission. That is a huge loss on the property.

Perhaps an interested party wants to partake in the luxury this property can provide. With a 20% down payment of $59,800 and a fixed 30 year rate at today's Bankrate average of 5.26% the monthly payment for the property would be $1,322.35 plus a tax payment of about $533 and your payments would be $1,855.44. Of course, this is before insurance and utilities.