Claim 750.000.00 GPB IN British Panasonic Promo. Send:




  • Digg
  • StumbleUpon
  • Reddit
  • RSS

Irvine Housing Blog

Irvine Housing Blog

Link to Irvine Housing Blog

Strategic default begins nearly one in four Nevada foreclosures

Posted: 31 Jan 2011 02:00 AM PST

Strategic default has become common and accepted in Las Vegas.

Irvine Home Address ... 260 DEWDROP Irvine, CA 92603 
Resale Home Price ...... $249,000


It's not right, but it's okay
I'm gonna make it anyway
Close the door behind you
Leave your key

Whitney Houston -- It's Not Right, But It's Okay

I am emotionally conflicted about strategic default. It's not right, but it's okay. Do you know what I mean?

I understand the argument that says borrowers should be responsible to keep their word and pay their debts. They should. However, I also believe that families should not be burdened for decades by one poor financial decision.

There are times when our values and beliefs are in conflict, and to avoid hypocrisy, each person must evaluate which of their conflicting values they hold in higher regard. I side with the family. I can't condemn a family for relieving themselves of a financial burden they cannot handle, particularly when lenders abdicated their responsibility of making sure the family could handle the debt.

Strategic default the norm in Las Vegas

Unless you have spent time talking with Las Vegas residents, you can't fully appreciate how common and accepted strategic default is in that town.

First, there is no class distinction when it comes to walking away. I know a business owner who walked away from his $1.1M mortgage. He said when he saw a few comps in his neighborhood go for less than $500,000, he said continuing to pay seemed pointless, so he walked.

I know a mortgage broker who walked away from three properties. She had a condo she bought in the mid 90s and two properties she bought when the market "corrected" in 2007. In early 2009, she saw a comp for her condo go for less than its 1996 purchase price. She calculated that she had almost $400,000 in mortgages on about $175,000 in real estate, and prices were still headed straight down.

Basically, anyone who bought in the 00s is underwater or nearly so, and there is little hope of price recover while the rest of the city strategically defaults because they too are underwater. The excess debt will be purged in Las Vegas, and the excessive debt service payments will not serve as a drag on the local economy as it will here. That being said, the purging process is not pretty.

In Nevada, 23 percent who lost homes to foreclosure could afford payments

Officials say trend shows no signs of slowing  

By Buck Wargo
Published Tuesday, Jan. 25, 2011 | 9:22 a.m.
Updated Tuesday, Jan. 25, 2011 | 3:06 p.m.

Nearly one in four people in Nevada who lost their homes to foreclosure have admitting to walking away even though they could afford their monthly payments, according to a study released today by the Nevada Association of Realtors.

The study said 23 percent of those surveyed described their own situation as a strategic default, meaning they decided to stop making payments on their debt despite having the financial ability to pay. Many of those who walked away from their homes said trusted confidants advised them that a strategic default was their best option, the study said.

Keep in mind that many of these borrowers probably could not really afford the payment long term. Those borrowers are merely accelerating the inevitable rather than truly walking away from an obligation they could comfortably cover.

The authors of the study said strategic defaults are a much greater problem in Nevada than the rest of the nation. It has less of a stigma here that it’s a shameful decision, and it’s becoming more popular as part of a snowball effect, they said.

“I believe the current trend upward. It could get worse,” said Joel Searby, SGS’s director of marketing and business development. “The cultural stigma is dropping, and it’s becoming more acceptable.”

The survey was conducted by SGS, a national research firm that has done similar studies in Florida and Pennsylvania. It held two focus groups in Las Vegas and interviewed more than 1,000 Nevadans by phone.

It was striking to see that nearly one in four Nevadans who lost their homes to foreclosure admitted they simply walked away from their mortgage,” said outgoing Nevada Association of Realtors President Linda Rheinberger.

Nevada has ranked No. 1 in the nation in terms of its rate of foreclosure filings since January 2007.

A report released today by California-based CoreLogic said foreclosure rates in Nevada increased in November to 9.49 percent of mortgage loans, up 1.71 percentage points from November 2009. The national rate was 3.48 percent in November.

In November, 19.65 percent of Las Vegas mortgages were 90 days or more delinquent, down from 19.70 percent in October. The statewide delinquency rate is 17.35 percent, CoreLogic reported.

It's difficult to imagine nearly 10% of mortgages in foreclosure and another 10% delinquent. It is difficult to keep a rate that high because after enough time goes by with a 20% delinquency rate, every mortgage in the area will turn over. The 20% in the pool from last year is a different 20% that is in the foreclosure queue now.

University studies in the past two years have suggested that between 17 and 25 percent of Las Vegas residents have considered or would consider walking away from their mortgage even though they could afford their payments.

Nevada had nearly 8,000 homes foreclosed upon in the fourth quarter of 2010, according to California-based RealtyTrac. If the survey is correct, that means more than 1,800 of those are people who did so strategically.

Searby said he was surprised with the findings of so many people walking away in Nevada. Anecdotal evidence in surveys in other states suggests the problem is “significantly worse” in Nevada, he said.

Nevada homes have taken one of the biggest price drops in the nation, and in Las Vegas prices have fallen about 60 percent from their peak in June 2006.

Cause and effect. Low prices are creating the circumstances leading to more strategic default. It is a classic downward spiral. The Las Vegas experience inspired the amend-extend-pretend dance to avoid a repeat in every housing market in the country. 

Searby said a culture is developing in Las Vegas and the rest of Nevada that strategic defaults are OK, and there isn’t the stigma once associated with it. That’s creating a snowball effect that increases its popularity, he said.

Some websites are dedicated to encouraging people to walk away from their homes. The Las Vegas Sun and its sister publication, In Business Las Vegas, has written on the subject, and one prominent home builder, Richard Plaster, president of Signature Homes, has encouraged people to do a strategic default to spare their finances.

“It is about how they’re perceived by their peers,” Searby said. “One man in a focus group said growing up this would have been an act of shame. It’s not seen as something that brings shame on him now. There’s a subculture arising who don’t believe walking away from a mortgage is necessarily bad. This has become a financial decision for most of the families first and foremost.”

This is the argument I have been making for months. The needs and interests of the family outweigh paying the mortgage on an underwater property when it's cheaper to rent.

This dilemma is not new. If your family were starving to death, would you steal food? Most would. Anyone who valued survival more than personal property law would. In fact, many wars have been fought because one group lacked resources to survive, so they go to war to take those resources from another.

Searby said what surprised him in the survey is that those who are walking away tend to be older, mostly 40 and over, rather than younger generations that might be perceived to be less financially responsible.

“They are looking at the last 30 to 40 years of their life and feel it doesn’t make sense to have that kind of debt hanging over their heads,” Searby said. “It’s about their quality of life and that all they are going to pass on to their kids is debt.

That scenario describes one Las Vegas resident who took part in the survey.

Lee, who didn’t want to use her last name, said she plans to walk away from her $1,700 a month mortgage even though she can afford the payment. Lee said the value of her home that she refinanced about six years ago for $235,000 plummeted from $270,000 to $80,000 today. Since then, she has retired from her federal job and had her husband leave her.

Interesting sob story, but at least she admitted to the HELOC abuse.

Lee said the Federal Deposit Insurance Corp. has taken over the bank that once held her loan and the lender now servicing the loan has been unwilling to work with her to reduce her payments. She said it’s prudent to keep the money for taking care of herself during her retirement.

“Why should I pay on something when it’s like losing $150,000 in the stock market,” Lee said. “The way I look at it is I’m 73 and never going to see this market come back. I don’t feel bad at all. They had a chance to work with me.”

Lee said she plans to rent a home from her girlfriend and isn’t worried that the lender will come after her for the first mortgage six months after foreclosing or for the second and third mortgages on the homes over the next six year as allowed under state law.

If that happens, she said, she will file bankruptcy.

In all likelihood, either the lender or a zombie debt collector will come after her, and she will have to declare bankruptcy to make the problem go away.

Most borrowers who walk away should declare bankruptcy. It's the only way to be sure the debt will never be a problem again. I can foresee many borrowers who walked away getting blind-sided by lenders several years from now when the borrowers have assets again.

Searby said those who walk away aren’t concerned that it would take them three to seven years to get another mortgage or that their credit might make it difficult to buy a car for a while.

That's because people don't have much reason to worry. The powers-that-be are determined to give everyone a pass.

The survey said most Nevada homeowners facing foreclosure weren’t aware of the federal and nonprofit programs designed to help them. Some 61 percent said they weren’t aware of foreclosure aid programs and only 3 percent said they used the state’s foreclosure mediation program or were helped by it in any way.

Many Nevadans experiencing foreclosure faced two or more life-altering events that increased their risk of defaulting on their mortgage, the study said. The report said the loss of a job and unexpected medical bills were the most common events triggering a foreclosure.

Homeowners statewide were far more likely to blame banks and lenders, at 46 percent, than the government, which polled 20 percent, for the foreclosure problem. Homebuyers got 13 percent of the blame, the study said.

Interesting. Lenders are getting their oversized share of the blame.

Short sales proved to be moderately helpful in avoiding foreclosures with the report saying 10 percent of those surveyed said it helped them.

NVAR President Mike Young said the study would be used as a basis with the state’s lawmakers to help address the problems with foreclosures. Besides advocacy and counseling, streamlining short sales could help stabilize the housing market, he said.

Short sales are those in which lenders allow the homes to be sold for less than is owed on the mortgage. Homeowners have faced hurdles in getting banks to approve that option.

Short sales are not the answer, and neither are loan modifications. More foreclosures are on the way.

What the foreclosed leave behind

I have found all manner of personal possessions left behind in properties. One of my competitors jokes about how he finds vacuum cleaners left in each property. I have only found 4 or 5 of them.

Some of the items left behind likely were beloved by their former owners. Mostly this is stuff like dolls or photographs, but on some occasions, it is much more.

Aren't these two cute?

They were a few days from starvation when we found them trapped in the back yard of a house the former owners. I understand owners abandoning their house. It's property. It's not alive. These owners abandoned their family pets. Disgraceful.

What goes through the mind of the former owners? Did they think someone like me would come along and save their dogs? What if we had waited another few days before taking possession?

We couldn't find any evidence of food left behind, although judging from these dogs appearances, they long since scavenged anything edible. After eating any remaining garbage and plant matter, they likely gnawed on that rubber tire.

Are these former owners such assholes that they left their dogs to die?

You'll be happy to know that we saved these two dogs from this fate and took them to a local shelter.

Should it really take two or more years to resolve a bad loan?

Today's featured property was originally posted April 26, 2007: More Jasmine Dew Drops in Quail Hill

This was a flip gone bad. The owner put the property for sale about a year after paying $450,000 for a one bedroom apartment. He tried off and on selling the property for the next couple of years. He tired of the payments and quit paying sometime before mid 2008.

Foreclosure Record
Recording Date: 11/29/2010
Document Type: Notice of Default

Foreclosure Record
Recording Date: 02/18/2009
Document Type: Notice of Sale

Foreclosure Record
Recording Date: 10/08/2008
Document Type: Notice of Default

They may have convinced him to pretend with a loan modification, but one bedroom apartments are still not selling for more than $450,000 six years later, so the owner doesn't see much point in remaining current.

When he bought the property, he used a $356,000 first mortgage, a $66,700 second mortgage, and a $27,300 down payment, so he does have some skin in the game.

I speculate he has other assets too. I further speculate this sale is being held up while the owner and the second mortgage holder agree to a settlement. I know none of these people, but it does explain why one property can be for sale for years while an underwater delinquent borrower continues to be on title.

Today's featured property should have been foreclosed on years ago and washed through the system. Here we are in 2011, and we haven't resolved bad loans from 2008.

Irvine Home Address ... 260 DEWDROP Irvine, CA 92603  

Resale Home Price ... $249,000

Home Purchase Price … $445,000
Home Purchase Date .... 11/21/05

Net Gain (Loss) .......... $(210,940)
Percent Change .......... -47.4%
Annual Appreciation … -10.9%

Cost of Ownership
$249,000 .......... Asking Price
$8,715 .......... 3.5% Down FHA Financing
4.78% ............... Mortgage Interest Rate
$240,285 .......... 30-Year Mortgage
$50,274 .......... Income Requirement

$1,258 .......... Monthly Mortgage Payment

$216 .......... Property Tax
$153 .......... Special Taxes and Levies (Mello Roos)
$42 .......... Homeowners Insurance
$297 .......... Homeowners Association Fees
$1,965 .......... Monthly Cash Outlays

-$117 .......... Tax Savings (% of Interest and Property Tax)
-$301 .......... Equity Hidden in Payment
$16 .......... Lost Income to Down Payment (net of taxes)
$31 .......... Maintenance and Replacement Reserves
$1,594 .......... Monthly Cost of Ownership

Cash Acquisition Demands
$2,490 .......... Furnishing and Move In @1%
$2,490 .......... Closing Costs @1%
$2,403 ............ Interest Points @1% of Loan
$8,715 .......... Down Payment
$16,098 .......... Total Cash Costs
$24,400 ............ Emergency Cash Reserves
$40,498 .......... Total Savings Needed

Property Details for 260 DEWDROP Irvine, CA 92603
Beds:: 1
Baths:: 1
Sq. Ft.:: 0830
Lot Size:: -
Property Type:: Residential, Condominium
Style:: One Level, Contemporary
View:: Peek-A-Boo
Year Built:: 2003
Community:: Quail Hill
County:: Orange
MLS#:: L27347


The realtor describes this place as LARGE and SPACIOUS. It's a one-bedroom one-bath condo of 830 square feet. The right word in realtorspeak is COZY.

real estate home sales

  • Digg
  • StumbleUpon
  • Reddit
  • RSS

Latest articles from Real Estate Local Experts

Latest articles from Real Estate Local Experts

Link to Real Estate Experts

Moroccan Decor And Your Home Decorating


Do you get tired of seeing the same old rooms day in and day out when you walk through your home? This means that it is time for you to make changes, and changing your home to Moroccan decor can really shake things up. Why simply change interior colors or replace furniture when you can have a whole new exotic and mysterious look instead? Moroccan home decor is an extremely popular option right now, because it combines different cultural influences and styles into a unique blend that is fabulous. There ...

Choosing The Perfect Backyard Landscape For Your Home


Presentation can be everything and the first bite is with the eye. A nice, manicured landscape can make all the difference to how people perceive your dwelling place. You can find the perfect backyard landscape for your yard that will create a separate space for you to enjoy every day. When thinking about landscaping any space, you must take into consideration, several things. Keep an accurate idea of the size of your space. You don’t want to misjudge and buy the wrong amount of landscaping supplies. Develop a plan and have ...

An Introduction To Italian Furniture


Italian furniture can actually be quite radically diverse in design. In ancient Rome, where the architecture of the period was generally highly elaborate with its intricate columns, fountains and frescoes, the need for equally elaborate furniture was deemed unnecessary. The architecture was designed to be eye catching whereas the furniture, quite elegant for sure but nonetheless quite simple, was designed mainly for comfort. Another style of furniture, however, can be characterized by having the opposite qualities. This style, known as the Tuscan style after the area in which it was first ...

Using The Moroccan Home Decor Style


Moroccan home Decor can be a perfect way to liven up a dull home appearance, and give your rooms a complete new look and feel. Carefully placing Moroccan furniture and adding a few Moroccan accents and touches can really spice up the interior design of your home. Moroccan lanterns, Moroccan tagines, rich fabrics, bright colors, exotic smells, and an air of mystery all combine in a result that is fabulous. Why not add a unique look to your home with some Moroccan furniture and lamps? The designs and patterns which are ...

Moroccan Home Decor Styles


If you want your home to be exotically furnished, yet still retain a high degree of elegance, the Moroccan home decor style may be the right choice. This style includes elements of mystery, combined with colors that are rich and vibrant. Moroccan home lighting is strategically placed , and components featuring mosaics and wood pieces which are intricately designed are included. Moroccan decor is becoming extremely popular for modern homes of all styles. The country of Morocco is a combination of influences which are blended together, with numerous cultures influencing the ...

Additional Secondary Asphalt Driveways For Homes, Contractors, or Places Of Business


It could be that an additional or secondary asphalt driveway should be in your immediate future. Why? Chances are that the dirt track, gravel trail, or just plain ruts or worn grass leading to one side of your home, headquarters, or warehouse are an eyesore? Am I right? Asphalt driveways are the near-perfect economical solution to your dilemma. You might consider calling an asphalt contractor today. What Additional Secondary Asphalt Driveways Provide Secondary or additional asphalt driveways serve several key functions and purposes. First, asphalt driveways provide a solid surface and ...

How To Make Your Kitchen Trendy Using Kitchen Appliances


From cooking to baking or sharing quality time with family members for some light snacks, the kitchen has been a hub for activities among family members or friends. Moreover, a kitchen can be a status symbol; the amount of money spent in designing and building may be directly proportional to family income. Naturally, choosing the right kitchen appliances has been a topic of great interest. Several factors affect kitchen design. Latest technologies, available space, common activities, and personal preference are just some of the important things considered in planning a ...

Top Reasons Why You Should Get A Fitted Kitchen


Any housewife’s dream house would not be complete without it- the perfect kitchen where she can do all the cooking and baking, where the family can share invigorating breakfast, or simply enjoy some sweets matched with a hot cup of coffee. It must have enough space for all the wet and dry kitchen works, designed to make it appear bigger by using materials with bright colors such as that of real honey-toned wood for tables and cabinets, with proper lighting to complement the overall theme of the fitted kitchen. A ...

Jewelry Armoire Chest


Contrary to common belief men are more likely to collect valuable items. Men’s collectible items often range from stamps, coins, comic books, cars, baseball cards and jewelry. Yes people, jewelry! In fact, jewelry is generally the most popular gift for men as it is for women. Unlike most of men’s collectible items, Men’s jewelry items are not meant to be just dumped in a box. To keep them organized and easy to find and reach, they need to be given proper storage. In this light, when men’s jewelry and mens ...

Making A Decision Between Contemporary And Traditional Bathrooms


Whether you’re planning a bathroom design for a new house or thinking of renovating an existing bathroom, you may want to know the difference between a traditional and contemporary bathroom design. Knowing the basic differences in design would allow you to decide which one to implement depending on your lifestyle. A classic traditional bathroom incorporates all the pieces required for an old-world luxurious bathroom. It is often highlighted by a large bath centerpiece accompanied by classical period furniture from a chosen era. While modern bathrooms are constantly evolving depending on available ...

What to Do When in Need of Fire Water Restoration


Several things can happen to necessitate someone to get fire water restoration. After all, fires happen. Floods also tend to happen. These are accidents that happen often and they cannot be seen coming. This can affect residential homes and apartments as well as commercial buildings and offices. So what should you do when you find yourself in need of fire water restoration? First things first – stop the problem. If there is still a fire, call the fire department. If there is risk that the fire might start up again, ...

Air Ceiling Fans


Air ceiling fans are an extremely beneficial addition to any home. They are very popular, and most people install them within the main living areas, such as the living room, kitchen, and bedrooms. They are possibly the most popular electric home accessory, and they work like any other type of fan with the exception of their ability to be hung from the ceiling. The best features of ceiling fans are their ability to keep you cool while also saving you money on your power bill. Ceiling fans provide an optimal cooling ...

How to Fill Cracks and Holes Around Your Home


It doesn’t take much to damage wood or plaster. Anything from the decorations you put up on the wall to your kids playing around the house can leave your walls damaged. Over the years these cracks and holes expand, damaging the substrate finish. For the quickest and easiest solution, wood and wall filler can be picked up from any DIY store and the repairs can be completed by even the most novice of DIY’ers in just a few minutes. Application of wood or wall fillers is a fairly simple task ...

Furniture Jewelry Armoire


Of all material possessions of man, jewelry is considered most valuable. It symbolizes not only beauty but also power and wealth. Hence, people took trouble earning and collecting pieces of jewelry. To care for such precious items, jewelry boxes were created to complement each peace with proper storage and protection. Later on, furniture jewelry armoire was created to provide a more organized and charming storage for all jewelry pieces. History tells that jewelry already existed about 75,000 years ago. Ancient African people made beads out of snail shells, which they wore ...

Outdoor Ceiling Fans


Some people may think that outdoor ceiling fans are a ridiculous idea. How helpful could they possibly be when you are outside in the heat, right? Actually, they can really assist with making outdoor sitting areas more comfortable, especially those that are screened in or have a cover over them. There are many different options you can choose from when purchasing an outdoor fan for your deck or patio. Below are some considerations you want to make when shopping for an outdoor ceiling fan. You should begin by thinking about the ...

Energy Star Ceiling Fans


During the summer, the desire to keep the home cool seems to be at the forefront of everyone’s mind, but there are more than a few things to take into consideration before you actually make use of an air conditioner or even a ceiling fan. First of all you should understand that we ARE in a recession, and as a result you will probably want to save as much money as possible. An air conditioner is not efficient on its own, though you can be selective about the times you ...

Solid Surface Countertops Offer Both Beauty And Long Lasting Service


Commercial food service facilities, schools, healthcare clinics, and hospitals all have their special challenges when it comes to facility design and construction materials used due to the necessity of meeting the most stringent environmental regulations and requirements. Maintaining clean, sterile environments begins with the construction materials that offer non-porous surfaces that are easy to clean and that do not promote the growth of bacteria, mold, or mildew. Additionally, they need to be very durable and enable harsh use that is resistant to damage from physical impact or chemicals. Looking good ...

Types of Ceiling Fans


Though many people may not realize it, there are several different types of ceiling fans on the market today. Some people may just look for the cheapest, or the one that offers a certain feature they would like to have. However, it is important that you consider a number of styles when shopping. This will allow you to pick the best ones for your home. With so many options, wouldn’t you like to know everything you can get from your investment? Various Functions Some ceiling fans are basic and require you to ...

Outside Patio Heaters: Why You Want Them


If you are one of the people that enjoy being outside all year round but have a little problem finding comfort in the cold winter weather, you might want to check out your options with outside patio heaters. Some people think that patio heaters are only for the people that like to throw big fancy outdoor parties. Even though having such heaters on hand for those occasions would be ideal, that is not the only reason to have the heaters for the patio. There are in fact many reasons to ...

Different Kinds of Unique Ceiling Fans


A ceiling fan can serve a multitude of different purposes. They can keep your home cooler in the summer, and warmer in the winter, circulating air throughout the room. They can have just a few blades, numerous blades, have lights and come in many different styles and sizes. Back in the day, you only had a few different styles to choose from, but today there are many traditional as well as unique ceiling fans to choose from. When it comes to unique ceiling fans, the sky is really the limit. You ...

Wooden Blinds Are The Best Money Can Buy


There are various benefits to installing wooden blinds in the home, which are only proven by their popularity throughout the decades. They are stylish, affordable, durable and easy to fit, making them a common choice with people all over the world. One of the main merits of wood blinds is their appearance. Their natural presence gives a real sense of warmth to a room that can also help bring out the features of other furniture. With so many different shades available, people do not need to worry about whether or not ...

Kitchenaid Food Processor Reviews


It is very important to do a little market research before purchasing a food processor. You always want to be sure that what you are buying has the ability to address all of your cooking needs and is the best product on the market. To help you with this decision, here are a couple food processor reviews on two of the best Kitchenaid products on the market: Kitchenaid KFP740 food processor This product is perfect for getting creative with your home cooking! It comes with a huge 9 cup work ...

A Florists Artistic Touch Of Green


Flowers speak to us with their beauty and implications. Their sweet aromas drum up pleasure to our senses and create a feeling all their own. The presence of a flower can take you back to childhood summers spent at your Grandparents home, a first date, or even a first kiss. Florists take these individual works of natural art and make them into precious symbols of love, happiness, mourning, thanks and congratulations. A flower arrangement has its place in any home or business just as a wildflower has its place in any ...

Is a Bissell Carpet Steamer the Right Choice for Your Carpet?


When it comes to cleaning carpets, Bissell is one of the big names. They make some great products. But when you’re shopping for a steam cleaner, you want to know if the reputation holds true. Is a Bissell carpet steamer a good purchase? That’s going to depend some on the particular model you purchase. But in general, they’re pretty good machines. Bissell makes a few types of carpet steamers. There are the full size upright models that are good for cleaning entire rooms. Then there are the little spot cleaners that are ...

  • Digg
  • StumbleUpon
  • Reddit
  • RSS