Thursday, December 1, 2011

Irvine Housing Blog

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Foreclosure settlement talks continue without California

Posted: 01 Dec 2011 02:30 AM PST

Despite California's withdrawal from the foreclosure settlement talks, the negotiations are continuing with other states.


Irvine Home Address ... 3 ABETO Irvine, CA 92620
Resale Home Price ......  $699,900

As usual, I'm in a tricky predicament
Weather in my thoughts, on the roof sneaking a cigarette
Dear California, it's been nice to know ya
Tell me, will you miss me when I'm gone?

Vanessa Carlton -- Dear California

California recently pulled out of the settlement talks with the major banks. Does anyone miss California?

Foreclosure Talks Push Ahead Absent California

Bank representatives and government officials are working on a broad settlement of most state and federal foreclosure-practices investigations that could move forward without the participation of California, long considered a key to any deal, people familiar with the negotiations said.

The terms of the deal remain fluid. Banks have proposed a deal excluding California that would carry a value of $18.5 billion, though the final outcome remains uncertain, people familiar with the discussion said.

Negotiators are continuing to make a push to persuade California to join a settlement valued at $25 billion among federal officials, state attorneys general and the nation's five largest mortgage servicers: Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. The talks center on the banks' use of "robo-signing," in which employees approved legal documents without proper review, and other questionable foreclosure practices.

The only reason the California Attorney General is not signing on is because she wants to extort more money out of the banks. The robo-signing issue was not a problem here because we don't have a judicial foreclosure system. By and large, there have been no questionable foreclosure practices. Nobody who was making their payments was foreclosed on. What we do have is a lot of squatters in shadow inventory gaming the system and hoping the California AG will bail them out with principal reduction in order to secure re-election.

The dollar value would include the value of principal write-downs, interest-rate reductions and other benefits to homeowners as well as cash penalties.

But negotiators now are discussing how to structure an agreement if California remains on the sidelines. Until recently, it seemed unlikely that a settlement would be possible without the participation of California Attorney General Kamala D. Harris. She left the discussions in late September, calling the deal then on the table inadequate. The state accounted for 13.1% of all mortgages outstanding at the end of September and 10.8% of all loans in foreclosure, according to the Mortgage Bankers Association.

"Our position remains the same. We are focused on securing maximum relief and lasting reform for California homeowners," said Shum Preston, a representative for Ms. Harris.

Her position is the same. She is still posturing for more extortion money.

Attorneys general in several other states, including Delaware, Massachusetts, Nevada and New York, also have raised questions about the potential settlement.

Participants on both sides are eager to reach a resolution after months of discussion. Administration officials have viewed the foreclosure settlement as a chance to break the foreclosure logjam, increase the number of reductions in loan principal and provide other assistance to homeowners. Banks, meanwhile, would like to reassure investors and put questions related to foreclosure practices behind them.

It's the banks who desperately want to make this deal to limit their future liability. They are right that investors will not buy banking stocks while there is a giant black hole eating everything on their balance sheet.

Any deal would require banks to use a portion of the penalties to modify mortgages by writing down loan balances, among other actions. In exchange, banks would be released from legal claims tied to servicing delinquent mortgages as well as certain mortgage-origination practices. Government officials still would be able to move forward with other legal claims, including those stemming from the packaging of loans into securities.

The discussions have turned in recent days to crafting a formula to determine how any settlement is scaled depending on which states opt out of the deal. Officials have discussed limiting the amount of loans that could be written down or refinanced in states that don't join the settlement, people familiar with the matter said, in order to provide a stronger incentive for states to join. States that don't join the settlement wouldn't receive any of the funds that will go directly to the states, nor will borrowers in those states receive cash payments for which they might otherwise be eligible, these people said. If California doesn't sign on, the state would lose billions of dollars in potential benefits, the people said.

Nice try, but California will extort even more money out of the banks with a separate agreement. It's wishful thinking to believe they can limit California's recovery from the banks if California refuses to participate in the deal.

The participation of California isn't the only item still on the negotiating table. The two sides still must agree on the choice of a monitor, who will be charged with ensuring that banks comply with the settlement, people familiar with the discussions said.

Following the departure of Ms. Harris from the talks, the price tag of a settlement rose by at least $5 billion and negotiators came up with a plan to help certain "underwater" borrowers, those who owe more on their mortgage than their home is worth, to get refinancing assistance.

California has more than two million underwater borrowers, more than any other state, according to CoreLogic.

That's a lot of houses. How many of them will survive to have equity again? Not many, I imagine.

The refinancing plan will remain in the deal even if California doesn't because it is attractive to other states that have seen large home-price declines, the people said.

Ms. Harris has come under pressure from labor and progressive groups seeking to extract greater penalties from banks for alleged mortgage-related wrongdoing.

Now we see the real reason she pulled out of the talks. The extreme left who want to give away free houses to loan owners are pressuring her. The extreme left is wrong on this issue. Is fiscal responsibility completely out of favor on the left?

Last week, her office issued subpoenas to Fannie Mae and Freddie Mac, the government-controlled mortgage companies, according to people familiar with the matter.

The subpoenas asked the firms to provide responses to about 50 different inquiries, according to these people, including demographic information about borrowers who have missed payments and who have received loan modifications, among other items.

The state also requested information on foreclosed properties owned by the firms, including any evidence of unpaid taxes or drug abuse on vacant properties.

If she really wanted to do something useful, she could request information on unpaid HOA dues by the banks. HOAs are getting killed by lenders who don't foreclose because when they finally get around to it, the HOA lien gets wiped out. Many HOAs are grossly underfunded.

Representatives of Fannie, Freddie, and the Federal Housing Finance Agency, which regulates the firms, declined to comment.

Ms. Harris has a limited ability to bring legal claims related to originations and servicing practices if she decides not to agree to the foreclosure deal, people familiar with the negotiations said.

How can she be bound by an agreement she doesn't sign? Her failing to sign the agreement does not limit her in any way.

The statute for filing cases related to loan originations is four years in California, meaning any legal action could cover mortgages originated only in 2007 and after. California allows foreclosures to proceed through a nonjudicial process, limiting the state's ability to argue that banks lied to the courts, these people said.

Separately, the Office of Comptroller of the Currency on Tuesday released a broad summary of the actions financial firms have taken this year to overhaul foreclosure practices. Bank regulators also posted copies of the agreements between banks and thrifts and the consulting firms, which include Clayton Services LLC, Ernst & Young LLP, PriceWaterhouseCoopers LLP and Promontory Financial Group LLC, that have been hired to review millions of foreclosure files for potential defects.
—Alan Zibel and Maya Jackson Randall contributed to this article.

Write to Ruth Simon at and Nick Timiraos at

I am torn on this issue.

I want to see the banks pay a very heavy price for inflating the housing bubble, but I don't want to see them get punished for their proper foreclosure practices.

I want to see the banks lose a lot of money, but I don't want to see these losses occur because some politician wanted to buy some votes by giving free money to a loan owner.

The punishments being inflicted on the banks are warranted, but not for the reasons being given. Two wrongs don't make a right.

Half a million dollar Ponzis

My data source for today's featured property doesn't tell me exactly when the previous owners bought the house, but the assesed value is $280,838 which suggests they paid about $265,000, probably sometime in the 1990s.

My records pick up with a $438,750 first mortgage on 3/21/2003. By this time, the owners were committed Ponzis.

Over the next four years, they proceeded to borrow and refinance many times culminating in a $744,000 Option ARM on 7/31/2007. The also managed a $29,900 HELOC on 10/11/2007.

They racked up $773,900 debt on a house they paid less than $300,000 for.

They quit paying, and got to squat for at least 15 months.

Foreclosure Record
Recording Date: 09/09/2010 
Document Type: Notice of Sale   

Foreclosure Record
Recording Date: 06/07/2010 
Document Type: Notice of Default

I'm out of unique ways to describe this behavior. I hope they enjoyed the money because they will likely never live that well again.

This property is available for sale via the MLS.
Please contact Shevy Akason, #01836707 


Irvine House Address ...  3 ABETO Irvine, CA 92620
Resale House Price ......  $699,900

Beds:  5
Baths:  3
Sq. Ft.:  2864
Property Type: Residential, Single Family
Style: Two Level, Traditional
Year Built:  1978
Community:  Westpark
County:  Orange
MLS#:  P803969
Source:  CRMLS
Status:  Active
On Redfin:  2 days
Proprietary IHB commentary and analysis 

Resale Home Price ......  $699,900
House Purchase Price … $664,114
House Purchase Date .... 6/24/2011

Net Gain (Loss) .......... ($6,208)
Percent Change .......... -0.9%
Annual Appreciation … 10.5%

Cost of Home Ownership
$699,900 .......... Asking Price
$139,980 .......... 20% Down Conventional
4.02% ............... Mortgage Interest Rate
$559,920 .......... 30-Year Mortgage
$136,606 .......... Income Requirement 

$2,680 .......... Monthly Mortgage Payment 
$607 .......... Property Tax (@1.04%)
$0 .......... Special Taxes and Levies (Mello Roos)
$146 .......... Homeowners Insurance (@ 0.25%)
$0 .......... Private Mortgage Insurance
$97 .......... Homeowners Association Fees
$3,529 .......... Monthly Cash Outlays

-$434 .......... Tax Savings (% of Interest and Property Tax)
-$804 .......... Equity Hidden in Payment (Amortization)
$196 .......... Lost Income to Down Payment (net of taxes)
$107 .......... Maintenance and Replacement Reserves
$2,594 .......... Monthly Cost of Ownership 

Cash Acquisition Demands
$6,999 .......... Furnishing and Move In @1%
$6,999 .......... Closing Costs @1%
$5,599 .......... Interest Points
$139,980 .......... Down Payment
$159,577 .......... Total Cash Costs
$39,700 ............ Emergency Cash Reserves
$199,277 .......... Total Savings Needed

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