The Misery Flows Upward In California
The San Diego Reader reports from California. “For the 12 months ended in February, bankruptcy filings in San Diego and Imperial counties are up 73 percent to 14,509, compared with the same period a year earlier, says Barry Lander, clerk of the bankruptcy court. Home foreclosures rose 133 percent in 2008 to 19,557, according to the county assessor’s office. The stunning increases in bankruptcies, foreclosures, and unlawful detainers are related. Says Richard Kipperman of La Mesa’s Corporate Management, a trustee in Chapter 7 cases, ‘In 2004, of the first 100 cases I did, 8 people owned real property. Nobody owned more than 1 property, and all 8 people said they would try to keep up their payments. Of the first 100 cases in January of 2008, fully 42 people owned real estate, and of those, 7 owned more than 1 property. And 22 people said they are just giving their property back to the bank.’”
“Radmila Fulton has been a bankruptcy attorney in the county for 27 years. ‘I have never seen it this bad,’ she says. ‘People are losing their jobs. They can’t make their debt payments.’.. She says, ‘People are walking away from their homes, but most banks aren’t taking back the keys; they want to go through the foreclosure process.’”
“Says Kipperman, ‘People lived off the equity in their homes. They used their home as an ATM card. The value would go up, they would refinance, take out money, pay off their credit cards, and take a trip to Hawaii.’”
“The misery flows through the economy and in this case is flowing upward. ‘The small business owner had been making it, but now sales are down dramatically as [customers] contract their spending. Now the small businessperson is not making the amount of money needed to make the mortgage,’ says Fulton. So her clientele is more upscale than she has seen before. ‘People have the feeling that things are not going to get better.’”
The Voice of San Diego. “Jim McConville arrived an hour late to the gathering in Vicki Jenkins’ Capistrano Beach living room. He’d come that evening in January 2008 to court partners for a massive real estate purchase. Over the next several months, McConville’s team arranged for Jenkins to obtain five mortgages.”
“Now, 74 of the 81 homes involved in the deals in Sommerset Villas and Sommerset Woods in Escondido and Westlake Ranch in San Marcos are in the first stage of foreclosure. The price for McConville’s buyers was $310,000 for two-bedroom units in Sommerset Villas last summer, for example. Since December, three similar units in the same complex have sold for less than $100,000.”
“Even more striking, McConville’s buyers were sold four 480-square-foot studios in the same complex for $265,000 each last summer, taking out loans for $212,000 on each one. ‘Property values will have to quadruple before that condo is even worth the loan amount,’ said Todd Lackner, a local real estate appraiser and mortgage fraud expert.”
“McConville’s straw buyers are already hurting. Frances Greenspan’s credit score, once the last shred of stability in her financial world, has been decimated. She’s seen the interest rate on her credit cards spike from 9 percent to 25 percent. She said she tries to stay positive, though she no longer realistically expects McConville will suddenly show up to pay off her loans. She doesn’t have a Plan B.”
“‘If I have to, I guess I’ll walk away from my home, which is all I have,’ Greenspan said. ‘I don’t know what I’d walk away with — I don’t have any family left.’”
“Vicki Jenkins told a similar story, as did Annemarie Miller-Jones, Norman Johnson, Mark Lassagne and Afsar Shamlou. ‘I guess that’s what I get for being greedy,’ Jenkins said.”
The Union Tribune. “Mark, a Northern California publisher who asked that his last name not be used…showed the Union-Tribune two HUD-1 forms. One showed no marketing fees. Another, provided by the voiceofsandiego.org reporter, showed the $180,454 fee.”
“Mark said he took out loans on four Escondido condos. Now, three of the four loans are in default, according to the San Diego County Recorder’s Office, and Mark too says he never received the $10,000 per loan he said he was promised orally. Both Greenspan and Mark acknowledge they did not have written contracts with McConville or Diamond House stipulating they would receive the fees. However, they also did not have to invest any of their own money for the purchases.”
“‘I kept calling Diamond House, and they would give me a song and dance about making the payments,’ said Mark. ‘I had pristine credit before this. Now, I can’t borrow money to help my business. It’s really the stupidest mistake in my whole life.’”
The North County. “Another wave of house foreclosures is poised to rumble through Southwest County, further disrupting an economy already trying to absorb the first wave of foreclosures and deal with a growing jobless rate. ‘We have unsustainable debt taken out during the housing bubble and it hasn’t popped yet,’ said Chris Sorensen, a Temecula-based mortgage and real estate expert retained by the county to lead a series of classes on avoiding foreclosure.”
“About 337,000 houses in Riverside County were purchased from 2004 to ‘07, before prices began to dive. Almost all of them now are worth less than their owners paid for them.”
“Sorensen says he is ’scared to death’ and ‘hopes he is wrong,’ but given the county’s other economic problems he fears an increasing number of owners of overvalued homes either will no longer be able to make payments or will ‘make a business decision over a moral one’ and abandon their houses.”
From Marketplace. “Minerva Cornelio and her husband Jonathan recently sold their home in Burbank, Calif. for $449,000 — that’s $16,000 less than they bought it for in 2004. The Cornelios have accepted that loss. They do need more room for their two young kids and soon they’ll be moving into her parents’ former home, which has more space. Still Minerva can’t help but remember when they almost sold their 1,100 square foot house a couple years ago. That’s when houses in her neighborhood were going for $600,000.”
“Cornelio: ‘And I wish — I’m kicking myself for that right now. You know, we should have done that two years ago, and we could be shopping for a bigger home right now.’”
“It’s just not happening in a lot of places anymore. Realtor Melissa Improta: ‘Sellers I think have finally realized that it’s a buyer’s market. And that there’s not a whole lot they can do about it.’”
The Ventura County Star. “A steady stream of property owners filed into the Tax Collector’s Office in the Ventura County Government Center today to pay their property taxes ahead of the midnight deadline. Property taxes are due twice a year, in December and April, and today is the last day to pay the second installment without incurring a late fee.”
“Ana Durand of Oxnard said she had been worrying all night about the deadline because, she said, she couldn’t pay the $7,000 due in property taxes and still be able to keep paying her mortgage. ‘I have no choice. I have to pay all the tax and now I won’t pay my mortgage,’ said Durand. ‘It’s been really hard and I don’t know what to do.’”
“Another property owner came from the Ojai Valley to ask if she had to pay her property taxes if she was in danger of losing her home to foreclosure. The woman told a reporter that she has been trying since January to get a loan modification and if it doesn’t happen soon, her home will go into foreclosure. The staff told her that she has to pay the taxes whether she’s going to be able to keep her home or not.”
The Marin Independent Journal. “In another sign of the economic downturn, the Redwoods retirement community in Mill Valley is reporting a handful of vacant apartments for the first time in its 37-year history. Plummeting real estate and financial markets have made it more difficult for prospective tenants to sell their homes, delaying their move into independent living units at the popular retirement center, managers said.”
“‘You need to sell your house to fund your next lifestyle change,’ said Penny Weiss, director of development. ‘What we’re finding (is) for some portion of the people who are on the wait list, either it wasn’t possible to sell their homes or the real estate values have gone down so much they don’t want to sell their homes.’”
“‘We recognize that our residents and potential residents are experiencing financial difficulties brought on by the economy,’ said Erik Flatt, executive director (at Drake Terrace Retirement Community in San Rafael.) ‘We also recognize that our potential residents are expressing similar concerns that it’s becoming more difficult to sell their properties.’”
“Nancy De Bartok, marketing director at Aegis of San Rafael, said after a summer of full occupancy and a waiting list for the 54-apartment site, she has a couple apartments available ‘for the first time in a long time.’ De Bartok said based on quarterly competitive comparisons, ‘everybody says it’s a little down from last year.’”
“‘If you talk to anybody across the board in this business, that’s what you’re going to hear,’ she said. ‘People who have never had vacancies, like the Redwoods, are now seeing an unusual turn.’”
The Press Enterprise. “A surge of home buying and the sharp decline in home construction in 2008 may have been just the medicine that Riverside and San Bernardino counties needed to stop home prices from falling, an economist says. The trend also could encourage home builders to start constructing new tracts of houses next year in the two-county region, a building consultant said.”
“The wave of foreclosures related to subprime mortgages sold during the housing bubble of the mid 2000s is over, said economist John Husing. But there could be another round of foreclosures when other categories of risky mortgages reset to higher payments starting in September, he said.”
“The inventory of new homes is declining slowly because lower priced foreclosed properties are attracting the majority of first time buyers and investors. As of February there were almost 31,000 unsold builder-owned homes, down from more than 39,000 in 2007 but still above the historic average.”
“Still, Jeff Meyers, a principal with Myers Builder Advisors, said if prices stabilize he expects that builders who moved to the sidelines last year will feel confident enough to start new projects in 2010. He said builders now can buy lots priced low enough so they can produce houses price competitive with foreclosures.”
