Sunday, February 17, 2008

Trail of Tears and Anger

Put down your coffee for this one. Take your blood pressure pills and get comfortable. We have a story to tell.

Declining values, defaults, foreclosures catch many local residents by surprise

A crisis hits home

By Scott Hadly
Sunday, February 17, 2008

Sitting in his bare kitchen surrounded by boxes of financial records, John Bailey looked as if he couldn't believe what was in front of him.

"I never thought this would happen to me," Bailey said last month as he looked at the stack of paper that told the story of how he lost his home.

The 74 year-old, who wears his red plaid shirt buttoned to the neck, is one of the 1,500 Ventura County homeowners whom lenders foreclosed on last year as the housing market crumbled under the weight of failing subprime loans.

On the top of Bailey's stack was a letter from the bank, letting him know that his home had been auctioned off, and he had a few weeks to clear out.

It was a depressing end to a monthslong fight for Bailey, who conceded he was out of options.

He and his wife, from whom he is now separated, had refinanced their Camarillo Springs home four times over six years as its value steadily climbed.

Refinanced four times in six years.

Each time, the couple pulled out a little money to fix up the place and to supplement their variable income.

Living off the equity extraction.

But when they tried to take out money again in early 2007, they discovered that the value of their home had plummeted.

Tried to refinance a FIFTH time in seven years. Aged 73 at the time.

The home was worth less than what they owed, said Bailey, who still works installing fiber optics in homes and businesses. They soon got behind on making payments and started to get notices that they were falling into default.

Got behind in mortgage payments that were lower than what he was looking to take on.

Bailey spent several months trying to work things out with the bank but failed. In the middle of negotiations on a "work-out" plan, the bank — without notifying him — auctioned off the property, according to Bailey. He found out about it on Dec. 4, a few days after the sale.

More than 9 months of delinquency and he thought he was in the middle of negotiations.

There's no government program he can turn to, and no more last-minute ideas or negotiations, Bailey said, just the prospect that he will never retire and never own a home again.

"I've been through ups and downs before, but I thought we'd make it through this one," said Bailey, who has dark bags under his blue eyes. "Forty-three years, and we never missed a mortgage payment on the various homes we owned. I didn't think it would turn out like this."

The correction

For anyone caught up in it, the mortgage crisis hit less like a market "correction" and more like a series of little roadside bombs that keep popping off, peppering neighborhoods with swaths of collateral damage.

It harmed poorer communities worse than others, with Oxnard taking the biggest hit in Ventura County.

Not true. For but one instance Oxnard is not the poorest community in Ventura County. The places with the most urbanism and the places with the most growth are taking the biggest hits and earlier. Notice as the article continues the frequent implication that these are almost historical events of 2007 and not an ongoing accelerating problem.

The correction also did damage to parts of Camarillo, Thousand Oaks, Simi Valley, Fillmore, Santa Paula and Ventura.

About 1,500 Ventura County homeowners were foreclosed on in 2007, a 90 percent increase over the previous year, according to DataQuick, the La Jolla-based real estate information company.

Ventura County ranked 31st for foreclosure activity out of the top 100 metro areas in the nation, according to statistics released last week by RealtyTrac. The Irvine-based company comes up with the ranking by comparing the number of homes in an area with the number of foreclosure filings, which include notices of default, auction sales or bank repossessions.

Ventura County is not a Metro Area. The term is Oxnard-Thousand Oaks-Ventura, CA (MSA) which does not include Moorpark, Simi, Santa Paula, Ojai and sundry.

Cities in California, Ohio and Florida dominated the list, with Detroit at the top followed by Stockton and then Las Vegas, according to RealtyTrac.

Although foreclosed homes make up less than 1 percent of the 243,000 county households, the numbers only tell part of the story.

Almost all who own homes here have felt the downturn in some way. Whether they were part of the more than 5,000 homeowners in default on their payments last year, or simply homeowners who watched the value of their houses — probably their biggest asset — plummet.

The median sales price of new and existing homes and condominiums in Ventura County dropped from a high of $630,000 in 2005 to $525,000 at the end of 2007. The median is the midpoint, where half the homes sell for more and half for less.

N.B. Nearly half of that decline has been in the last 6 months. The decline is accelerating.

Some estimate prices won't hit bottom for two more years. That's not good news for thousands who will see the value of their homes drop below what they paid for them.

Two more years of decline would encompass tens of thousands of homes underwater.

According to data compiled by The Star, the total market value of homes foreclosed on in Ventura County during 2007 totaled almost $750 million.

The Center for Responsible Lending, a nonprofit based in Washington, D.C., projects that foreclosures will, over the next year or so, continue to push home values down by an estimated $6,300 per house. The group estimates that in Ventura County foreclosures will eat away about $730 million in property values.

Talk about bad reporting. Foreclosures do depress local property values but they are not what is responsible for the other 90% of observed declines.

The group projects that nationally the amount of wealth that will be lost because of the spillover from foreclosures on subprime loans made in 2005 and 2006 will be more than $200 billion.

Not subprime. The MSM is so 2007. It only started in subprime. this is like saying the crisi on the titanic is contained to the bow.

It goes beyond property values, with the downturn slamming mortgage companies, banks, Realtors and workers in the building trades.

Assessing the damage

Economists differ on what effect the market correction will have on the overall economy.

Ventura County has not been hit as hard by the mortgage crisis as places like San Bernardino, San Joaquin and Riverside counties, according to Mark Schniepp, executive director of the California Economic Forecast in Goleta.

Ahem, hundreds of Countrywide layoffs? Further down in the story they contradict themselves on this very point. Again the MSM is mixing issues. It is like the "mortgage crisis" is the cause and result all in one. If only the mortgage industry could get back to 2005 everything else would be fine. Not.

Barring massive layoffs, terrorist attacks or some other kind of unforeseen shock to the local economy, "I think we'll weather the storm," Schniepp said.

Bill Watkins, executive director of UC Santa Barbara Economic Forecast Project, agreed. Economic indicators are good, said Watkins, who is more worried about how layoffs at Amgen Inc. and Countrywide Financial Corp. might hurt the area.

Both economists said efforts by lenders and President Bush to encourage banks to work with borrowers could also help some vulnerable homeowners. Over the next year or so, as many as 2 million homeowners with subprime adjustable-rate mortgages will see their rates reset higher, according to federal figures. So far, the industry has renegotiated the terms on about 200,000 of those loans.

No, the blogs have already shown that number to be a lie.

"I see the challenge we have is the number of resets," said Bob Davis, branch manager of First Mortgage Corp. in Ventura.

Right now, Davis said, he thinks there isn't enough incentive for lenders to work with borrowers. He sees the work so far as "a drop in the bucket."

"Basically, I'm screwed," said one Camarillo small-business owner facing a possible foreclosure. "Everything they're proposing in the last 30 to 60 days won't help us at all."

The man, who asked that his name not be used, said he and his wife used the equity in their home of more than 40 years to help cover mounting medical bills for their family. It worked until the market dropped last year.

The best part about a blog is calling bullshit when you smell it. There's a reason people like this request anonymity and it rarely has anything to do with medical confidentiality.

"There are needs, and there are wants," the man said. "For some people, they refinanced because they wanted the new car or the 34-inch plasma TV. We don't have the new car or any of that stuff. We took out equity to pay for needs."

Apparently owning a home in the face of mounting living and medical expenses was considered a need as well.

It's hard to ignore that the past year was pretty bad for many homeowners. All indications are that this year will be even worse as a big chunk of adjustable-rate mortgages in the county reset to higher monthly payments.

In some neighborhoods, as many as 40 percent of the loans taken out in 2006 were subprime adjustable-rate mortgages, according to federal Home Mortgage Disclosure Act data compiled by The Star. The monthly payments on many of those adjustable-rate loans are expected to jump by 30 to 40 percent this year.

EN readers are directed to look at the really spiffy interactive maps for context when the Star gets around to fixing them. Without knowledge of the area it may seem confusing. Suffice that the really high concentrations of bad lending are in very recent high density construction. Static picture here.

It means more homeowners likely will be stretched to the limit to pay their monthly mortgages, leading to possible foreclosure.

Trying to stay afloat

"If we can't sell, we'll just walk away," said Maria Ambriz, who with her husband, Jack, has watched the monthly payments on the Camarillo home they bought in the spring of 2006 soar from $2,500 to $4,700. They're spending about 85 percent of their monthly income just to cover the payments.

Let's do the math. $4700 is 85% of $5,500/mo. We'll be kind and assume take home not gross. That means if they didn't lie on their loan they would have qualified for a $250,000 mortgage not the $540,000 mortgage debt they appear to have.

The couple said they didn't understand the rate increase that came with their adjustable-rate mortgage loan.

While the couple said they are partly to blame, they think their Realtor and mortgage broker should share some responsibility.

"No one ever explained that to us; they sort of smoothed things over and said we could do it," Ambriz said.

A friend of hers who cleans houses is facing similar problems after being coaxed into buying a $400,000 home.

"It makes no sense that she got a loan, and now she's like $30,000 in debt because she was using a credit card to try and cover her payments," said Ambriz, 55.

In the case of the Ambrizes, they thought they'd quickly be able to refinance the home as its value increased, but it didn't happen. The couple cannot refinance because the value of the home dropped, and they now owe more than it's worth.

Although they haven't fallen behind in their payments, Maria and her husband, a 50-year-old retired Marine gunnery sergeant, are each working two full-time jobs. They both work night and day.

Four full time jobs plus military retirement to bring home $100k/yr? And they bought in Camarillo? Yes, a condo.

The silver lining is that their home is so little that they pay almost nothing for their utilities, said Jack Ambriz, who works as a security guard and for a company that makes computer chips for cell phones.

"We don't see each other," said Maria, who works at a pharmacy and as a customer service manager at Big Lots. "We have so much stress."

Trying to keep up with their mortgage each month has left the couple sleepless and tense. They've both lost an unhealthy amount of weight. In December, everything reached a breaking point.

"Finally, I started crying and said, We can't do this anymore,'" said Maria, who sold most of her jewelry to keep up with her rising mortgage payments.

Their options now are limited.

If they continue to make their interest-only monthly payments, they'll owe even more on the home in a year, and its value will likely have dropped lower than it is now. They're trying to do a "short sale," selling the home they bought for $610,000 for $399,000. Of course, they would lose their $73,000 down payment and may still owe money on the house, but they would walk away with their credit intact.

The worm turns. The $4700 is not just an ARM but an Option ARM.

"We both have cried over this," said Maria. "I'm crying right now because I don't want to lose the house. We love to work hard but not like this. There's nothing else to do. I say to my husband, Don't worry honey, we'll buy another house some day.'"

Last week, they got an offer for $405,000 on the home. While they want to sell, and their Realtor is confident the deal will work out, the bank ultimately has to approve the transaction.

In some Ventura County communities, more than half the properties for sale are either bank-owned or "short sales," homes priced for less than what the owner paid.

That means opportunity for some people.

With two kids and a relative all squeezed into their 900-square-foot Thousand Oaks home, Laurence and Kaylene Jacobson longed to move up.

But prices in Thousand Oaks, where median home values peaked at $690,000 in late 2006, were beyond what they could afford.

When prices seemed to plateau and drop a little, they saw their chance and snapped up a bank-owned home on Teasdale Street for $521,000. It had sold in 2005 for almost $700,000.

They thought they'd timed everything right, but almost immediately Laurence was laid off from Amgen.

"That was like a blow to the solar plexus," said Kaylene, who is 38.

What was it the economist said earlier in the piece? Barring massive layoffs, terrorist attacks or some other kind of unforeseen shock to the local economy, "I think we'll weather the storm," Schniepp said.

She later collected her thoughts and chalked up the change to "God's plan" for her family. Laurence, 35, quickly switched gears and ramped up a computer consulting business he had nurtured out of his home.

The Jacobsons — the couple have a daughter Rebekah, 4, and a son, Nate, 7 — suddenly found themselves juggling a mortgage on their old home, one on their new one and an equity line of credit.

Despite the stress, the couple said, they have things under control.

"I think people got crazy there for a while, and a lot of people got into loans without really understanding what it means," she said. "We know exactly what we're doing."

That's why you are paying two mortgages?

Critical observer

John Kaspar is not as big a risk-taker. Ventura County's high-priced market has kept him on the sidelines. A manager at a building supply company in Camarillo, Kaspar is hesitant to leap in and buy.

Married with three children, Kaspar watched prices even in middle-class parts of Camarillo nudge up past $540,000 two years ago when he began looking.

By traditional lending standards, a family would have to earn $150,000 a year to afford a home in the range of $511,000 to $612,000, according to some estimates.

"We prequalified for $500,000, but there was no way I was going to do that," he said.

Kaspar didn't want to overextend his family. He's seen booms and busts before. He felt the "bubble was about to pop."

But it has been difficult to sit and watch.

"I have a friend who refied' five times and mostly for silly things," he said.

Now that the market's crashing, Kaspar is not sure if it's fair that people who took big risks and their lenders — some of which were "absolutely predatory" — should get government help.

I do. So do we all.


j9359 said...

First, pay your Prosper loan!

Tyrone said...

"I never thought this would happen to me,"

I don't understand that comment. Given his actions, common sense would dictate that the outcome was obvious--foreclosure.

And let's face it, at 74 years old, he took out a bunch of money and he doesn't have to pay it back. He's maximizing his consumption years on Earth.

Sac RE Agent said...

On the surface these might be sad stories, but with the same story being retold in every town, it sounds like there are a lot of 'not so bright' individuals across America. Then again, it might be me that's not so bright.

Our government has a tremendous history of helping people that make the same decision repeatedly (i.e., building in floodprone or hurricane areas, etc.). And with this being an election year, anything is possible.

This is no longer a story about someone being foreclosed upon, this is a story of a record level of foreclosures across America and the trail of financial bodies still to be counted.

David said...

Given how many years the 74-year-old man lived in his home of 40-years, how much equity must he have had? And he shot it all in 4 HELOCs?

Equivalently, he could have sold his house, rented, and used the proceeds as he wished. He just did the process in a different order.


Anonymous said...

Smug on the way up, whiny little biatches on the way down.

unbelievable said...

Most of these people are greedy or stupid or both

I'm sorry, that's just the way I feel

Rob Dawg said...

The sense of entitlement is astounding. And this is a place with unbelievable appreciation. You'd almost have to be Casey to get into the trouble these people found.

Anonymous said...

Quick! Somebody call a waambulance!

w said...

Check out this link:

Check out page 5, 59% of new home purchase loans in Ventura County during 1Q 2007 were IO. Pretty much the entire central and south coast of CA is toast. Oh Hell, pretty much the entire West Coast.