Special offer

Foreclosure Hits Close to Home.......

By
Mortgage and Lending with First Lending Solutions NMLS ID 1325784

I often wonder what makes people tick.....

My wife had a conversation with our neighbor a couple of weeks ago, as we found out the neighbors were moving as the house was being foreclosed upon. Huh? The house next door with all the bells and whistles is going into foreclosure? We'll go back to this later in the story.

The tenants moved into the area because of the excellent school district, paid $2500 monthly rent, first and last month up front, while they saved additional money for a down payment to be able to move into the neighborhood. This was April of 2007.

Let's follow the clock backward.

Sale went through March of 2007 for $699K with 100% financing. The kids (our former neighbors) bought out their parents who were the original owners dating back to 2004 when we moved in to the new community. Oh, but the parents never lived there...it was just a paper transaction.

Essentially, nine months later, the property hasn't had any payments made, and the sheriff puts up a notice announcing the bank is foreclosing, and the current tenants have 40 days to move out from the date of the sale. This will be yet another post, as this is opening a cottage industry of tenants who lack any protections from shady homeowners going into foreclosure.

You have to wonder that something tragic must have happened to the family that purchased the home, and was never able to make the payments.

You know what happened? Two people saw an opportunity to capitalize on the business of walking away. This will be a completely separate post.

The Mortgage Debt and Forgiveness Act of 2007, HR 3648, allowed homeowners to walk away, eliminating the federal taxable liability of the loss that they would've received a 1099 for.  Ahhh....bet the politicians didn't see that unintended consequence occurring, did they?

You see the former owners (Mom and Dad) bought the property in 2004 for $450K, and ‘sold it' (to the kids) for $699K in 2007. Can you say non arms-length transaction?

Or maybe, we should call it what it is? Equity stripping? You see, the kids have been in finance and mortgage for 10 and 20 years respectively. Can you imagine $249K in gross profits, less transaction costs, going to the parents (or should we call it like it is....going to the kids through the parents?). Do you think they knew what they were doing? Should I mention that they walked away from 2 homes, not just 1. Total losses to the bank? $1.3 million dollars. And this is but one of countless stories playing out across America.

Either way, I believe that we should love thy neighbor....until they show their true colors, at which time karma will deliver what they so rightfully deserve. I will not be the one to judge them, but I certainly will not be making an effort to make ourselves available for the next birthday party or special event.

I think the apple doesn't fall far from the tree, and the last thing I want is to have my kids playing with their kids. I'm funny like that.

 

Bill Nazur has an extensive background in finance & mortgage lending who gets to serve as an author, speaker, and consultant to the real estate industry, as well as a featured regular guest on FoxBusiness, MSNBC, and Univision. Bill also hosts a new radio show at http://www.realcoachingradio.com/, along with a thriving (yes, its thriving, not just surviving!) mortgage business, powered at Bank of America Mortgage. Bill's experience in calling the current foreclosure crisis, along with many of the real causes, along with the taboos in dealing with such a sensitive subject, led to the publishing of Finding Foreclosures, published by Entrepreneur Press. Allow my team to help you, as we can also lend in all 50 states. While Real Estate is local, knowledge is universal. We hope to help you soon.

Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island
BILL - This is the darker side of foreclosure.  Being that I am working with a lot of them now, I can tell you that a lot of these people are living in squalor until they are evicted.  These are the people that I feel bad for, even if it was only fiscal irresponsibility that caused the situation (sometimes, not always).  What you are describing is fraud, and they should not only lose money, but they should do jail time if this was a way to just make profits and then walk away leaving others to deal with the consequences of their actions.  I don't blame you one bit for keeping your kids away from them.  Who needs your kids learning from dishonest people?  I look forward to your future posts on the subject.
Feb 09, 2008 11:19 AM
Wendy Abner
Xeon International - Bradenton, FL

Bill

 

I agree this needs to come out. I believe 60 min had a story on 2 weeks ago that had a woman saying" She was Walking" no financial trouble, just that she was upset at the "money" she had lost??? Where is this thinking coming from???  It is appalling. This should be criminal and the Govt better wise up because they are being taken to the cleaners, and we are as well as taxpayers and mortgage brokers. We have not seen the worst yet, but the News needs to get this out, anything you can do would be great. It is not the" Mortgage Brokers" who caused this housing fallout. It is the greedy consumer and subprime lenders with no real underwriting standards.

 

Feb 09, 2008 11:24 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Adam

This is the part of the business that pushes me over the edge. It is good to be back....I've been dealing with enough stuff to be able to blog for a year, and you can bet, my postings will be grittier than ever...it is time to take the gloves off and make a difference. And, you better believe, my kids will NOT associate with them. It would make me complicit in their behavior.

Aside from that, I hope things are well with you. I will slowly acclimate back to the group. :)

Wendy

Everyone played a part, but the consumer and that subprime industry bears a WHOLE LOTTA RESPONSIBILITY here! They sure enjoyed the seadoos, the vacations, and all of the other goodies, so why  Laughing 1 would you ever walk away from having enjoyed all of that, unless of course, the government pandered to its constituents who conveniently failed to mention that they'd already spent the money.......

I think Homer Simpson has the best explanation I've heard thus far...........DOH!!!!!!!!!!!!!!!!

oh, I guess my smiley face jumped ahead of itself.....woops!

 

 







Feb 09, 2008 11:39 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Mike

I am coming back with a freaking vengeance! Glad to see you're still reading!

Feb 09, 2008 11:48 AM
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ
Bill, This one takes the cake as I had seen people buy multiple properties, rent them out never making one payment and run with the rent plus deposit and the tenant gets screwed but a family scam? Oops,had a family scam in my area involving mom,son,daughter and wanna be investors who worked in the medical field.Agree with you 100% on what goes around comes around and apples are only as sweet as the tree they grow on.
Feb 09, 2008 02:49 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Cameron

These people may not pay today, but they certainly will.....imagine the smug look on their faces, until the day that knock on the door occurs, or the subpoena at work, that brings them up on fraud charges for something they did 'so long ago'. Sad to imagine, but the kids always pay....I guess that is the part that just drove me over the edge, is that they have two darling little children that will grow up twisted in some way by the behaviors of their parents.

Thanks for stopping by! hey, and you're local!!! Greetings from your neighbor up the 15!

Feb 09, 2008 03:07 PM
Kris Wales
Keller Williams Realty - Lakeside Market Center - Macomb, MI
Real Estate Blog & Homes for Sale search site, Macomb County MI

What a sick sick story.  Great example to set for the children (that's assuming they'll ever be aware of the background of this).  

In Michigan we have seen and are still seeing more economic foreclosures than "investment" foreclosures.  I still believe it is the right thing to do for the government to help out when there has been a true economic need (job losses here in our state with no new jobs in sight).  For the bozos though that took advantage of the mortgage market and pocketed profits then walked away..I say no bailout, no government help, no to anything that helps them one iota. 

Feb 09, 2008 09:52 PM
Hugh Krone
Weichert Referral Associates - Hamburg, NJ
Realtor, Sussex County NJ
Crooks plain and simple i hope the authorities get them somehow, thats the only way you are going to stop people from doing it put a couple in jail
Feb 09, 2008 10:04 PM
Scott Wall
StoneHouse Realty, Inc - Bristow, VA
I know it's going to effect the value of your local market and thus your house. And I know it's easy to be angry with them. But until you know the full version and walk in their steps, it's hard to say what happen. I will adnmit from your post they look like a a bunch of losers. I'm just saying, no need to get work up over it. Times are going to get rougher and we'll need to let a lot of water roll off our back.
Feb 10, 2008 12:31 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Kris

Agreed. Michigan and Ohio are perfect examples of an economic failure on the part of local and state government failing, combined with industries that failed to adapt to the 21st century.

Hugh

The FBI and the IRS are actively looking into this sort of thing. They will get around to it eventually, particularly if the losses are as large as they are.

Scott

This is but one of many in the overall neighborhood. Really, I'm less angry, and more disappointed that they chose to do this. Trust me, I know their financial picture fairly well. I'm not making any assumptions, as I only chose to write about what I know.

Feb 10, 2008 01:57 AM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Bill, What's amazing to me is that it was right next door. It is still anecdotal. We can't be sure what percentage of cases are like this, and how many are actual "victims of circumstance."

If the number is only one percent it is still a huge number. But some here on AR act like the numbers are reversed. Under no circumstances is fraud a majority.

Bill Roberts

Feb 11, 2008 02:53 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Bill

I will be writing a separate post that I will probably title the "Business of Walking Away". There are more of these than I imagined. This one just happened be close to home proximity wise.

I agree with you however that fraud is not the majority unless you consider irresponsible behavior and trying to keep up with the neighbors as fraud.....

Feb 11, 2008 06:27 AM
Ron Avneri
Seattle, WA
Financial Professional

Bill,

 Had one next door to me about a year ago.  Some chump investor decided it would be fun to lie and do a 100% owner occ through Greenpoint (big surprise their not in business any more) when he owned 4 other houses.

Never made a payment, never moved, house looks like crap now in a nice neigborhood.  I'd like to tattoo him with my baseball bat if you know what I mean.

Feb 11, 2008 08:57 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Ron

Chump is probably the kindest thing I would say....I just don't understand how we could throw underwriting common sense out the door.

I would turn my head to see justice done.......

Feb 11, 2008 09:31 AM
Ron Avneri
Seattle, WA
Financial Professional
some of us have, some of us haven't. I think you and I know who.
Feb 14, 2008 01:34 AM
Bill Nazur
First Lending Solutions - Riverside, CA

Ron

Yes we certainly have....

Feb 14, 2008 03:02 PM
Todd Clark - Retired
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

OK, that is just wrong and the bank should go after them! They certainly did plan this, that is for sure! That is a lot of money and never having paid a dime also says a lot about these people. Are they still in the business or are they living high on the hog.

Feb 20, 2008 04:52 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Todd

I believe they will come after them...our area is one of the California epicenters of foreclosures, and the local District Attoney's office does not look kindly upon this stuff. I believe they are still in the business but rapidly dying from lack of business.

Thanks for stopping by....great to see you (or at least read you!).

Feb 20, 2008 05:09 PM
Mark Hawley
Keller Williams Realty - Indio, CA
Very interesting post.  I have heard of some of these situations, but only rumors and stories. 
Mar 16, 2008 04:28 PM
Bill Nazur
First Lending Solutions - Riverside, CA

Mark

Just this afternoon, I picked up all of the newspapers on the front lawn, the notices on the front step, and called my gardener to eradicate all the weeds that are now growing in the front. My wife will call the company tomorrow that is supposed to be maintaining it to see if she can't get them on the ball.

It is a sad story that didn't need to happen, if not for greed.

Thanks for stopping by!

Mar 16, 2008 04:50 PM