Gonowabie is a magical little street in Crystal Bay. The name is even magically fun to say. The even numbered houses are lakefront, and the views are unparalleled. They’re not making any more lakefront, right? Not the sort of place you would expect to see a Notice of Default show up.
The house I’m talking about is a little cracker-box cabin built in 1974. It is a dinky 3/2 that the county shows as 1365 SF with a 990 SF unfinished basement and no record of any permit work. The house was listed last July, and the current asking price is $3,995,000 noting 1827 SF and 103 feet of lakefront. The listing agent hasn’t gotten around to posting pictures yet, AKA this is a knock down, it will never sell. (why take the listing?)
Purchased 9/01 for $1,500,000 with a $1,000,000 first and $500,000 down. (WFB)
HELOC 1/02 for $800,000. Down payment and $300,000 extracted in 4 months. Where did the HELOC money go? 931 La Rue. (WFB)
Refi 11/02 for $1,824,000 with a 125% Option ARM. (WAMU)
HELOC 1/04 for $200,000. (Deepgreen)
HELOC 11/05 for $1,000,000. (Countrywide)
Refi 8/06 fore $3,500,000 with a 115% Option ARM, $11,542 minimum monthly payment. (Platinum Capital Group)
HELOC 1/07 for $400,000. (Countrywide)
NOD 2/10/2009.
Assuming minimum payments on the Option ARM and 5% per year negative amortization, there is about another $400,000 in debt on the property, though the MLS listing didn’t specifically call this out as a short sale. Over the last 8 years, this cabin increased in value (according to what the banks lent) by $25,000 a month, $300,000 a year, $2,400,000 total. It just totally burns me that these are the financial wizards our tax dollars are now bailing out. Loans in this stratosphere are not securitized and and sold off – they are held in portfolio and should be rather conservative investments. Not the case here.
I have no clue where the money went – it certainly didn’t go back into the property and I hope the owners had a really fun time. But I’m ready to round up the posse, and I’m searching for some tall trees with overhanging limbs. Yes, I know I’m going to have to pay for this mess, and it ticks me off no end. Where are the judicial foreclosures?
And why are we saving these institutions that made these Wonderland loans if they are unwilling to aggressively pursue to their dead beat borrowers?
Walter
Why do they need to pusue their deadbeat borrowers when the government is just going to take them off the hook? Mike, you and I and all who read here are meaningless. It does not matter what we think or what we say. We are essentially riffraff to the Big Boys club. Stop driving yourself crazy.
Reno Ignoramus
Mike, thanks for yet another story of a bank, a borrower, and the symbiotic dance of greed, arrogance and irresponsibility by both partners on their way to oblivion.
But in some sense I have to agree with Walter. You are going to run out of bandwidth before you run out of examples of the Voodoo money juiced crap that comprised the real estate market between 2001 and 2006, now otherwise known as the biggest bubble in history.
Seriously Mike, you could spend 40 days and 40 nights locating examples like this, and still not exhaust all the cases to be found.
smarten
“Over the last 8 years, this cabin increased in value (according to what the banks lent) by $25,000 a month, $300,000 a year, $2,400,000 total!” Who said there’s no money to be made in real estate? And this guy [or gal] didn’t have to pay a sales commission!
BTW Mike, go a little bit down the road and you’ll run into Gonowobie’s brother; Beowawie.
Casa de Dolor
Mike, as always another wonderful nugget mined from the public records. Correct me if I’m wrong, but my reading of Nevada Law is that mortgage holders need not proceed with Judicial Foreclosures to recoup losses; they can go the non-judicial route and then within six months file a complaint for the deficiency. I know that most lenders are not exercising that option; however, in this case if I were the “homeowner” I’d be on the look out for a process server.
longerwalk
Wrong, guys. This might work for us law-abiding, taxpaying, conservative-with-our-money folk if we send the info along. Try Reid’s office, to start. I’m also sending a link to this along to friends & family . . . it’s a succint story to stiffen the spines of those who have to resist–and write their congresspeople.
BanteringBear
I’d like to see a page dedicated to ALL of these deadbeat banks and borrowers. As more are uncovered, they are added to the compilation. Then anyone, even Harry Reid, or perhaps the district attorney can easily refer to the source for ideas and general knowledge. It’s time to expose as many of these fraudulent scumbags as possible. Perhaps it will lead to some deficiency judgments, and if we’re lucky, criminal charges.
Sully
BB, only a page?
Phil
It seems to me the FBI is already overwhelmed trying to deal with the corporate fraud. Forget individual fraud.
I also doubt there is enough room in prison for all the people who lied on their mortgage applications.
Makes you wonder about creating a debtor prison. Where you have to work off the debt. Then again think about all the health care costs.
The burden we are faced with is making me mad as well. I don’t see how we are getting out of this downward spiral, and I think government spending is not the solution, and is only postponing the inevitable crash.
WE need sustainable jobs not some surge in an industry which will have to layoff in the future once the money dries up. Do we really think millions of people are qualified to build bridges and roads?
Tom
“… surge in an industry which will have to layoff in the future once the money dries up …”
Phil, good point. Last night some economists interviewed were projecting an ongoing stream of money being required to avoid just that future forced lay-off inevitability — thus the costs to keep this quick-shot in the arm going will be like the proverbial snowball falling downhill.
DonC
Phil and Tom – Spending and investment is projected to be down by $2T over the next two years. The stimulus bill includes about $900B in spending and tax cuts. Given that some percentage of the bill is tax cuts, and given that tax cuts are not terribly effective as a stimulus, the gap should be obvious. So yes, the spending is insufficient to make up for all the spending and investment that has been lost.
Criticizing the spending as “short term” is, however, misguided. It depends on what it’s spent on. If a road or bridge is a good investment, then you get the short term kick from employing people to build the bridge, and the added growth attributable to connecting people to the economy after the road is completed.
Or take weatherization projects. You get a short run stimulus by hiring people to do the work, and, once it’s completed, rather than sending money to Saudi Arabia or Venezuela for heating oil, you keep the savings in the US as either investments or savings.
But yes, if you’re building roads and bridges to nowhere in Alaska then there is no real return on the spending and you have a spending program whose effect will stop once the money stops.
FWIW from the little I know about the stimulus bill the House bill is far better than the Senate compromise because it has more spending on programs that have higher multipliers and targets more sensible investments.
DonC
Do we know what entity made these loans? Loaning this much money on this property seems incomprehensible, but people were getting lines of credit in these amounts without any hard collateral. IOW the HELOC may not have been necessary for the borrower to secure the loan, and may have been added as extra protection. (And not just individuals. Private equity and hedge funds had access to large unsecured loans as well).
I know of someone who had a great job and lived in IV. In the good days he could probably have qualified for $1M unsecured line of credit. But now he’s lost his job and can’t find anything that pays remotely what he was making.
GreenNV
I’ve updated the post to show the lenders involved. The final $3.5M refi looks like a private equity firm.
Edit – If you ever want to edit or delete a comment you have put up on any of my posts, just drop me an email and I’ll take care of it right away.
BanteringBear
Rant on.
I’ll admit that I am purple faced angry about the current situation. I just read a headline: “Bank executives vow to work on regaining public’s trust”. Eff that. Eff them. I don’t want vow’s. It’s too late for that. I will never trust a bank so long as I live. And I want blood. I want public lynchings. I’m not kidding. Perhaps I’ll settle for life without parole. When you sell an entire country, perhaps world, down the river in the name of greed, because you have the power to and you care about nobody but yourself and your buddies, you’ve proven your worth. You are worthless.
These people are nothing more than parasites feeding off of the population while producing nothing. Anyone with a 401k should also be angry as hell and consider trading in the remote control and computer for a pitchfork and a lantern. You’ve been scammed. Until we start seeing some prosecutions of these “untouchables”, nothing is learned. So far, none of the perpetrators have suffered any negative consequences. To hell with that. It’s time for “change”. Color me irate.
SBW
Long time reader here. If you can, please keep up posts like these.
Since there are continuous efforts to distort the causes of our current crisis, you can never display too many examples of housing fraud — and I mean never. This post is a perfect example — we all know this lakeside price was inflated because the government forced the banks to sell houses to poor people…
Hands down this site is far superior to RGJ on reporting local housing conditions.
And in general, financial blogs — piecing together news from normal media, company announcements, and financial statements, then adding analysis, have been far more prescient and accurate than major news outlets on this crisis. I work in IT and hate to revert back to channeling cheesy Internet commercials from the late 90s, but I think that the Internet, and weblogs in general, are radically changing the handling of this financial clusterf*ck versus earlier crisis.
Simply put, corruption is far easier to spot today than even as late as the 1980s.
Yes, I realize that TARP got passed anyway, but it took two House tries — and I think the first failure had a lot to do with weblog mobilization against the bill. I will continue to let all my family members and friends (many who do not track these things) know about how the taxpayer is being forced to pay for the investment risks, and failures, of others.
If the ‘will of the people’ never prevailed, a lot of us would still be working in 19th century conditions, so I reject resignation and passivity as a solution. Thank God there were fighters then.
To sum it up — all the contributors to this site are doing a public service, whether you realize it or not.
It is appreciated.
smarten
BB, I share your anger.
This loan or series of loans is/are what the media refers to as “toxic.” I am 110% AGAINST the Feds buying ANY toxic assets such as these for the reasons we’ve been discussing. I almost feel like there needs to be an independent ombudsmen to protect the public from the Feds to make sure they don’t bail out financial institutions such as these. The ombudsmen needs to do an investigation of each and every so called toxic asset because I’m afraid that without it, the lenders now holding the bag on this baby ARE going to be bailed out at our expense.
In any event, we need to get the word out that the “innocent” foreclosure problems the media highlights [someone lost his/her job; a medical catastrophy; an option/ARM reset; the inability to refinance because homeowners are upside down; etc.] are NOT the only reasons for the mess we’re facing and Mike has done a very good job of demonstrating this.
I don’t know what we can do to publicize crap like this but I’ve sent a link to Bill O’Reilly in hopes his people will investigate and then publicize how Congress can’t be allowed to use taxpayer money to bail out crooks like these.
And I keep saying law enforcement needs to make an example of borrowers like these. I saw it about 10 years ago in Silicon Valley where some lady secured about 15 owner-occupied loans on 15 different investment purchases and when she defaulted, the local D.A. went after her for fraud on a lender. She was sentenced to prison which IMO is where the borrowers of the subject property belong.
Maybe if we saw a couple of prosecutions like these, people would start getting the message.
SouthBay
BB – This sickens me like you. We should be out rioting!
For those that think the worst has passed need to recognize the NOD was filed just yesterday and the amount of property that will be foreclosed upon in the next few years will only grow. Those who bought in 2008 are underwater and will be mailing in there keys soon enough as personal responsibility has flown the coop.
I think I’ll be fudging my taxes a bit this year as I think my direct purchases will do a better job for this crappy economy than giving more to Oblahblah & Pelosi to spend on pet projects.
Sully
WASHINGTON (Dow Jones)–Top executives with Citigroup and Bank of America Wednesday told U.S. lawmakers they’d be willing to suspend foreclosures until President Barack Obama’s administration unveils a new plan to help troubled homeowners keep their homes.
“If we could put a timeframe on it, we would do it,” said Bank of America (BAC) Chief Executive Kenneth Lewis, who appeared with seven other top bankers at a House Financial Services hearing aimed at examining how banks are using government funds provided through the $700 billion Troubled Asset Relief Program.
Citigroup (C) Chief Executive Vikram Pandit also said he was willing to commit to helping more homeowners stay in their homes.
Not sure whether to laugh or cry! 🙂
Phil
DonC,
Another thing to worry about with all this spending. Is how many qualified people can actually build bridges and roads properly. I really don’t want the homeless starting to build a bridge I will be anywhere close to. I’d rather not be connected.
BTW the project here in Reno being considered for “immediate” construction is the 395 Meadowmall interchange. Yes that intersection can get a bit wild, but I have yet to be discouraged going there.
I just feel there is too much spending too fast with little planning going on. Everybody seems to want a piece of the pie. How many million dollar doorknobs do we need?
Of course every penny is going ot be documented on a web site!
Yea I am mad that the owner of this property is probably got a million stashed away while he walks away.
CommercialLender
Sully,
Let’s re-construct their comments: The Banks will be happy to hold onto the foreclosures they already have for a few more months until the Govt can create and fund a program to magically take the foreclosures off their books at taxpayer expense. (and we wonder why so many NODs dont translate over to TDs and NOS’ in Reno???)
Walla! Wipe their hands! Bank CEOs suddenly ‘make a profit’ and then they collect their fat bonuses which they promised Capital Hill yesterday. And the taxpayers get shafted, again.
new in town
wonder if this is true??
Speaker of the House Nancy Pelosi’s home district includes San Francisco .
Star-Kist Tuna’s headquarters are in San Francisco, Pelosi’s home district.
Star-Kist is owned by Del Monte Foods and is a major contributor to Pelosi.
Star-Kist is the major employer in American Samoa employing 75% of the Samoan work force.
Paul Pelosi, Nancy’s husband, owns $17 million dollars of Star-Kist stock.
In January, 2007 when the minimum wage was increased from $5.15 to $7.25, Pelosi had American Samoa exempted from the increase so Del Monte would not have to pay the higher wage. This would make Del Monte products less expensive than their competition’s.
Last week when the huge bailout bill was passed, Pelosi added an earmark to the final bill adding $33 million dollars for an ‘economic development credit in American Samoa ‘.
Pelosi has called the Bush Administration “CORRUPT” ? ?
How do you spell “HYPOCRISY” ?
EVERY PERSON IN THE WORLD SHOULD GET THIS E-MAIL.
Why do we not get media coverage of stories like this?
Paul
Another great find Mike. I remember a friend of mine leasing that very cabin about 10 years ago for the paultry sum of $1,700 per month long term. Cheap rent even then, I doubt it could be leased for more than 3k per month now. What do you think the final sales price will be, assuming an NOS completes?
Could lakefront land return to such a low value that in real terms, as in 1974, a 1365 sf cabin would be the highest and best use? Could we return to the days when a 10,000 sf mansion, even on the waterfront, be considered an unwise overdevelopment of the property given the historically cyclical nature of resort areas?
inclinejj
And I keep saying law enforcement needs to make an example of borrowers like these. I saw it about 10 years ago in Silicon Valley where some lady secured about 15 owner-occupied loans on 15 different investment purchases and when she defaulted, the local D.A. went after her for fraud on a lender. She was sentenced to prison which IMO is where the borrowers of the subject property belong.
The lady who was buying all them homes in Sunnyvale and Mt View and had a house up in Los Altos Hills?
inclinejj
Could we return to the days when a 10,000 sf mansion, even on the waterfront, be considered an unwise overdevelopment of the property given the historically cyclical nature of resort areas?
Well, drive down Lakeshore Drive..lots of houses for sale on boths sides of the street..In this market the only people selling are the people who have too..
Prices will keep coming down!!!
BanteringBear
Incline Village prices, and all other Tahoe areas, are set to take a throttling.
inclinejj
Incline Village prices, and all other Tahoe areas, are set to take a throttling.
South Shore already has…
I know this, you know this, but do the lenders, and delusional sellers know this??????????
DonC
new in town — Nice piece of fiction. It’s been thoroughly debunked, with every claim proving untrue. Maybe you should just stick to the “Obama is a secret Muslim” or “John McCain fathered a black child” stuff.
http://www.factcheck.org/askfactcheck/did_nancy_pelosi_get_wage_breaks_and.html
DonC
BB & IJJ – Do you think prices will come down or will we just see a dead market? Smarten hasn’t seen much of a decrease and historically prices are quite sticky downwards. At the low end of the market the number of distress sales has driven prices lower. Personally I’d like to see some significant reductions but I haven’t yet. Or at least I don’t think I have.
inclinejj
DonC
With only a couple sales a month in IV I see a pretty stagnant market..
Prices will come down a lot..
The Average DOM is a lot higher in Incline..Even when the market was strong..
I see many homes in the dead market from 1mil-3mil going on the foreclosure listings..
smarten
DonC –
IMO IV is an interesting market.
I have prepared two spreadsheets to track the IV SFR market. The first represents sales from January 1, 2009. Surprisingly [to me], there have been 8 and the median sales price stands at $1.925M which is about 60% HIGHER than the 2007 peak.
The second represents sales from October 1, 2008 [when prices really started coming down]. There have been 20, and the median sales price stands at $1.295M which is about 15% HIGHER than all of last year.
So to the outsider, prices look like they are holding firm just like our friend Don Kanare tells the public. But if you take a look at what you can buy today at last year’s median sales price and compare it to what you could have bought a couple of years ago, the differences are dramatic. Basically the same money but a whole heck of a lot more house.
Basically a year ago I predicted that the IV SFRs selling for: $1M-$1.4M would be selling for $700K-$900K; those selling for $1.5M-$1.9M would be selling for $1.1M-$1.4M; and, those selling for $2M-$2.5M would be selling for $1.5M-$1.9M. And by and large, this is exactly what has happened.
Because the median sales price doesn’t accurately reflect the drop in prices [at least in IV], I’ve come up with a price/square foot which I find to be more accurate. Although this never worked before in IV because few homes are the same [most are custom], I find it to be a pretty good guide right now. And my price/square foot is between $300-$400. In 2008, 39% of all SFR sales closed at less than $400. Since October of last year, the number has increased to 55%. And since January of this year, it stands at 50% [also, there are 6 SFRs in escrow and at least 4 of them will close at a price/square foot of less than $400].
Now when you compare the prices/square foot SFRs were selling for two years ago to my numbers, you immediately see there has been a dramatic drop in prices. But the problem is you’d never know it unless you dug deeper than the median sales price.
I don’t like to rely upon DOM numbers because they’re too easily skewed. But rather, I look at absorption rates. As I’ve been reporting for over a year, due to the very small number of sales, they’re abysmal in IV and I see little change on the horizon.
At least these are my observations FWIW.
inclinejj
Hey Smarten..shoot me an email..jjadco@aol.com
Raymond
You let me know what kind of response you get from Senator Reid. I predict maybe a nice letter on his Senate Majoriity Leader expensive letterhead, or maybe a return email thanking for for your concern and be assured that he takes this issue seriously. Maybe even a phone call from a staffer, but that’s not likely.
The only thing you can be assured of is that your letter or email of concern will almost immediately be relegated to one pile or another never again to be considered.
Perhaps you have not noticed that Sen. Reid has been a big PROponent, not opponent, of all the bailouts, prop ups, guarantees and “rescues” since the sh!t hit the fan last September. The last thing Sen. Reid is interested in is letting the market adjust free of interference and asking people to be responsible for their actions.
ditz
http://www.nytimes.com/2009/02/12/world/middleeast/12dubai.html?_r=1&em
If you don’t pay your obligations in Dubai, you have serious consequences.
billddrummer
Slightly off this topic, but a shame nonetheless:
411 11th St., Sparks (just behind the theatre):
Owned since 1997, purchased then for $107,500–1 building with 4 1br/1ba apartments, 1760 total sf.
A 3,019 s.f. addition added in 2007, consisting of what looks like 3 2br/1.5 ba apartments.
Here’s where it gets interesting–1st DOT for $504,000 and 2nd for $45,000 placed 6/07.
NOD filed on both 2/11/09 (ELP).
Guess they couldn’t rent up the addition at $1300/mo/unit.
I’m wondering whether the property was cash flowing as it sat before the owners decided to expand.