The drill was supposed to work something like this: buy a house as an investment property, use an Option ARM, make the minimum payment, and with a decent down payment, the investment would be cash-flow positive. Then sell and reap the appreciation. Even if the negative amortization is running 5% per year, what could go wrong?
Fallis Properties LLC bought 19 homes in those salad days between April and August 2005. ALL with were 125% Option ARM loans, 16 from Home Savings and 3 from WaMu. These guys came in with HUGE down payments for the time, usually 40%. They never claimed to be owner-occupants. 2 of their properties have received NODs this week.
All the homes were resales, and all were pretty much in line with the median price at the time. Even with 40% down, these properties are now under water. The principal balance has risen about 25% over the last 5 years (assuming minimum payments) and the property values have dropped close to 50%.
I have no beef with Fallis Properties LLC, in fact I feel for them. I know of several other investors out there with similar sized portfolios that are in the same situation – just no NODs yet so no stories to tell. The point of this post is to serve as an exclaimation point on the comment string that got going on the Closer Look post. If you are renting, you really need to check out your landlord. Do they own other properties? What are their loan terms? Get a "Request Notice of Default" into your lease terms.
Date Address Purchase $ Loan $ Bank
4/5/2005 1005 Backer $335,500 $180,000 World
5/4/2005 7265 Heatherwood $375,000 $225,000 World, QQ
5/4/2005 5154 Pillary $322,500 $193,500 World, QQ
5/4/2005 4075 Venetian $320,000 $192,000 World, QQ
5/11/2005 4620 S. Catus Hills $325,000 $193,500 World, QQ
5/27/2005 14315 Ghost Rider $441,000 $286,500 World
6/3/2005 1130 Forest Knoll $335,000 $217,750 WAMU
6/15/2005 1015 Backer $332,500 $203,125 WAMU
6/15/2005 1558 Backer $380,000 $228,000 World, QQ
6/22/2005 6450 Chesterfield $361,000 $216,600 World, QQ
6/24/2005 9675 Boulder Creek $403,000 $241,800 World
6/29/2005 1429 Lindsay $377,000 $226,200 World
6/30/2005 9625 Boulder Creek $403,000 $241,800 World
7/12/2005 10025 Hampton Park $349,000 $209,400 World
7/12/2005 6598 Fall River $349,900 $227,435 WAMU
7/15/2005 9671 Comanche Moon $403,000 $241,800 World
7/26/2005 1878 Cambridge Hills $342,000 $205,200 World
7/29/2005 5855 Royal Vista $335,000 $251,250 World
8/15/2009 14400 Ghost Rider $415,000 $249,000 World
billddrummer
Resurrecting an old thread,
Fallis Properties LLC purchased 16 SFRs in Reno and Sparks in 2005 using Option ARMs and hefty down payments, more than likely hoping to flip them for a handsome profit.
All 16 properties were slated to go to auction on 7/19/10, but the borrower filed bankruptcy to stop the sale.
I found the bankruptcy status by logging on to the trustee’s website, National Default Servicing Corp.
And the beat goes on.
And the lawyers get paid, but nobody else.
Paul
Its kind of ironic, “Fallis” sounds like the latin “phallus”.
billddrummer
To Paul,
I guess someone got “sc***ed.”
Latin or English, not a good thing.