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There were only three Notice of Sales published in the RGJ Monday. All three appear to be Option ARM loans that have reached their maximum 110% of the original loan amount. Where these properties are and the amount of the defaults are bearing out the predictions from The Next Wave. Look at the amounts due at the sale vs, the Option ARM loan amounts.
978 Glenrock #38 (pictured) is a free standing condo in Incline Village. It was purchase in April 2003 for $375,000. The NOS was posted 13 October 2008 for $549K. Here’s the loan history:
4/23/2003 – $300,000 first. $75,000 second (100%).
6/1/2005 – Refi $360,000.
7/5/2005 – HELOC $86,250 (see below).
11/7/2005 – Refi $472,000 Option ARM, 110% max.
11/15/2005 – HELOC $41,300.
The last HELOC was used to put 5% down on 661 Saddlehorn in IV, which they purchased for $875,000. There hasn’t been any other loan activity on this property, but a NOD was filed 7/9/2008.
937 Jennifer in Incline Village is a SFR purchased in February 2005 for $622,500. The NOS was posted 13 October 2008 for $721K. Loan history:
2/5/2005 – $498,000 first, $124,500 second (100%).
3/15/2006 – Refi $650,000 Option ARM 110%, HELOC $120,000.
The same owner bought 861 Jeffrey in IV in April 2002 for $350,000. By August 2006, they had run their outstanding loan balances on the property to $555,000. None of the cash out refis or HELOCs went to the purchase of Jennifer. The primary interest only loan hasn’t reset yet, but I wouldn’t be surprised to see a NOD filed soon.
10100 Via Verona is a Toll Brothers monster house located in ArrowCreek. It was purchased in May 2004 for $969,000 and the NOS was posted 13 October 2008 for $914K. It originally sold in January 2002 for $886,056. History:
5/3/2004 – $649,500 first, $150,000 HELOC (80%).
5/25/2004 – $43,700 third loan.
3/8/2005 – Refi $810,000 Option ARM 110%.
10/16/2006 HELOC 200,000.
This property is currently listed at $850,000 by Michelle "Honey" Plevel. Her patented sweet talk the lender into a loan modification system that worked for her on one of her investment properties doesn’t appear to be working for this owner.
I don’t mean to imply that all the properties going NOS are the result of Option ARMS – it was a freakish day for the RGJ. But look at the neighborhoods effected. Look and the magnitude of the loans. Two of the three own multiple properties here. All have HELOCs on top of the first loans. Connect the dots – how many more loans like this are out there ready to go sour?
I DO mean to imply that if you have an Option ARM loan and have been paying the minimum option and going neg-am, you WILL lose your house. No amount of honey can sweeten that bitter pill.
smarten
Great data [as usual] Mike. And I LOVE your reference to Ms. Honey Muffin [you know, if you use a little “honey” with your lender, it may very likely reward you with modification]. Since you’re no longer posting on ChaseNation, I think I’ll have a friend send her an e-mail to alert her, in all fairness [remember Mr. Ken Cash of “separate addendum required” REO fame], to the discussion about another one of her listings.
Also personally appreciate your calling out Incline Village. The areas you cite have been sources for many a recent foreclosure and your data helps to explain the many reasons why.
Keep up the good work!
Inclinejj
937 Jennifer looks pretty close to Mt Rose Highway plus the 3rd Creek Drainage area is known for avalanches..
861 Jeffrey close to Mt Rose Highway
Inclinejj
Option Arms the true WMD’s….weapons of mortgage destruction
billddrummer
Great data, Mike!
The other thing that hurts when an Option ARM reaches its cap percentage is that the cap balance is amortized over the REMAINING TERM of the mortgage. So in your first example, the cap amount would be amortized over 27 years, not 30.
So if the teaser rate was 1%, the initial payment would have been around $541/mo. The reset at the cap percentage, assuming a 6% run rate, would be $4,049.33/mo.
It just gets worse and worse, doesn’t it?
The next wave is here, and these loans were written at the peak of the market.
By the way, Ms. Plevel and her ‘angels’ bought one of the units in the Sierra Pines office complex at the corner of Huffaker & Virginia St. (That was when she was with ReMax.) I don’t think they ever moved in.
smarten
To add to billdrummer’s comments, many of these ARMs are tied to the LIBOR index. Have you seen what has happened to the LIBOR rate in the last two weeks compared to the prime and other used rates? FORGET about a 6% run rate. It’s the trifecta!
Mike
I have not heard anyone say anything good about these ARMS. Would it be out of line to just outlaw that type of mortgage entirely or is there or was there some good purpose with it being around at one point in time?
Reno Ignoramus
Mike,
Option ARMs have been around for more than 35 years. They initially were developed as a financing product for sophisticated borrowers with substantial net worths. These borrowers were people whose income stream fluctuated, sometimes drastically, over the course of a year or more. People such as trust fund recipients who recieved yearly distributions, or high income business people who received substantial yearly bonuses. The option ARM allowed these types of borrowers to pay minimal amounts for 11 months of the year and then make a substantial payment once a year, which payment brought the loan back out of negative amortization. The product fit their cashflow. For this original purpose, the option ARM was, and still can be, a useful product. In the hands of a sophisticated and disciplined borrower, there is nothing inherently bad about an option ARM.
The problem arose when the option ARM became misused by unscrupulous lenders and their agents as a tool to enable unsophisticated, and usually unqualified, borrowers to buy a house they could not afford by any traditional lending standard. It became the most favored tool in the Voodoo withdoctor’s toolbox. Take an otherwise unqualified borrower, “qualify” him at the neg am rate, and then guarantee that he “can always refinance” before the loan resets. it was the biggest sham in an industry full of shams.
Long time readers of this blog will remember Jeff the Mortgage Guy. You all remember Jeff? He was the guy who blew onto the blog and told us all how the option ARM was the greatest product ever, since it allowed regular folk to attain the “American Dream” of home ownership. It was also the highest commission loan for guys like Jeff to sell.
What ever happened to Jeff?
Grand Wazoo
Let us also not forget the famous “Loan Queen”, whatever her name was.
Calling these “Mortgage Professionals” pond scum simply gives pond scum a bad name.
GreenNV
smarten, I run into a lot of Incline properties in my searches. There is an awful lot of schmutz up their right now, but I don’t comment about it because I really don’t understand the market in Incline. And my relationship with the community goes back 30 years, which may be why I don’t get it.
Diploma in hand and wet behind the ears, I got hired in 1978 by EDAW, the landscape architectural firm that master planned Incline Village. I was the draftsman on Incline Village Tennis Club, if it still is standing (looked like 2 Mill Valley garages – funny, the designer lived in Mill Valley and had just built a new garage).
What IV has evolved into bears little resemblance to what we envisioned back in those days. It was designed purposely to be a middle class vacation retreat for for those that could not afford Old Tahoe. We thought it would be at least 90% summer usage, and year long residency was never really considered in the plan. So IV has had to catch up on all the commercial, retail, and civic uses we never planned for.
Sitting on a wharf in San Francisco, we really didn’t have any concept of what a 500 foot elevation change could mean in the winter. This was a summer resort, unless you were a really hearty soul or just nuts. Since our target market was low end, we built cheap – San Mateo apartments transposed into an Alpine environment. We truly had no grasp of the entropy that occurs in the IV climate, and the early structures now meed to be completely rebuilt in order to survive.
So what was meant to be Joe six pack become Jose Chardonnay. The white trash escapist vacation community has become a tax haven and an upper class residential community.
Reno Ignoramus
Angie. Her name was Angie.
Angie was most famous on this blog for suggesting that buyers be wary of paying too little for a house. According to Angie, buyers really needed to overpay(and hence require a larger loan)in order to keep up values in their new neighborhood.
Angie’s goofy comments here on the RRB were so bizarre that they went national. I believe it was the first time the RRB got exposure on some of the national blogs.
smarten
GreenNV, what an interesting trip back through time. Thanks so much!
Actually, there REALLY is an Incline Village “community” [delightful I might add] and there are a number of full time residents. EVERYONE here has an incredibly interesting story as to what attracted them to Incline Village, and how they were able to position themselves to make the move.
And there’s an advisory measure on this November’s ballot to convert Incline Village/Crystal Bay from a General Improvement District into a “Town” [i.e., a real municipality]. So I wouldn’t say it’s simply a “tax haven” anymore [BTW, what exactly do you mean by “haven” compared to let’s say Sparks (or Montreux)?].
I think your observations about the quality of construction back in the early years is accurate. I always thought the reason for so much REdevelopment was because today’s cost of land mandates a different type [and quality] of improvement. But with your insights, I now see it as really making year round homes “habitable.” It’s really no different than going through an older neighborhood in the Bay Area where junkers are being torn down in favor of McMansions.
Just out of curiosity, do you have any first hand experience with how and under what circumstances the beaches were conveyed to the Improvement District? As you may know, they’re “off limits” to non-property owners/their designees notwithstanding the fact they’re about to be publicly owned [there are also two lawsuits pending] and their maintenance costs are in part being subsidized by the taxpayers of Washoe County. The “so called” justification is a “deed restriction” imposed by some of Incline’s original developers. Just curious!
Thanks again.
Inclinejj
History of IVGID
The Incline Village General Improvement District (IVGID) was created by Washoe County under State law (Nevada Revised Statute 318), effective June 1, 1961 (Washoe County Ordinance No. 97, Bill No. 57). NRS 318 authorized the newly-created District to levy taxes to pay for improvements and for five elected Trustees to set up and run the District. The initial Board was appointed by Washoe County and consisted of Robert L. McDonald, Raymond Plunkett, Raymond M. Smith, Harold B. Tiller, and John H. Uhalde.
Since its beginning in 1961, IVGID has had nine general managers. John Uhalde, the project manager for Crystal Bay Development Company, served as an unsalaried general manager of the District from 1961 to 1967. Subsequent General Managers included Wallace W. White, Kermit McMillin, Larry Rihl, Mike McHugh, Robert Hunt, Pat Finnigan, John Danielson and current General Manager William B. Horn.
In 1961 Incline Village was being developed by Crystal Bay Development Company with Arthur L. Wood as its President. IVGID issued bonds to pay the cost of building water, sewer and road improvements, and the bonds were repaid through assessments levied against the properties that benefited from the improvements. Administration of the District was paid for by ad valorem taxes. IVGID’s tax rate at that time was $.50 per $100 of assessed valuation. (IVGID’s current tax rate is $.0741.)
The District’s first job was to construct, maintain and operate the District’s sewer and water systems. The District was also authorized to build roads within the District to Washoe County specifications, and when the roads were completed they were dedicated to the County for maintenance and were no longer a District responsibility.
In 1967 Washoe County amended IVGID’s enabling ordinance to add recreation facilities to its responsibilities. After extensive public hearings, in June 1968 IVGID purchased Burnt Cedar Beach and Incline Beach from Crystal Bay Development Company for $2.1 million. IVGID instituted a $50 per year Recreation Fee (collected at the same time as property taxes) to pay for bonds to finance the purchase and make improvements. The deed to the beaches contains a restriction that limits access to the beaches to the District as it was constituted at the time of the purchase.
In the late 1960s, IVGID began planning to expand its sewage collection and treatment facilities to serve the entire District and export the treated effluent out of the Tahoe Basin. This was necessary because of a state and federal mandate that the use of septic tanks in the Tahoe Basin be discontinued and that all treated effluent be exported out of the Basin. The cost of this major project was funded by a Federal grant and by assessments against the benefited properties.
The properties along Lakeshore Drive that were not part of the original District and the area between the District and the California State Line also had to find a way to serve their properties with sewage collection, treatment, and export. The residential properties along Lakeshore Drive that were not a part of the District annexed to IVGID in order to obtain sewer service. Washoe County Sewer Improvement District No. 1 (the club area and a small residential area in Crystal Bay), and Crystal Bay General Improvement District (the area between IVGID and Washoe 1) obtained sewer service through merger agreements with IVGID. The merger of Washoe County Sewer Improvement District No. 1 was completed in 1978. However, IVGID served the Crystal Bay General Improvement District with sewer service through an agreement until 1996. IVGID was not willing to merge with CBGID until their water system was brought up to IVGID standards, and that was finally done in 1996, at which time the merger with CBGID was completed.
In 1976 IVGID purchased the Championship Golf Course and Executive Golf Course (now called the Mountain Golf Course) for $1.2 million, and Ski Incline for $1.5 million. IVGID purchased these recreation properties from Japan Golf who had purchased them from Boise Cascade in 1973. IVGID’s Recreation Fee was raised to $100 per year to cover the debt service of this purchase. Included in the purchase of the golf courses was Bowl Incline, which IVGID sold for $400,000 in 1978.
In 1977 IVGID acquired from Boise Cascade the 58-acre “core area” parcel which extends from Tahoe Boulevard to Incline Way. IVGID’s original seven-court tennis complex was constructed on this site in 1978. Six acres of this parcel was sold to the Washoe County School District for the Middle School site at its appraised value of $284,628. The playing fields at the Middle School are on IVGID property and were jointly developed by Washoe County and IVGID, with funding provided by District 9 (now 4B) construction taxes, Washoe County School District and IVGID. The Middle School fields were open for use in 1981.
In 1983 IVGID completed the purchase of 900 acres in Douglas County to be used for development of a disposal site for its treated effluent. New regulations on the disposal of wastewater required IVGID to either upgrade its treatment facility in order to continue disposing of the treated effluent in the Carson River or to have a year-round, land-based disposal system. IVGID’s treated effluent was being used for irrigation on a ranch in Douglas County in the summer and was being discharged into the Carson River in the winter. Construction of the Wetlands Enhancement Facility was completed in 1984.
In 1986 the Ski Lodge was renovated, the Ski Incline Master Plan was completed, and planning began for expanding Ski Incline. In 1988 the new Ski Incline quad chairlift was completed and the Crystal Ridge run was opened, along with a new Child Ski Development Center, and a new maintenance shop. Ski Incline was also renamed Diamond Peak.
After nearly twelve years of discussions and planning regarding an indoor swimming pool/community center for Incline Village, construction of the Recreation Center began in 1991. District 9 (now District 4B) residential construction tax funds were used to help finance the cost of construction of the Recreation Center, which opened in December of 1992. The parcel on which the Recreation Center was constructed was purchased by Washoe County and deeded to IVGID after the Recreation Center was constructed.
Construction of IVGID’s Burnt Cedar Water Disinfection Plant was completed in 1995. The plant uses ozone to disinfect IVGID’s drinking water and allowed IVGID to receive an exemption from the filtration requirements of the federal Surface Water Treatment Rule.
With community input, a Strategic Plan entitled “Creating Our Future – a Shared Vision” was developed in 1999.
Construction of the new Burnt Cedar Pavilion was completed in 2000. The facility received Washoe County’s Award of Distinction in 2000 and TRPA’s Best in the Basin Award in 2002.
After many community meetings and much public input, the Recreation Facilities Master Plan was completed in 2000.
In 2001, the skateboard park was constructed at the corner of Tahoe and Southwood Boulevards, and Snowflake Lodge was remodeled.
Major projects in 2003 included construction of a new $3.2 million Public Works facility, planning for and beginning construction of the new Chateau building, the Championship Golf Course renovation, construction of a new high speed quad chairlift at Diamond Peak, the construction of four new tennis courts, and the finalization of a program for the sale of potential surplus land coverage.
The year 2004 saw the opening of the new Chateau in the fall. The Championship Golf Course re-opened in the spring of 2005. The election year, 2004, saw the election of two new Trustees; Bea Epstein and Beverly Mapps and the re-election of Trustee Bob Wolf to another four year term. These three Trustees’ terms will expire at the end of 2008. Joining these three Trustees are Trustees John Bohn and Gene Brockman whose terms expire at the end of 2006.
In 2006, the Board of Trustees adopted a Strategic Management Plan. The Board members and Staff have agreed that this document will be reviewed and updated, at an annual Board workshop, to be held following the first Board meeting of each new calendar year. Late 2006 saw the completion of Phase 1 of Effluent Export Pipeline Project.