There's More Where This Came From

The snowball is starting to grow.

The Housing Bubble Blog:

The LA Times: “In the county of Riverside, in the city of Corona, on a street called Plume Grass, there’s a foreclosed house that no one wants to buy. A decade ago it was worth $148,000. That’s what Theodore and Cassandra Judice paid the developer, Beazer Homes, borrowing nearly all of that sum.”

“Life threw some curveballs. In 2000, they refinanced, drawing cash out in exchange for a bigger monthly mortgage. Theodore would marvel at his neighbor’s boats, their swimming pools, their toys. He and Cassandra did some remodeling, getting the patio done, he remembers, was particularly urgent.”

“The couple refinanced again in 2001, 2003 and 2004, borrowing larger sums each time.”

“In September 2005, the Judices borrowed $447,500. Almost immediately after that, they put the house on the market for $480,000. It was time to go: They had drawn so much cash out of their home they couldn’t afford to live there anymore. The ATM had turned into a trap. With no equity cushion, they couldn’t afford to cut their price either.”

“‘They got offers, but they weren’t high enough for them to break even,’ says their agent, Peter Pesek. ‘They wanted to keep waiting for something better.’ It never came; the market had peaked.”

“The couple moved to Austin, Texas, and bought another house. They couldn’t afford both mortgages, so for Plume Grass they tried to negotiate a short sale, an agreement in which the lender accepts less than it is owed. The deal fell through.”

“A notice of default was filed June 9, 2006, making the house one of the first in Corona to enter the foreclosure process in the current downturn.”

“‘We made some bad decisions,’ acknowledges Theodore. ‘No one ever came to our house and forced us to do anything.’ He figures it will take him several years to clean up his credit record.”

“GMAC Mortgage took ownership after the foreclosure. The lender asked Leo Nordine, a veteran foreclosure agent based in Hermosa Beach, to clean up the house and evaluate it for resale.”

“On March 15, Nordine recommended $6,000 in cosmetic work and a low price to get out in front of the market. ‘Don’t overprice,’ he warned.”

“His suggestion: $425,000 for the house as it was, $437,500 if the repairs were done. The lender didn’t authorize the repairs, and stuck a price of $445,000 on the house. No one wanted it.”

“On May 30, Nordine advised reducing to $409,000. GMAC agreed to drop the price, but only to $419,500. Six weeks earlier, that might have done the trick. Not anymore. A week later, Nordine recommended $399,000. The lender didn’t respond.”

“On June 27, he suggested $390,000. Lower the price, he urged yet again: There are three times as many lender-owned homes on the market now as there were a few months ago. On July 31: ‘This is the worst market I’ve ever seen.’ He proposed $385,000.”

“There was no answer. GMAC, like most lenders, has been in turmoil. In late April it said it would fire 700 workers. The asset manager for the Plume Grass house was one of them.”

“To sell the house now, Nordine said late last week, would require a price of $379,000. ‘The banks will wise up after a bit,’ the agent said. ‘I think the fall is going to get really ugly.’”

“A GMAC spokesman said Friday morning that the lender’s goal was to sell all its properties, including the Plume Grass house, for ‘fair market value.’ Several hours later, either wising up or merely responding to the glare of publicity, GMAC sent Nordine an e-mail authorizing him to drop the price to $395,000.”