Ode To Chase
After the beginning of the real estate meltdown in 2005, banks began
to tighten their lending standards. They realized that the housing
market wasn't not everything it was cracked up to be. There was no way
anyone could convince a bank to lend money on a home that was worth
less than the loan. Or could they?
golfer_x at
Housing Kaboom
is constantly monitoring the housing market in the Inland Empire. He
clearly wants to be ready to act when the time is right to buy. The
only way to know if the time is right is to watch the market.
* Photo courtesy of Housing Kaboom
golfer_X
is known for finding what he calls the Realtard of the month. It is
awarded to real estate agents that just don't seem to be playing with
all of their faculties. In May of 2008, he wrote about a home at
17362 Woodentree Ln, Riverside that was owned and listed by a real estate agent that was way overpriced for the neighborhood.
Fast forward a few months and guess what golfer_X found. The same listing is amazingly still on the market. Only now the property is listed at $1 million.
It
gets richer. The current owner bought it as an REO. The county records
show a sale in November of 2007 for the price of $535,000. The lender,
Chase Bank, gave a loan amount of $603,250. That is $68,250 more than
the purchase price in 2007 when the housing market was in free fall and
the credit crisis was in full swing! That is more than 112% of the
purchase price. I wonder what all that extra money was used for. My
guess is that it was used to install fake grass and pay for a
commission. Guess the banks just didn't learn. Here's to the wise
underwriters of Chase. Nobody can pull a fast one over on you!
If
that wasn't bad enough, there was apparently a double closing. On the
same day that the agent purchased the home for $535,000, the new
agent/owner sold the home for $635,000 to someone else. That is a
profit of $100,000. Not bad for a days work. I wonder if the agent
disclosed his financial gain to his client? I wouldn't pay $100,000
more for a home that just sold on the same day.
A few months
later in March of 2008, a private lender provided a $50,000 loan to
somebody. It isn't clear if it was the agent or the lucky new owner.
Regardless, the county shows that the home was sold back to the agent
on the same day. My guess is that the agent provided a parting gift to
the guy he sold it to back in November of 2007 for a huge profit. There
is no sales price listed for the March sale, just a record of a deed
giving the property back to the agent/owner.
Fast forward to
June of 2008 and the agent/owner managed to get another loan for
$132,500 from a private lender. Bad mistake Mr. Lender. Within one
month the new loan was in default. The entire amount is in default! Not
one payment was made on the new loan. In fact, the county records show
that the loan is in default for the amount of $134,200.
My
guess is that the total owed on this property far exceeds the $700,000
mark and that the loan that is in default is a second or third lien. If
the agent/owner only owed the $134,200, they could list the property
for $300,000 and have it sold yesterday. Instead he is trying to list
it at a completely unreasonable price.
Here is the best part.
Since the most recent lender is not in first position, they must
foreclose on the property to protect their asset. If the first lien
holder were to foreclose on the property, then all junior liens (2nd
and 3rd mortgages) would be wiped out. That means the junior lien
holder must pay all other loans while they are in foreclosure
proceedings to protect their asset. Unless of course the agent/owner is
paying the mortgage on the first. Somehow I doubt that is occurring.
Wonder why the FDIC is announcing bank failures? This is one example of the many reasons.
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