Irvine Housing Blog |
The OC Register Says California had no real estate bubble Posted: 09 Mar 2011 02:30 AM PST The Orange County Register actually released a news story boldly stating that California had no real estate bubble. Brace yourselves for a kool aid overdose.
Irvine Home Address ... 2110 TIMBERWOOD Irvine, CA 92620
Really biased and misleading crap is common on realtor blogs, which is why nobody reads them. When realtors are allowed to post their bluster as news on the OC Register, many people take it as information rather than indoctrination. It soils the OC Register when they permit this. Published: March 7, 2011 California had no real estate bubble MIKE COTTER
This guy has an interesting way of setting up his argument. He makes a bold and easily disprovable statement as if it were fact, and he proceeds to base his diatribe on this ridiculous statement.
This guy has based his entire reality on the two anomalous periods where kool aid intoxication took over. He genuinely believes house prices can go up faster than wages and faster than inflation. The magic appreciation fairies must sprinkle it like pixie dust.
Trees really do grow to the sky, right?
Because it was a massive housing bubble that never should have been allowed to push so high to begin with. The fact is that the severe correction isn't complete yet, and when it is finally done, don't expect rapid appreciation any time soon.
Mr. Cotter worked hard writing that piece, and he deserves attribution, so his contact information is presented here as a courtesy. Please don't call or email him with inflammatory comments. If you like that perspective on the market from a broker, please go work with him. Reality is not for you. Mr. Cotter may stop by and defend himself in the astute observations. Wouldn't that be fun? Why the OC Register print this kind of garbage? I found this in my Google news feed, so this is being passed off as news -- an unbiased representation of fact. Is this the version of reality we are to embrace? Should trees grow to the sky?
The slow death of the OC Register has been painful to watch, and each time they run a realtor puff piece as news, they take their credibility down one more notch. I know they want content, and I wouldn't be surprised if this guy either paid for the content or advertises a lot with them. It can't be good for the OC Register when readers have to be mindful of bullshit. It's supposed to go up more than 10% a yearThe speculator who bought today's featured property is trying to get her money back out. Six years after the peak, and we are still grinding along the bottom making new lows. Rather than going up 10% a year as the realtor above suggested, this woman has owned for two years, and she isn't going to sell for enough to cover the commission. The bubble owner paid $375,000 in 2003, and in 2005 refinanced with an Option ARM with a 1% teaser rate. After $145,000 in mortgage equity withdrawal, the property had $480,000 in debt and went into foreclosure. A flipper bought the property at auction on 4/14/2009 for $341,200 and resells it a month later for $399,000. That was a great flip. The current buyer paid $399,000. As far as I can tell, she paid all cash. She is taking a haircut.
Irvine Home Address ... 2110 TIMBERWOOD Irvine, CA 92620 BEAUTIFUL 2 BEDROOMS+ 2.5 BATHROOM TOWNHOUSE IN NORTHWOOD POINT, GATED COMMUNITY, FEW STEP UP TO LIVING ROOM, FEW STEP UP TO KITCHEN AND DINING ROOM AND FAMILY ROOM, TWO BEDROOM UPSTAIRS, TWO CAR ATTACHED GARAGE WITH DIRECT ACCESS FROM THE HOUSE, QUIET INTERIOR LOCATION, 2 MASTER SUITE, NICE HIGH CEILING IN LIVING ROOM, GRANITE COUNTERTOP IN KITCHEN, BREAKFAST COUNTER, VERY BRITE AND AIRY, WALKING DISTANCE TO AWARD WINNING SCHOOLS, ELEM. AND NORTHWOOOD HIGH, PARKS AND TRAILS, AMENISTSIES INCLUDE 2 SWIMMING POOLS, LIGHTED TENNIS COURT, GATED COMMUNITY OF COLLAGE, |
Predatory lending moves from subprime to high end Posted: 08 Mar 2011 02:29 AM PST Predatory lending happens across the financial spectrum. Subprime lending has long been associated, but today we have a case at the very top of the market.
Irvine Home Address ... 8153 SCHOLARSHIP Irvine, CA 92612
The top of the world must be a lonely place. But with so many looking up in envy, people strive for a lifetime to reach the pinnacle. Today we have tales of high end property distress in Newport Beach and in Irvine. Predatory LendingAccording to Wikipedia predatory lending is described as follows: "Predatory lending typically occurs on loans backed by some kind of collateral, such as a car or house, so that if the borrower defaults on the loan, the lender can repossess or foreclose and profit by selling the repossessed or foreclosed property." It certainly looks as if the highest of high-end homes may be a target of predatory lending. After reviewing the following article, I will let you decide. I want to start by saying I don't know John McMonigle. I have no ax to grind with him, nor do I have reason to take his side. I know nothing specific about this case other than what is in the OC Register article. High-profile agent's headquarters in default THE ORANGE COUNTY REGISTER March 1, 2011
The problem with stories like these where the property owners are specifically named (something I never do here at the IHB) is that their reputations are smeared by implication rather than fact. If McMonigle is delinqent on his loan and his properties are going into foreclosure, the implication is that he is experiencing major financial distress. The facts may or may not bear that out. Mr. McMonigle maintains he is merely reacting to the bank's bad behavior, and his statements may be accurate, and his actions may be justified.
If this accusation is true, and if the building in question is worth more than the current loan balance, the lender is engaging in predatory lending with regards to his Villa del Lago project, and this property is being drawn into the broader dispute.
It is likely the debt on the office building was paid down from $9.4M to $6.8M due to the loss of value on the property. The lender will want to maintain a safe loan-to-value ratio, and if the property value falls, the loan balance must fall with it. The lender may have the contractual right to compel the borrower (McMonigle) to maintain a certain LTV which required him to pay it down. The predatory lending is the bank's decision to stop funding the construction loan on Villa del Lago. Whatever that property is worth, it is worth significantly more if it is completed and can be marketed appropriately to high-end clients. If it goes to auction, it will fetch the lowest possible sales price. Look at this from the bank's perspective. They already have $20,000,000 into the property, and if they add $$2,000,000 more, it makes the house worth $30,000,000. As it sits unfinished, it is probably worth $12,000,000 at auction, maybe less. The bank can buy the property for the amount of their note, finish it themselves, and they can make $8,000,000. By forcing a stop to construction, the lender can foreclose and step into Mr. McMonigles shoes and take his equity. No competing bidders will step forward at that price point, and even if they did, the bank would probably be relieved to get their principal back on a property that is not complete after the housing bust. In short, if what Mr. McMonigle alleges is true, this looks like predatory lending.
So he has millions on deposit with this bank, but they won't release his money or the loan money for him to complete the project. It doesn't look good for the bank. The other sidePerhaps the lender is merely protecting itself because the various loans Mr. McMonigle has are underwater? The lender has a right to protect itself by keeping the loan-to-value to a reasonable level, and despite the delusions of high-end owners, prices have fallen. Further, the lender has a broader look at Mr. McMonigle's financial status. Perhaps he really is distressed. The real estate commissions aren't what they were five years ago. I have no idea, but there may be very legitimate reasons the bank is acting to protect itself and not give this borrower more money. If the facts bear out the bank's case, everything Mr. McMonigle contends is public relations spin, and I have completely fallen for it. Is predatory lending real?If you think predatory lending sounds fartetched, I have seen another lender act in a predatory manner on a project I am familiar with. After nearly a decade in the entitlement process, the developer had four or five million into the project, and the lender had nearly ten million in debt applied. If the project gains entitlement, it's worth $80,000,000. If it sits as raw land, its value is a few million at most. On that project, I watched the lender start putting the screws to the developer, and with the final vote within sight, the lender triggers some contractual provisions which put a chain of events in motion which lead to the developer defaulting to compel the lender to continue funding and the lender chosing to foreclose instead. In that instance, the representative for the lender clearly saw the value in the property and figured they could take it back and get the value. In the end, the bank failed to recognize that the developer had "cultivated" the political relationships to get the final vote. The new guy in town had none of this political cloout, so the vote went against the bank and the project was denied. The developer lost his entire investment, and the bank lost more than 80% of theirs due to greed, stupidity and predatory lending. That's a BIG lossI don't have the property records, but the details of who lost what aren't really that important. What matters is that this property lost $884,880! OMG! That is so much money! He buys this place in the summer of 2007 when rumors of a collapsing housing bubble abounded. But he knew better, right? He tried to sell it for $1,950,000 back in early 2009. Clearly, this owner was a delusionall fool. At least he isn't the biggest loser in Irvine....
Irvine Home Address ... 8153 SCHOLARSHIP Irvine, CA 92612 ------------------------------------------------------------------------------ |
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