Have you noticed that most of the human interest stories from the housing bubble have no heroes? The housing bust has brought out the worst in mankind. Every party involved seeks to avoid any financial responsibility while simultaneously looking for ways to game the system to their advantage. The cast of characters includes lenders, realtors, delinquent mortgage squatters, holdover tenants, mortgage brokers, basically anyone involved with real estate. Today’s featured article describes some of the nefarious characters, looks at their motivations and false beliefs of entitlement, and illustrates what happens when everyone is wrong, greedy and stupid.
The owner had walked away, expecting a foreclosure that never came. The other man says a real estate agent let him move in and told him where to mail rent. A battle for the loft begins.
Jeffrey Cote was driving home from work one evening this spring when he noticed a light on inside Unit 312 of the Little Tokyo Lofts.
This was the industrial loft he had bought in downtown Los Angeles for $647,000 — with no money down — at the top of the market in 2007.
Let’s be clear about this “owner.” He put nothing down. The only thing he ever owned was the loan. He is on title, but the bank put up all the money, and if they were solvent enough to foreclose and take the write down they would foreclose and remove him from title.
He thought it would be a great investment.
Every fool who bought into the North Korea towers here in Irvine thought the same thing. They were equally delusional and stupid.
It was also the loft he had abandoned less than two years later, after filing for bankruptcy and expecting the bank to foreclose.
The loft was still in Cote’s name,
The banks have been particularly eager to amend-extend-pretend on downtown lofts, and vacation homes. There is no market for these units, and there may never be. When they finally get around to foreclosing, they will take a huge loss. Interesting that this guy filed his bankruptcy before the foreclosure. I wonder if he is protected from this old debt.
so the light surprised him. A few weeks later, he and his girlfriend decided to investigate. They got off the elevator and saw a new welcome mat outside Unit 312. When his key didn’t work, Cote knocked on the door.
John Glover, a well-dressed marketing consultant, answered.
“I own this loft,” Cote recalled blurting out. “This is my place.”
“Well,” Glover remembered replying, “I’ve been renting it for the last couple years.”
So began a battle for control of the loft that stretched on for months. Cote said Glover was a squatter.
So the delinquent mortgage squatter who abandoned the property is upset about the squatter living there? Isn’t that the pot calling the kettle black? Cote’s main claim to the property is a loan document he signed years earlier which he expunged in his bankruptcy. He is on title, but he shouldn’t be. The bank should have foreclosed on this property years ago, but since they have their own problems, they created this bizarre situation where a delinquent mortgage squatter is trying to assert his “ownership” rights.
Glover insisted he had a right to be in the apartment.
The standoff is another legacy of the housing meltdown. Large swaths of California were hit by the real estate downturn, but few places fell as far or as fast as downtown L.A.
Cote is one of many who bought into the hope of an ever-rising housing market and the promise of a revitalized downtown in the mid-2000s, only to see that investment — and the dream — disappear. Lofts that once sold for $800,000 to $1 million are now worth less than half the amount.
Just like the people who bought in the North Korea Towers.
… In the last year, more than a dozen units in Little Tokyo Lofts have changed hands through short sale or foreclosure. The first-floor storefront, which developers had hoped would attract a shop or restaurant, is occupied by a methadone clinic.
So much for the revitalized downtown.
“This whole thing just brings back huge regrets,” Cote said. “I look back at all these things, and I’m just full of regret.”
Yeah, that’s because he was pretty stupid.
Cote, 43, remembers the excitement when he and his then-wife moved into the Little Tokyo Lofts five years ago: dinners at new restaurants popping up in the Arts District and nights out at L.A. Live. They’d picked the loft because of its low cost per square foot, he said, after convincing themselves that the homelessness and blight around skid row were “part of the charm.“
The only “charm” these people saw was the rising prices and their hopes to cash in. It’s amazing the stupid things people convince themselves — like the North Korea towers are a walkable urban space….
At the time, Cote was teaching in Anaheim and his wife was working in real estate. Then, in June 2007, Cote made the first in a series of decisions that would come to haunt him. He quit his teaching job to pursue a career in the entertainment industry.
So it’s late 2007, the aspiring actor quits his real job to chase his dream. Why not? He now had a cash cow that was going up in value and undoubtedly would provide him endless streams of spending money once the HELOC money started coming in. Plus, his wife was going to make a fortune selling and reselling those lofts for ever-increasing prices.
LOL! I mean… come on… when we look back on what people believed during the mania, it’s so ridiculous it’s hard to imagine anyone taking this seriously, much less acting on those beliefs and taking on hundreds of thousands of dollars worth of debt.
Over the next 12 months, his wife’s business collapsed, the couple couldn’t afford their mortgage payments, and their marriage fell apart. By the end of 2008, Cote had filed for bankruptcy. He packed up his belongings and moved in with his parents in Moreno Valley. He figured a foreclosure was imminent and tried to put Loft 312 out of his mind.
During the next three years, the title for the home remained in his name and his lender never moved to foreclose. Cote assumed he was not allowed to live there because he’d stopped making payments, which had been about $3,000 a month. ….
Glover, 42, said he had noticed a vacancy at Loft 312 in early 2009 while moving out of a different unit inside the building. He said he met a real estate agent in the hallway who claimed to represent the unit’s owner.
Glover said he and the agent negotiated quickly, and he signed a rental agreement for $2,150 a month.
This nefarious character doesn’t get enough attention in the news article. Some realtor rented this guy a property the realtor had no claim to. This is pure theft. Unfortunately, with an absent owner and a bank looking the other way, there is plenty of opportunity for realtor thieves to operate this way. It takes a lot of nerve for a realtor to rent a property they don’t own and don’t even know the owner. It was free money to them, so why not? Right?
…Cote met with a real estate agent who suggested he try for a short sale of the property. Working with the lender, they listed Loft 312 for $230,000.All they needed to do was to get Glover out.
Another realtor wants to help him… some people never learn.
Glover was not eager to leave. He considered making an offer on the unit. But after digging through Cote’s bankruptcy case, Glover and his lawyer decided they could challenge Cote’s claim of ownership.
Glover was not eager to leave because as soon as he realized his lease was bogus, he quit paying it. What was the shady realtor going to do, evict him? So now the former tenant is a squatter, and he is fighting with the delinquent mortgage squatter who wants the property so he can skim the rent from some other fool while he waits for the bank to foreclose. At this point, he sees his big mistake as abandoning the property rather than keeping it to skim rent.
… “You have played game over game with me,” Glover said in one text message to Cote. “I am in this situation because you abandoned the unit and allowed someone to misrepresent themselves as an agent of the property.”
Cote didn’t allow a realtor to misrepresent the property. That realtor acted on their own accord. Cote’s mistake was not watching the property to prevent a crook like that realtor from skimming the rent for himself.
“You’re a squatter,” Cote replied. “You’ve been given an eviction. You need to leave.”
The delinquent mortgage squatter doesn’t even recognize what he is. One squatter is claiming the other squatter is victimizing him. Unbelievable.
The association filed a lawsuit against Cote, seeking back dues of more than $35,000. Cote had title to the loft and was still responsible for the dues but had trouble even getting into the building. A security guard one time threatened to report him to police for trespassing. The association’s property manager did not respond to a request for comment.
Since his bankruptcy was finalized before the foreclosure, he may be liable for the back HOA dues he hasn’t paid over the last three years. The HOA lien will be disconnected from the property at the foreclosure, but that doesn’t extinguish the debt. All the parties involved are trying to get a piece of the pie.
…Cote posted fliers around the Little Tokyo Lofts accusing Glover of being a squatter. He called a TV station, which sent a reporter to interview Glover. A producer for the station confronted Glover outside the building.Glover continues to say he was a victim. He said he sent money orders each month to a Sacramento County post office box, an address given to him by the real estate agent.
Didn’t that seem odd to him? Sending untraceable money orders to a distant PO box?
(He explained he did not pay by check because he was going through a divorce at the time and did not have his own account.)
Bullshit. He probably knew this deal was shady. Either that, or he was trying to rip off the X-wife by hiding income or assets from the divorce. Nice guy.
The phone number on the agent’s business card has been disconnected, and Glover said he hasn’t been able to find him. He said that after Cote confronted him, he stopped paying rent.
So the dodgy realtor disconnects his phone, and Glover becomes a true squatter. What possible claim does Glover have to the property at this point. He knows his rental agreement was bogus, and he hasn’t been paying the rent. Although Cote is a delinquent mortgage squatter, he is still on title, and he should have right of eviction to boot this squatter out.
The Times reviewed a copy of Glover’s rental agreement and tried unsuccessfully to reach the agent. Glover and his lawyer said they had contacted LAPD detectives to try to track down the man.
“There’s a thousand one cases of this stuff happening, because when the real estate market crashed, you had people abandoning houses, and then there were people out there wanted to take advantage. That’s the story of 312,” Glover said.
So the crooked realtor who leased Glover this property melts into the crowd of other crooked realtors doing the same thing. Nice.
“But instead, Cote wants to label me the bad guy and just harass me and drive me out.”
Glover is a bad guy and should be driven out. Cote is a bad guy who should be foreclosed on. The realtor should go to jail. The bank should get it’s head out of its ass and foreclose.
Recently, Bank of America confirmed that Cote still owned the loft, issuing a statement saying it was working with him to avoid a foreclosure.
LOL! Working with him to avoid a foreclosure? Cote’s only interest in avoiding a foreclosure is to give him more time to skim rent. BofA’s only interest is to delay or avoid taking a huge loss on the bad loan they made. At least BofA gets some good spin out of this.
Bank of America did not explain why it had not yet foreclosed. But experts said it is not uncommon for the bank to wait years to seize vacated lofts or condos so it doesn’t have to pay homeowners association fees.
“I’ve had many clients who’ve been living rent-free in their condos and town houses for 12 to 24 months,” said Leon Bayer, a bankruptcy attorney.
Last month, Glover decided to pack up and leave the Little Tokyo Lofts and move in with a friend in Westchester. … Two days later, he (Cote) returned to Loft 312 to have the lock changed on the front door.
So now the delinquent mortgage squatter has his deeply underwater condo back. He is facing a huge bill for back HOA dues, and at some point BofA will finally foreclose. All that work just so he could skim some rent for a few months. A real American Hero, right?
Getting the most out of that old condo
The former owner of today’s featured property managed to extract the maximum value out of his old condo. It was originally purchased at the bottom of the last housing bust in 1997 for $168,000. It looks as if the guy put $118,000 down and got a first mortgage of $50,000 from his mother. A few years later, the mailing address changes to Penn Valley, CA, and the guy refinanced with a $333,600 first mortgage. Finally, at the peak of the bubble, he took out an Option ARM for $500,000 with a 1.4% teaser rate. Like most other borrowers who had Option ARMs, the loan recast to a higher payment, and since he was deeply underwater, he stopped paying. He already extracted as much as possible, and continuing to make those payments was just going to drain his cash.
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Proprietary OC Housing News home purchase analysis
$420,000 …….. Asking Price
$168,000 ………. Purchase Price
8/12/1997 ………. Purchase Date
$252,000 ………. Gross Gain (Loss)
($33,600) ………… Commissions and Costs at 8%
$218,400 ………. Net Gain (Loss)
150.0% ………. Gross Percent Change
130.0% ………. Net Percent Change
5.9% ………… Annual Appreciation
Cost of Home Ownership
$420,000 …….. Asking Price
$14,700 ………… 3.5% Down FHA Financing
3.36% …………. Mortgage Interest Rate
30 ……………… Number of Years
$405,300 …….. Mortgage
$103,844 ………. Income Requirement
$1,788 ………… Monthly Mortgage Payment
$364 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$105 ………… Homeowners Insurance at 0.3%
$422 ………… Private Mortgage Insurance
$3 ………… Homeowners Association Fees
$2,683 ………. Monthly Cash Outlays
($262) ………. Tax Savings
($654) ………. Equity Hidden in Payment
$15 ………….. Lost Income to Down Payment
$125 ………….. Maintenance and Replacement Reserves
$1,907 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$5,700 ………… Furnishing and Move In at 1% + $1,500
$5,700 ………… Closing Costs at 1% + $1,500
$4,053 ………… Interest Points
$14,700 ………… Down Payment
$30,153 ………. Total Cash Costs
$29,200 ………. Emergency Cash Reserves
$59,353 ………. Total Savings Needed