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.
Owner leaves his loft empty — then sees a man living inside
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.
By Sam Allen, Los Angeles Times — December 2, 2012, 6:27 p.m.
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.
Now that’s a fall from entitlement.
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
27165 EL MORO Mission Viejo, CA 92691
$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
The property above is available for sale on the MLS.
Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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23 Responses to “Crooks, thieves, and liars: the nefarious characters of the housing bust”
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With ‘usury’ as a business model, and monetary policy where destroying purchasing power and trashing margins are the end results, it comes as no surprise that ”the worst in mankind” is quite prevalent.
As someone who likes to believe people are basically good, I am disappointed by the actors in these mini-dramas. There is very little good in any of them, and every actor in the play has some degree of blame for the evil it displays.
The funny thing is, you actually thnk there was a realtor involved. Most likely, the divorced squatter was cashing his own cashiers checks so he could keep the money from his ex-wife.
Interesting thought. I guess my mind wasn’t devious enough to think up that possibility.
New Jersey Foreclosure Starts up 538%
A significant drop in foreclosure starts brought down foreclosure activity in November, according to a foreclosure report from RealtyTrac.
Foreclosure starts were filed on 77,494 U.S. properties in November, a 71-month low and the lowest level since December 2006, RealtyTrac reported Thursday.
The decrease represents a 13 percent drop from October and a 28 percent decline from November 2011. Twenty-eight states experienced annual declines in foreclosure starts, with Oregon (-84 percent), Pennsylvania (-67 percent), and California (-63 percent) registering the biggest decreases.
Eighteen states posted annual increases in foreclosure starts, with the most substantial upsurges seen in New Jersey (+538 percent), Arkansas (+455 percent), and New York (+209 percent).
The drop eased the number of foreclosure filings overall, which include default notices, scheduled auctions, and bank repossessions. Foreclosure filings were reported on 180,817 U.S. properties in November and fell 3 percent from October and 19 percent from a year ago. The yearly decline is the 26th straight month of annual decreases in foreclosure filings.
While the worst may be over, foreclosures may still make a comeback.
“[F]oreclosures are continuing to hobble the U.S. housing market as lenders finally seize properties that started the process a year or two ago — and much longer in some cases,” said Daren Blomquist, VP at RealtyTrac.
“We’re likely not completely out of the woods when it comes to foreclosure starts, either, as lenders are still adjusting to new foreclosure ground rules set forth in the National Mortgage Settlement along with various state laws and court rulings,” he added.
While foreclosure filings and starts fell, bank repossessions rose annually for the first time in 25 months.
FHA’s Underwriting Policies Set Families Up for Failure
The Federal Housing Administration (FHA) has a mission of making the American dream of homeownership accessible to low- and moderate-income families and first-time homebuyers.
However, due to FHA’s underwriting policies and practices, Edward Pinto, resident at the American Enterprise Institute (AEI), argued the administration has instead put “a high percentage of low- and moderate-income families and communities at risk of excessively high foreclosure rates.”
According to a recent study released by Pinto, more than 9,000 U.S. zip codes have a projected foreclosure rate exceeding 10 percent on loans backed by FHA, with the average projected foreclosure rate at 15 percent. The study looked at 2.4 million FHA loans from 2009 and 2010.
Based on those numbers, the study says 1 in 7 families in the zip codes will likely lose their home to foreclosure. The zips assessed account for 44 percent of all FHA loans that are in the low- and moderate-income zips.
The problem though is not FHA’s decision to provide credit to low- and moderate-income families. Pinto instead sees it as an issue of FHA straying away from providing “responsible” mortgage credit.
“[T]he real choice is between responsible and irresponsible underwriting polices targeted at low- and moderate-income families,” the report stated.
The report says FHA’s underwriting policies encourage risky financial decisions from low- and moderate income families through low down-payments, high debt-to-income ratios, 30-year loan terms, and by providing loans to borrowers with low credit scores.
The combination, Pinto contended, set up those families for failure; as a result, the “hope for the American dream turned into a nightmare.”
These borrowers, Pinto says, are just “a car repair away from failure.”
FHA announced their preliminary 2013 MIP requirements (Mortgagee Letter promised before year-end):
All loan terms:
90% LTV at origination – MIP remains in effect for the full term
They are now targeting the riskiest loans and they’re charging indefinitley for that risk.
Error above – here’s the full breakdown:
90% LTV at origination – MIP remains in effect for the full term
One more attempt (comments must think “>” symbols are commands or something).
LTV 90% at origination – MIP remains in effect for the full term
Symbols removed:
LTV less than or equal to 90% at origination – MIP cancelled after 11 years
LTV greater than 90% at origination – MIP remains in effect for the full term
Wow, do yo have that link?
I tried to find a link. My info is from a PDF emailed to me from an FHA “Actuarial Report – Automatic Cancellation of MIP Policy.” Looks like the PDF was a slide presentation/PowerPoint.
Mortgage Rates Hover Near Record Lows
Fixed mortgage rates made small movements this week as fiscal cliff negotiations seemed to stall.
According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) interest rate averaged 3.32 percent (0.7 point) for the week ending December 13, down slightly from 3.34 percent the previous week.
The 15-year FRM this week averaged 2.66 percent (0.6 point), down week-to-week from 2.67 percent.
Adjustable rates also budged, though only slightly: The 5-year adjustable-rate mortgage (ARM) averaged 2.70 percent (0.6 point), up one basis point from the last survey, while the 1-year
ARM averaged 2.53 percent (0.5 point), down from 2.55 percent previously.
“Mortgage rates held relatively steady following the November employment report,” said Frank Nothaft, VP and chief economist at Freddie Mac, noting that the November’s unemployment rate was down to 7.7 percent. “However, in its December 12 monetary policy statement, the Federal Reserve noted that this rate remains elevated and modified the statement to tie any increases to its target rate to the unemployment rate falling below 6.5 percent.”
If the Fed’s projections hold out, that rate will not be reached until 2015 or later.
Rates measured by Bankrate’s weekly survey were even more sluggish. The 30-year fixed averaged 3.52 percent, a slight increase from last week’s low of 3.50 percent. The 15-year fixed average remained unchanged at 2.85 percent. The 5/1 ARM was also flat, holding at 2.74 percent.
“Mortgage rates showed little movement as the fiscal cliff talks looked more like a stalemate,” Bankrate said in a release. “But a newly announced stimulus plan from the Federal Reserve aimed at buying longer-term Treasuries should help bring both bond yields and mortgage rates lower, albeit modestly. Don’t expect any big moves in mortgage rates as long as the fiscal cliff talks drag on.”
Rental Income Rises 12% Over the Year in September
After growing just 1.3 percent in the second quarter of this year, the economy grew 2.7 percent in the third quarter—falling more in line with market predictions, according to CoreLogic. Economic growth received a boost from residential investment, which up until now has not contributed much.
“The real estate cycle is now contributing to economic growth,” CoreLogic economists stated in its December report.
“This is good news,” they added, “because residential investment is the most important cyclical component of the economy.”
While disposable income increased just 1 percent year-over-year as of September, rental income of residential properties increased much more substantially.
Rental income of residential properties, which CoreLogic defines as “gross rents for homeowners and renters minus the associated cost of financing and other expenses,” rose 12 percent from September last year.
Furthermore, “[t]his growth shows no signs of slowing down,” according to CoreLogic.
Rental rates have to level off in a few months. Incomes are not growing, in fact taxes are going up.
The squeeze is on…… Blue Shield just announced 12-20% rate hikes (effective Mar1) for its Calif customers.
A lot of the newer townhome and condo buildings finished 2006 or later were loaded with about 25% squatters and investors that stop paying their HOA dues. Does any one know of a HOA that to charge the existing owners higher dues for their neighbors not pay? Or if there HOA basically had to file for bankruptcy?
My sub & master HOAs meet that description – construction began in 2006. Both HOAs’ accounts are full. The sub-HOA is even lowering our monthly dues $10 in 2013 because they’re so flush with cash.
Some of the old HOA are charging more to the paying members to make up for the non-paying members. A co-workers HOA as raised from $75 to $150 that only takes care of the landscape and trash removal.
Some of the new HOA were very smart. The purchase price included 2 years of pre-paid HOA. Squatters are using up the 2 years of their HOA, but all are current with the 2 years rolled into the purchase price.
We come to a point where right is called wrong and wrong is called right. Any one who actually wants to fix the credit market or housing is call heartless and then vilified in the press.
Bills rarely go through this fast in Congress. I wonder what to new FHA rates will be?
U.S. senator seeks to bring FHA bill before Senate
WASHINGTON | Thu Dec 13, 2012 6:00pm EST
(Reuters) – A top U.S. Senate Democrat on Thursday said he would push for a vote on a bill aimed at placing the U.S. Federal Housing Administration on firmer financial footing before lawmakers leave Washington for the holidays.
In a letter obtained by Reuters, Senate Banking Committee Chairman Tim Johnson said he was calling on his colleagues to bypass the usual committee process and back the bill with a speedy vote. The legislation has already passed the House of Representatives and would go straight to President Barack Obama for his signature if the Senate approves it.
“I believe this is a necessary and responsible step to protect the taxpayers given the short amount of time left in the legislative session,” Johnson said in the letter to Republican Representative Spencer Bachus.
The FHA backs 15 percent of all U.S. mortgages used for home purchases. The agency, a main source of funding for first-time home buyers and those with modest income, provides liquidity to the housing market by insuring lenders against losses on loans.
It is facing a projected $16.3 billion deficit in its insurance fund, which has raised concerns it will need a taxpayer bailout. The bill is aimed at reducing the FHA’s need for a cash infusion from the U.S. Treasury Department.
The legislation, which cleared the House on a strong bipartisan vote, would set a minimum rate for the annual premiums paid for mortgage insurance, allow the FHA to exclude poorly performing lenders from the program and tighten the agency’s oversight of delinquent loans, among other measures.
It is unclear whether the measure has enough support to pass the Senate. Some Republican senators believe it falls short of what is needed to prevent the FHA from going to the Treasury for cash.
(Reporting by Margaret Chadbourn; Editing by Dan Grebler)
Squatters gone wild….
Process servers in fear when delivering foreclosure notices
Posted by kpanchuk on 12/14/12 at 10:50am
Process server Michael Root says that he knows how angry foreclosure notices can make homeowners — because one property owner almost killed him and members of his family.
As it turned out, Root wasn’t even bringing a foreclosure notice when, he said, he was attacked in June by a homeowner in Wingdale, N.Y.; it was a notice about a credit card bill. But according to Root, the man didn’t know that and he’d already been served notice of foreclosure on his home by another process server that day.
The man became so enraged at another legal notice, Root said, that he jumped on a nearby backhoe and drove it into Root’s car. “He raised the bucket and pushed it through the back window and almost cut my kid’s head off,” added Root, who said that he happened to have his wife and daughter with him that day. (Root is pictured above, on the job.)
That alleged attack — which resulted in criminal charges against the homeowner — is the kind of mayhem that process servers say they commonly confront as the messengers in our legal system. Although violence toward process servers has always been a problem, because they so often bring gloom to people’s doorsteps, those in the industry claim that the risks of their profession have only gotten worse as the housing crisis has pushed 4 million mortgage-holders out of their homes.
Although there’s no hard data on the rate of violent incidents between process servers who deliver foreclosure notices and homeowners who receive them, some who represent the servers say there’s a strong consensus
Yes, We’re Still in the Middle of a Foreclosure Crisis
loan portfolios show substantial weakness at the big banks, particularly Bank of America and JPMorgan Chase. Even at Wells Fargo, the bank with the best data here, nearly 1 in 11 first-lien mortgages in their portfolio are in some stage of delinquency.
That number widens with BofA, which only has 84.4% of its loans current, and 4.81% in foreclosure, well above traditional averages. JPMorgan Chase’s foreclosure rate is 5.06%.
These just aren’t good numbers, and they suggest continuing softness in the sector. Worse, home seizures have begun to rise for the first time in two years.
http://news.firedoglake.com/2012/12/13/yes-were-still-in-the-middle-of-a-foreclosure-crisis/
IR, In BK what is the statue of limitation for filing a claim in court? How much time does the bank have to prefect the FC for a BK claimant? In some cases, the seconds may be wiped out, but not likely the first. The HOA pre-BK may also be wiped out, but not likely the post-BK dues.
Looks like they are milking another person’s cow. Collecting rent with any expense (monthly payments).
In these days, why buy the cow when you can get the milk for free?