Many loan owners made mortgage payments over the last few years when they would have benefited more from strategic default. Many of those loan owners were motivated by the false hope of a government bailout bringing principal reduction or other goodies. California led these sheeple down the path and garnered much public attention for the tough stance the Attorney General took in favor of loan owners.
Everyone rejoiced. Loan owners could taste the debt relief. Kamala Harris stoked her political ambitions as a pandering lefty. The banks got relief from further lawsuits.
There was only one problem. Governor Jerry Brown and others in the state legislature decided giving money to loan owners wasn’t the best use of taxpayer funds — thankfully. The State is diverting the extortion booty it garnered from the bank settlement to others leaving loan owners with nothing but their denial and false hope. Loan owners got screwed.
~~ giggles to self ~~
Needy states? The only thing needy about the State of California is our overblown sense of entitlement. How does the seventh largest economy in the world get classified as needy? I suppose since the entire economy depends on HELOC abusers, we need house prices to go up to fuel consumer spending.
Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.
This is a huge slap in the face to loan owners. Hopefully, this will wake them up to their sheeple status. Politicians don’t give a crap about loan owners. They never did. They are interested in saving the banks and banker’s bonuses, but the State couldn’t care less about loan owners.
In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.
Loan owners were mere pawns in the game of politicians and extortion. Now that the State has its money, the pawns are expendable.
The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.
The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.
As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers.
The drop in the ocean — the root of false hope for loan owners — was so tiny it would never have materially impacted foreclosure rates, but it was a large enough chunk that politicians wanted to steal it.
Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.
In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.
Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.
“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”
For as dirty and underhanded as this bait and switch is, the policy is the best use of public funds. Loan owners should never have been given this money. The false promises were a ploy to extort the banks and get loan owners to make a few more payments.
Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”
… In California, Attorney General Kamala D. Harris had played hardball in the settlement negotiations, holding out until the very end for a deal guaranteeing that a large share of the benefits would go to California, and then trumpeting her success in a news conference and a flurry of interviews with national news outlets. So Mr. Brown’s revised budget put her in an awkward position.“While the state is undeniably facing a difficult budget gap,” she said in a statement, “these funds should be used to help Californians stay in their homes.” Both officials are Democrats.
When asked if Mr. Brown could legally appropriate the money, which is supposed to be held in a special fund “for the benefit of California homeowners affected by the mortgage/foreclosure crisis,” a spokesman for Ms. Harris declined to comment.
There’s no way she is going to challenge Jerry Brown. She might bluster for a photo-op, but she will do nothing substantive to make up for this severe embarrassment — which is fine. I don’t want her to succeed in bailing out loan owners.
Just last week, Ms. Harris announced plans to give about half the money to groups that provide housing counseling and legal assistance to homeowners — groups whose budgets have shrunk while demand for their services grows. The other half would be used primarily for investigation of mortgage-related crime.
So much for how she wanted to spend the money.
… Using the money for other purposes is shortsighted, housing advocates warn. “If you leave homeowners hanging out there to dry, then in the short term maybe you help to meet the budget gap this year,” said Maeve Elise Brown, the executive director of Housing and Economic Rights Advocates, based in Oakland. “But in the long term the more people we have going through foreclosure, the worse it’s going to be for our economy as a whole.”
These people just don’t get it. Foreclosures are essential for the economic recovery. The main reason our economy is still sputtering six years after house prices topped is because lenders have consistently delayed the cleansing foreclosures that need to occur. If lenders had foreclosed and cleansed the system of bad debt and pushed prices to very low levels, a new crop of buyers with less debt would be in at lower price points. The recovery from an oversold position is stronger, so those who bought at the bottom would quickly acquire move-up equity, and their move-ups would support the rest of the market. This process was aborted, so instead we have a slow loss of equity, falling prices, and no viable move-up market. Contrary to popular belief, foreclosures are good for the economy, and lower prices would stimulate home sales, and free up disposable income for other expenditures.
Borrowers we don’t want to bail out
The left is disingenuous in its pandering to loan owners. Every borrower is portrayed as some hapless victim of deceitful bankers. In reality, they were victims of their own greed, stupidity, and desire for entitlements they could not afford. These borrowers do not deserve bailouts of any kind for any amount.
- The property was purchased for $690,000 on 7/2/2002. I don’t have their original loan information, but it didn’t take them long to head straight to the ATM machine.
- On 4/28/2003 they opened a $50,979 HELOC.
- On 8/26/2003 they refinanced with a $605,000 first mortgage.
- On 5/24/2004 they refinanced with a $650,000 first mortgage.
- On 7/16/2004 they obtained a $175,000 stand-alone second.
- On 4/19/2005 they refinanced with a $975,000 first mortgage.
- On 6/8/2005 they obtained a $150,000 HELOC.
- On 7/20/2006 they refinanced with a $1,000,000 first mortgage and obtained a $150,000 HELOC.
- On 8/24/2006 they opened a $250,000 HELOC.
- On 3/14/2007 they refinanced with a $1,000,000 first mortgage and received a $282,500 stand-alone second.
- Total property debt was $1,282,500.
- Total mortgage equity withdrawal was at least $592,500.
Do you want to give people like this such large sums of your tax money? What about their sad state of affairs warrants such compassion?
It think Ponzis like this should adjust to living within their means in a rental for a few years — you know, living like the rest of us did. The shock of their loss of entitlement will be crushing.
San Clemente Overview
Median home price is $627,000. Based on a rental parity value of $552,000, this market is over valued.
Monthly payment affordability has been worsening over the last 4 month(s). Momentum suggests worsening affordability.
Resale prices on a $/SF basis declined from $283/SF to $281/SF.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Median rental rates increased $66 last month from $2,250 to $2,316.
Rents have been rising for 12 month(s). Price momentum suggests rising rents over the next three months.
Market rating = 1
$899,900 …….. Asking Price
$690,000 ………. Purchase Price
7/2/2002 ………. Purchase Date
$209,900 ………. Gross Gain (Loss)
($55,200) ………… Commissions and Costs at 8%
$154,700 ………. Net Gain (Loss)
30.4% ………. Gross Percent Change
22.4% ………. Net Percent Change
2.7% ………… Annual Appreciation
Cost of Home Ownership
$899,900 …….. Asking Price
$179,980 ………… 20% Down Conventional
3.75% …………. Mortgage Interest Rate
30 ……………… Number of Years
$719,920 …….. Mortgage
$188,398 ………. Income Requirement
$3,334 ………… Monthly Mortgage Payment
$780 ………… Property Tax at 1.04%
$350 ………… Mello Roos & Special Taxes
$225 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$178 ………… Homeowners Association Fees
$4,867 ………. Monthly Cash Outlays
($757) ………. Tax Savings
($1,084) ………. Equity Hidden in Payment
$225 ………….. Lost Income to Down Payment
$132 ………….. Maintenance and Replacement Reserves
$3,383 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$10,499 ………… Furnishing and Move In at 1% + $1,500
$10,499 ………… Closing Costs at 1% + $1,500
$7,199 ………… Interest Points
$179,980 ………… Down Payment
$208,177 ………. Total Cash Costs
$51,800 ………. Emergency Cash Reserves
$259,977 ………. Total Savings Needed
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