I have profiled many stories of the capricious nature of the housing bubble and how it impacted people for better and for worse. The daily HELOC abuse posts have covered the odious behavior of borrowers from all walks of life. Usually I relegate those stories to the bottom of the daily posts because they are so common they no longer rise to the definition of “news.” However, when I discovered today’s featured property I was astounded at the scale of the HELOC abuse. When I did a search on the name of the owner I came across an interesting back-story of divorce, deceit, and elder abuse. The story is so compelling, I decided to make it the focus of today’s post.
SANTA ANA — An Orange County woman who won $12.6 million in the California Lottery last year is suing her son and daughter-in-law in an effort to regain the money, which she claims they coerced her into signing over to them.
Joan F. Markham, 66, a British citizen who was living in Buena Park when she won the prize last summer, alleges that the couple, who are now divorcing, threatened to have her deported or sent to jail unless she gave them the money. They also threatened to keep her away from her grandchildren, whom she baby-sat regularly, according to the lawsuit filed Monday in Orange County Superior Court.
This divorcing couple allegedly harassed an old lady into giving them her lottery winnings by threatening to prevent her from seeing her grandchildren. Real nice.
“She’s just really upset about all of this,” Markham’s attorney, Milford W. Dahl Jr., said Tuesday. “I think she wants to have control of the money so she can make sure her grandchildren get it rather than have her son and daughter-in-law spend it on themselves.”
She was right to be concerned. As we will see when we examine the amazing HELOC abuse on her property, the daughter-in-law has a sense of entitlement that is big even by Orange County standards.
There are two sides to every story, and the events as described by the attorney for Ms. Markham may not be accurate.
Dispute Over Lottery Winnings Heard in Court : Lawsuit: Woman contends that the action involving her estranged husband and mother-in-law is a scheme to keep her from getting her share of $12.6 million.
… An attorney for the 41-year-old Nicole Markham, relating her side of the story for the first time, said the lawsuit is really a scheme by her estranged husband to cheat her out of her share of the winnings.
“I firmly believe that this is just another step in Brian’s scheme to exclude his wife, Nicole, from community property proceeds,” attorney George C. Rudolph said.
“Brian went out and bought a lottery ticket. He doesn’t know what to do when he wins because he doesn’t want to share the proceeds with his wife. So, he held the ticket for three weeks until his mother came back from England and concocted a scheme where Joan went to the lottery office and claimed to be the winner,” Rudolph said.
That sounds very plausible. Who would want to give millions of dollars to someone they’re divorcing? Unfortunately, whether the guys wants to turn over the money or not, they were still married when he won, and the soon-to-be-X-wife still gets half.
The elder Markham, who is a British citizen, contends in a lawsuit filed Monday that the couple coerced her into signing over her 1994 lottery winnings last fall by threatening to keep her from seeing her grandchildren and threatening to have her deported. She is suing to have all the winnings returned to her.
In her lawsuit, Joan Markham, who lives in South County on a long-term visa, claims that she gave her son money to buy lottery tickets for her while she was on vacation in her native Great Britain.
Her attorney, Milford W. Dahl, said Monday that Brian Markham held onto the ticket for three weeks until his mother returned to claim the prize, which amounts to $631,000 a year for 20 years, or $454,320 annually after taxes.
Dahl said that after a “campaign of harassment and intimidation” by her son and daughter-in-law to get the money, Joan Markham signed her winnings over to her son in order to preserve her health and her relationship with her grandchildren. The attorney said his client is diabetic and had to be hospitalized after a confrontation with her daughter-in-law last September.
Rudolph said the elder Markham’s version of events is simply not true.
“Then only thing that we can do is sit back and wonder why we are here a year after this alleged incident has occurred,” he said.
… On Wednesday, Fell scheduled a preliminary hearing for Aug. 11. She ordered that a lottery disbursement of more than $454,000, scheduled to be paid to the estranged couple this week be given to their respective attorneys until the matter is resolved.
Rudolph argued against any delays, saying his client needs her share of the money to live on. He said she spent most of her first payment to buy a new home in Coto de Caza. He said Nicole Markham did not ask for financial support in the divorce and does not have a job. …
Does not have a job? And she is buying a Coto de Caza mansion? How did she plan to make those payments?
Well, she must have won the case, but even then, the $315,500 yearly split of the lottery winnings were not enough to satisfy her sense of entitlement, so she turned to her HELOC.
She hit the lottery twice
By purchasing a house at the bottom of the last real estate cycle, the former daughter-in-law and ex-wife managed to ride the equity wave of the housing bubble. As a consummate free-loader, she didn’t work and overspent her lottery allowance and turned to her HELOC to indulge her expensive tastes.
- This house was purchased on 1/18/2005. The actual purchase prices is not given, but the seller provided a carry-back loan for $1,403,000. I assume the buyer put 20% down with her first payment from the lottery money as stated in the news article. The purchase prices was likely $1,750,000.
- On 3/11/1998, the paid off the original seller by refinancing with a $1,590,000 first mortgage. She also netted $187,000 for her troubles. I guess that lottery money wasn’t going far enough.
- On 1/27/1999 she refinanced again for $1,725,000 pulling out another $135,000.
- On 4/16/2001 she obtained a $250,000 HELOC.
- On 7/5/2002 she obtained a $500,000 HELOC.
- On 1/7/2004 she refinanced with a $1,614,171 first mortgage.
- On 3/14/2005 she refinanced with a $2,465,000 first mortgage.
- On 2/27/2006 she opened a $100,000 HELOC.
- On 7/21/2006m she refinanced with a $3,850,000 Option ARM.
- Total mortgage equity withdrawal was a whopping $2,447,000 plus negative amortization and three years of squatting.
- She was served a Notice of Default on 9/29/2009 which means at the latest she quit paying in May of 2009. In all likelihood given the slow pace of high-end foreclosures, she was delinquent even before then. She was allowed to squat for nearly three years in this beautiful Coto de Caza mansion.
A crushing fall from entitlement
How will this woman adjust? She only has about two years left on the lottery payout, then she will have nothing. No lottery money. No house. No HELOC money. Nothing.
At 59 years old, she hasn’t worked in nearly 20 years, so it doesn’t seem likely she will start earning $500,000 per year to support her habits. What will she do? Will she pull herself up by her own bootstraps?
I foresee a truly crushing fall from entitlement in her future.
When famous people fall, it makes news, but when plebs fall, no notice is given; no ritual is performed. The silent souls quietly abandon their perceived privilege while the raucous proles forcefully defend their binding birthright through procedural delays and faithlessly modified promises. In the end, all fall to the support of their own resources and suffer to the degree they resist reshaping their lives to reflect reality.
We witness this fall as HELOC abuse posts, short sales and Trustee Sales. Like forensic examiners, we follow clues in the property records looking for what methods were used and what motivated homeowners to borrow and spend their family homes. This work is consequential because unless we see conditions for what they are, unless we see people’s defective reasoning and overriding emotional gambits for what they are, we may fall victim to the same Siren’s Song.
Who will fall, and how much will they suffer?
Suffering is a spiritual concept; suffering is a negative judgment of experience exacerbated by attachment, delusion and aversion. Suffering and attachment directly relate; each soul suffers in proportion to the attachments formed to objects, people, beliefs and ideas, or anything the mind’s grasping can’t bear to lose or give up. Are you aware of your own suffering?
Homedebtor suffering directly relates to their over-indebtedness and HELOC dependency; each suffers in direct proportion to (1) their debt-to-income ratio, (2) the magnitude to which they consistently outspend their wage income, (3) and the extent to which they must have that which they must lose. Rapid appreciation and HELOC spending to supplement lifestyle is not coming back, and all who hold their breath will give up, pass out or walk away. In the interim, they suffer. Quietly and anonymously they hatch fantasies of golden geese and high-flying home prices not to be.
Coto de Caza Overview
Median home price is $789,000. Based on a rental parity value of $883,000, this market is fairly valued.
Monthly payment affordability has been improving over the last 9 month(s). Momentum suggests improving affordability.
Resale prices on a $/SF basis increased from $242/SF to $246/SF.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Median rental rates increased $134 last month from $3,530 to $3,664.
Rents have been falling for 3 month(s). Price momentum suggests unchanging rents over the next three months.
Market rating = 1
$2,899,000 …….. Asking Price
$1,750,000 ………. Purchase Price
1/18/1995 ………. Purchase Date
$1,149,000 ………. Gross Gain (Loss)
($140,000) ………… Commissions and Costs at 8%
$1,009,000 ………. Net Gain (Loss)
65.7% ………. Gross Percent Change
57.7% ………. Net Percent Change
2.8% ………… Annual Appreciation
Cost of Home Ownership
$2,899,000 …….. Asking Price
$579,800 ………… 20% Down Conventional
4.17% …………. Mortgage Interest Rate
30 ……………… Number of Years
$2,319,200 …….. Mortgage
$593,146 ………. Income Requirement
$11,301 ………… Monthly Mortgage Payment
$2,512 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$725 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$785 ………… Homeowners Association Fees
$15,323 ………. Monthly Cash Outlays
($1,676) ………. Tax Savings
($3,241) ………. Equity Hidden in Payment
$860 ………….. Lost Income to Down Payment
$382 ………….. Maintenance and Replacement Reserves
$11,647 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$30,490 ………… Furnishing and Move In at 1% + $1,500
$30,490 ………… Closing Costs at 1% + $1,500
$23,192 ………… Interest Points
$579,800 ………… Down Payment
$663,972 ………. Total Cash Costs
$178,500 ………. Emergency Cash Reserves
$842,472 ………. Total Savings Needed
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