One house's trip through the boom and bust

[n2doc]

One house's trip through the boom and bust
With refinancing easy, it was like an ATM for the owners. But that ended.
By David Streitfeld, Los Angeles Times Staff Writer
August 12, 2007
In the county of Riverside, in the city of Corona, on a street called Plume Grass, there's a foreclosed house that no one wants to buy.

How it got that way says a lot about why Wall Street is in turmoil and the housing slump is worsening.

A three-bedroom house with a cathedral ceiling and lots of storage space, it's been on the market for 103 days, with no offers or even nibbles.

The only guaranteed way to move it would be to drastically slash the $419,500 asking price. That's something the owner, GMAC Mortgage, refuses to do.

And so the house sits. What's it really worth, this rather ordinary suburban dwelling?

A decade ago, just as Southern California was emerging from the last real estate slump, it was worth $148,000. That's what Theodore and Cassandra Judice paid the developer, Beazer Homes, borrowing nearly all of that sum.

For a few years, the house fulfilled its traditional role: It was a place to sleep, to eat, to raise their two boys. "It was a blessing, a beautiful place," says Theodore Judice, a telecommunications worker.

Life threw some curveballs. Cassandra, a healthcare worker, had medical problems and left her job. Theodore had a year or two when he wasn't working full time. And, always, there were credit card bills and home equity loans to pay.

In 2000, they refinanced, drawing cash out in exchange for a bigger monthly mortgage.

Corona, and America, was soon full of people doing the same thing. Lenders have never been so careless with their loans, knowing they could easily resell them to Wall Street. With home values on the rise, houses took on a new role. They became ATMs where you never had to make a deposit but could withdraw endlessly, or so it seemed to many at the time.

Theodore would marvel at his neighbor's boats, their swimming pools, their toys. He and Cassandra did some remodeling -- getting the patio done, he remembers, was particularly urgent.

The offers to refinance came in the mail every day, sometimes two or three of them. Theodore would tear them up. Eventually, though, he would succumb.

The couple refinanced again in 2001, 2003 and 2004, borrowing larger sums each time. Each time they drew money out, Theodore would say, "We're not doing this again." And then they would need money, and they would do it again.

In September 2005, the Judices borrowed $447,500. Almost immediately after that, they put the house on the market for $480,000.

It was time to go: They had drawn so much cash out of their home they couldn't afford to live there anymore. The ATM had turned into a trap. With no equity cushion, they couldn't afford to cut their price either.

"They got offers, but they weren't high enough for them to break even," says their agent, Peter Pesek. "They wanted to keep waiting for something better." It never came; the market had peaked.

more:

http://www.latimes.com/business/la-fi-corona12aug12,0,3320473.story

[MADem]

1. STUPID. I feel sad for them, but they're stupid.

Your house should be your home, a place where you LIVE. Not an ATM. You tap that equity in EMERGENCIES, not for a new car or a treat. And if your woes are THAT bad, like medical issues or job losses, you fucking sell and downsize, not have your cake and eat it too. If they'd done that, they'd have been better off. Now, they're financial bums. But no one is stigmatized by that anymore, it seems.

I live in a house that would sell in this lousy market for well more than thirty times its original purchase price in a week or less. But then, we've been here a long time. It's a good house. In a good place. We've taken decent care of it down the years. And we don't use the house as an ATM. It's a home, a port in a storm. A refuge.

If you need money from your house, get a roommate!

Maybe it will become fashionable to PAY YOUR BILLS once more. People like me, who don't carry massive credit card balances, aren't desirable customers for these companies. I pay my bills when they're due. I save for big ticket items rather than incur debt. It's mind-blowing how, in this society, that sort of behavior is viewed as NOT GOOD by lenders.

They can't make much off of people like me, so they don't care for their trade, I guess. But they can count on a lregular, reliable payment from people like that--what a concept!

[salin]

2. When the economy was collapsing under corporate implosions... we were told...

"The Housing Sector is strong" - indeed around 2002+ it was the one sector, we were told, that was booming. Enron, WorldCom and others collasped due to very shady dealings that included using equity in risk to - get loans for more risks. Only in the second wave of (FEC) reforms. And within six months of that legislation we started hearing, through the news, that corporations were rebelling - as the "reforms were too onerous/costly"... And investors, somehow, forgot the the greed - and intentionally corrupt behavior of masking "risk"/debt - as if it had only been one or two bad apples during the corporate implosions in the early 2002s. And now we learn that the one sector that was working well (or so we were led to believe) - was done on fraud, predatory practices - and the current implosion was as pedictable as rain.

Yoo Haw the Bushjr years. While we may take comfort that the historians will be harsh - we still have to live with the horrible aftermath on so many fronts.

[OnceUponTimeOnTheNet]

3. K&R Sad and foolish.

Refinanced in 2001, 2003, 2004, and 2005 and shot the wad each and every time?! Dumbstuck here.