After the beginning of the real estate meltdown in 2005, banks began to tighten their lending standards. They realized that the housing market wasn't not everything it was cracked up to be. There was no way anyone could convince a bank to lend money on a home that was worth less than the loan. Or could they?
golfer_x at Housing Kaboom is constantly monitoring the housing market in the Inland Empire. He clearly wants to be ready to act when the time is right to buy. The only way to know if the time is right is to watch the market.
Fast forward a few months and guess what golfer_X found. The same listing is amazingly still on the market. Only now the property is listed at $1 million.
It gets richer. The current owner bought it as an REO. The county records show a sale in November of 2007 for the price of $535,000. The lender, Chase Bank, gave a loan amount of $603,250. That is $68,250 more than the purchase price in 2007 when the housing market was in free fall and the credit crisis was in full swing! That is more than 112% of the purchase price. I wonder what all that extra money was used for. My guess is that it was used to install fake grass and pay for a commission. Guess the banks just didn't learn. Here's to the wise underwriters of Chase. Nobody can pull a fast one over on you!
If that wasn't bad enough, there was apparently a double closing. On the same day that the agent purchased the home for $535,000, the new agent/owner sold the home for $635,000 to someone else. That is a profit of $100,000. Not bad for a days work. I wonder if the agent disclosed his financial gain to his client? I wouldn't pay $100,000 more for a home that just sold on the same day.
A few months later in March of 2008, a private lender provided a $50,000 loan to somebody. It isn't clear if it was the agent or the lucky new owner. Regardless, the county shows that the home was sold back to the agent on the same day. My guess is that the agent provided a parting gift to the guy he sold it to back in November of 2007 for a huge profit. There is no sales price listed for the March sale, just a record of a deed giving the property back to the agent/owner.
Fast forward to June of 2008 and the agent/owner managed to get another loan for $132,500 from a private lender. Bad mistake Mr. Lender. Within one month the new loan was in default. The entire amount is in default! Not one payment was made on the new loan. In fact, the county records show that the loan is in default for the amount of $134,200.
My guess is that the total owed on this property far exceeds the $700,000 mark and that the loan that is in default is a second or third lien. If the agent/owner only owed the $134,200, they could list the property for $300,000 and have it sold yesterday. Instead he is trying to list it at a completely unreasonable price.
Here is the best part. Since the most recent lender is not in first position, they must foreclose on the property to protect their asset. If the first lien holder were to foreclose on the property, then all junior liens (2nd and 3rd mortgages) would be wiped out. That means the junior lien holder must pay all other loans while they are in foreclosure proceedings to protect their asset. Unless of course the agent/owner is paying the mortgage on the first. Somehow I doubt that is occurring.
Wonder why the FDIC is announcing bank failures? This is one example of the many reasons.
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