Foreclosures Now Hitting Luxury Homes

[BPSCG]

Last month, Doman toured an empty six-bedroom mansion in the Villages at Waxpool, an upscale development in Ashburn, looking crestfallen as she pointed out the movie room, wet bar and library. Her client, local real estate investor Keith Thai, was struggling to close a short sale on this house he had bought for $1.2 million. It was in near-perfect condition with unscuffed white walls and shiny granite countertops. The tub in the downstairs bathroom had never been used -- and still had the original stickers -- even after renters had been living there for more than a year.

Doman ran her hands along the wrought-iron banisters and sighed. "This is nice," she said.

But the bank didn't approve the short sale, and Thai's house fell into foreclosure. So did Thai's 10 other high-end properties, including his own Ashburn home.

"I feel like a loser," Thai said, putting his head in his hands.

After WorldCom's downfall in 2001, Thai quit the company and systems engineering altogether to start a second career in real estate. He took classes and attended seminars. He was enthralled by Donald Trump's tale of building a real estate empire and vowed to make his own real estate fortune. And, on paper, he did.

"In two years," he said, "I made tenfold what I made in the last 15 years."

Thai flipped houses. He gathered investors to buy a high-end home from a builder before ground was even broken. When the house was completed, he sold it for a hefty profit.

Thai deferred the taxes on the sale of the investment property by channeling that profit into three new homes with adjustable-rate mortgages. He rented those homes to families for about $3,000 to $3,500 a month, while the interest was at 1 percent. The rent on each house was about $200 a month less than the mortgage, but at the time, Thai said, he could afford it.

After about a year, he would sell a house and repeat the process.

At the height of his investing, as home prices continued to skyrocket, Thai owned 15 homes in Northern Virginia. He later sold four, and of the remainder, nine were valued at about $1 million.

But in 2006, homes values stopped rising. The housing bubble was deflating. When interest on Thai's adjustable-rate mortgages jumped as much as 11 percent, he took the equity out of the homes to pay the deficit and keep his investments alive.

"I hang on and I say, 'Okay, bad time. When it's over I can sell it back,' " he said.

The market never improved. Builders lowered the prices on new homes, making it impossible to sell back his investments to break even. In just six months, Thai spent his entire savings. The bank barred all his short sale attempts.

Cry me a river. And explain to me why the taxpayers should be on the hook for one damned penny.

 

[fuelair]

Because.....uuuh, oh yeah , because....Oh, never mind.

 

[ponderingturtle]

Cry me a river. And explain to me why the taxpayers should be on the hook for one damned penny.

Remember only bankers deserve to be bailed out of their stupidity.

 

[BPSCG]

Remember only bankers deserve to be bailed out of their stupidity.

Who thinks that?

 

[LibraryLady]

The bankers.

 

[Suddenly]

Cry me a river. And explain to me why the taxpayers should be on the hook for one damned penny.

For this guy? He should get squat.

One can arguably identify public policy reasons why a family using a house as a residence should possibly be helped out. Such reasons strike me as a bit thin, but extending help to pure speculators is complete nonsense.

What helps everyone is to get people into these houses at a viable payment structure. The classic foreclosure/sell scenerio will get there eventually, but the lawyers and such are going to get a big chunk of the dough. Cutting out that part of the system while not forcing these families to play an expensive game of musical houses is a good idea that would cut out economic waste. This leaves more money for the loan holders, less money spent by moving around, children staying in the same schools, etc.

 

[BPSCG]

The bankers.

...and certain members of Congress, it would appear.

 

[Modified]

What helps everyone is to get people into these houses at a viable payment structure. The classic foreclosure/sell scenerio will get there eventually, but the lawyers and such are going to get a big chunk of the dough. Cutting out that part of the system while not forcing these families to play an expensive game of musical houses is a good idea that would cut out economic waste.

The mortgage holders had a good opportunity to do that with short sales, and to save themselves money as well. I keep seeing stories in the paper here about banks that refused a short sale a year ago and are now accepting one on the same property for 3/4 the price.

 

[Demigorgon]

Some people are stupid, some are greedy.

Am I the only one who is getting sick of hearing these commercials on the radio from mortgage companies talking about "Did you get caught up in an ARM... ...come switch to a low fixed rate!" - when they were the ones who were putting people into those ARMs the year prior!

edited to add: and don't get me wrong, I don't feel sorry for those poeple who bought into an ARM.

 

[BPSCG]

Some people are stupid, some are greedy.

Am I the only one who is getting sick of hearing these commercials on the radio from mortgage companies talking about "Did you get caught up in an ARM... ...come switch to a low fixed rate!" - when they were the ones who were putting people into those ARMs the year prior!

edited to add: and don't get me wrong, I don't feel sorry for those poeple who bought into an ARM.

You don't? But you should if someone was putting them into those ARMs.

Someone tried to put Mrs. BPSCG and me into an ARM last year, but a warning shot from the .38 Special made him drop our kitty cat that he was holding hostage, and we were able to stay with our fixed-rate 30-year loan.

This time. Next time a lender tries to put us into an ARM, we might not be so lucky.

The Second Amendment: All that stands between you and a subprime loan.

 

[LibraryLady]

Sixteen years ago, when I bought my house, the lender floated the idea of an ARM, with a big smile and a "gee, isn't this great" attitude. I just gave her my librarian look and said, and I quote, "Why in the world would I want to do that?" The subject got dropped. And she returned her library books the next day.

 

[Suddenly]

You don't? But you should if someone was putting them into those ARMs.

Someone tried to put Mrs. BPSCG and me into an ARM last year, but a warning shot from the .38 Special made him drop our kitty cat that he was holding hostage, and we were able to stay with our fixed-rate 30-year loan.

This time. Next time a lender tries to put us into an ARM, we might not be so lucky.

The Second Amendment: All that stands between you and a subprime loan.

There was some fraud involved with some people, mostly poor uneducated elderly people who were lied to about the payments, etc. They can be considered victims. Most people are just victims of wishful thinking and deserve a giant kick in the credit.

The fraud stuff kills me. Older people in houses with no foundation in locations with no demand for housing because there is nothing there but old people in crappy houses, carrying ARMs for like 1000% of any sane resale value, assuming someone would ever want the thing, which they don't....

....and then someone bought this loan. Imagine the look on the face of the person tasked with forclosing on this property...

It is almost worth crashing the economy to teach some of these people a lesson about responsibility.

 

[ponderingturtle]

There was some fraud involved with some people, mostly poor uneducated elderly people who were lied to about the payments, etc. They can be considered victims. Most people are just victims of wishful thinking and deserve a giant kick in the credit.

ANd yet so little of that seem to be hitting the profeshionals who designed loans where you had to basicly sign your name, and state that you could pay it back. Why not punish the profeshionals who removed any desire to verify that the client had a pulse(as dead people got loans).

I just don't see why people seem to blame the home owners so much more than the bankers facilitating the situation.

 

[Suddenly]

ANd yet so little of that seem to be hitting the profeshionals who designed loans where you had to basicly sign your name, and state that you could pay it back. Why not punish the profeshionals who removed any desire to verify that the client had a pulse(as dead people got loans).

I just don't see why people seem to blame the home owners so much more than the bankers facilitating the situation.

I blame the morons buying the end securities. They are the ones that really should have known better, and their stupidity and blind greed enabled the whole mess.

If the securities don't sell easily, the loans aren't made, and the real estate prices don't explode causing more demand for the crap loans that shady brokers can't sell enough of because these same morons will buy them up without asking any questions about quality.

....and when it explodes some of them will get fired and have to make do with obscene severance packages, the poor dears.