We Buy Houses

Israel Medina admits he got too gung ho about the idea of getting rich by flipping Bay Area real estate.

Medina, a Concord resident who ran a limousine company before wading neck-deep into the housing market, has seen not one, but 11, of his Northern California properties move into foreclosure in the past year, he said.

“I was a real estate tycoon; I had everything,” said Medina. “Now I have nothing.”

A Chronicle analysis of public records shows that speculators like Medina played a significant role in the region’s subprime loan meltdown.

These real estate gamblers are hardly the struggling home buyers often portrayed as victims of the Bay Area’s and nation’s foreclosure crisis. Some bought houses as often as other people buy shoes, rarely putting down any money. The speculators were betting that home prices would continue to shoot up. Instead, when the market started softening and prices sagged, many of their properties ended up as foreclosures.

More than one-fifth of 6,557 Bay Area properties that fell into foreclosure from January through September this year were owned by investors, according to a Chronicle analysis of public records compiled by DataQuick Information Systems. Of properties repossessed by lenders, 1 in 6 had been owned by people who had two or more foreclosures in their names. Eighteen Bay Area investors had five or more foreclosures.

“During the frenzied period, you got people rolling the dice and buying as many properties as they could,” said Andrew LePage, an analyst with DataQuick of La Jolla, San Diego County.

Easy money through no-questions-asked subprime mortgages allowed almost anyone to become a real estate speculator. The flood of investors and first-time home buyers into the market helped to fuel the Bay Area’s double-digit price appreciation in recent years.

And while lenders are left holding the unpaid loans for these investments gone bad, experts say the region’s homeowners and the public at large share the pain.

“All of us end up paying in some way for the losses incurred by the lenders,” said Hans Johnson, associate director of the Public Policy Institute of California, who is an expert on housing issues. “And anyone living next to one of these foreclosures would certainly say it affects them.”

The Chronicle’s investigation showed those with multiple foreclosures ranged from naive investors to people who may have been victims of fraud - or committed it themselves. What they all had in common was the hope for a payday.

A working-class Livermore couple bought four investment properties, believing the real estate would finance their children’s college educations; one has gone through foreclosure and others are on the verge. A Marin resident invested $1 million in four properties that a construction company owner told her he would fix up and flip; she lost all the money, her good credit and her own home.

The Marin resident, Rose Hodges, said she attended Marin investment clubs and met many people like herself who wanted to learn how to invest in real estate.

“All these Baby Boomers started inheriting money from their parents and looking for ways to invest it. And the real estate market was booming,” said Hodges, who learned the hard way that such investments can have a big downside. “It’s crazy out there and people ought to know.”

Medina, who got a real estate license early this year, said he dabbled in real estate for years and made some money before gambling too big and buying 11 properties at virtually the same time in early 2006.

http://www.thehomebuyingcenter.com/real-estate/

Real Estate News from the We Buy Houses team 

By Kristin Jensen

Dec. 3 (Bloomberg) — Democratic presidential candidate Hillary Clinton called for a 90-day moratorium on foreclosures for homeowners who default on subprime mortgages.

The New York senator, is also seeking a five-year freeze on the monthly rate for subprime adjustable mortgages and a requirement that the industry report how many mortgages have been modified. In a letter to Treasury Secretary Hank Paulson, Clinton said she may consider legislation to protect lenders from lawsuits and let them convert certain mortgages into “stable, affordable loans.'’

Paulson and Treasury officials are trying to craft an agreement with lenders to prevent a surge in defaults in the $11.5 trillion mortgage market. Clinton said any deal should include the provisions she has suggested.

“The administration and the mortgage industry must reach an agreement that matches the scale of the problem,'’ Clinton, 60, said in the letter released by her campaign today. “If you produce an inadequate agreement, or fail outright, the cost to our economy will be incalculable.'’

Clinton also proposed a fund of as much as $5 billion to help communities suffering from high rates of foreclosures. The moratorium on foreclosures would be at least 90 days and only apply to owner-occupied homes.

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Real Estate News from the We Buy Houses team 

MAPLE HEIGHTS, Ohio (AP) — After the unpaid mortgage bills, the creditor warnings and finally the sheriff’s sale, it’s sometimes left to a handy man like Adrian Brad to clean up the mess left by the nation’s home foreclosure crisis.

“I’m not trying to become a millionaire,” said Brad, a firefighter who has found a new part-time career buying and fixing up foreclosed homes. “It’s something I do.”

Most foreclosed homes are bought at auction by the lenders, get fixed by contractors who specialize in the work and return to the real estate market. Few get the attention of one-man operations like Brad’s, according to Leo Baez, construction director in New York with Enterprise Community Partners Inc., which works on housing issues with neighborhood development organizations across the country.

Rehabbers gamble that the renovations they do — new carpeting, fresh paint, refinished floors, for instance — will enable them to quickly resell or rent a property. A rehabber’s stake depends on the market and neighborhood, and that can be as little as $20,000 or $30,000 for a fixer-upper in blue-collar Cleveland, where a rehabbed home might fetch $50,000 or $60,000.

In the current down market, “If you can get away with 15 grand profit, shoot, I would take it,” said Tony Patterson, who buys and fixes up two or three foreclosed homes a year, in addition to his home repair contracting business in Pittsburgh.

In a hot real estate market, Patterson said he can make $20,000 to $40,000 fixing up and selling a foreclosed home, sometimes turning them over in one or two months.

Brad rents out one rehabbed home, lives in the second one and took on a tougher project for his third: a three-bedroom, 1,150-square-foot bungalow with detached garage in a blue-collar neighborhood that has become a poster community for foreclosures.

On a recent afternoon, for-sale signs were outside three of the eight homes closest to Brad’s house in this city of 27,000. Some homes had a fresh coat of paint but others had a well-worn or vacant look.

The number of U.S. homes in foreclosure is expected to keep soaring after more than doubling during the third quarter from a year earlier, to 446,726 homes, according to Irvine, Calif.-based RealtyTrac Inc. That’s one foreclosure filing for every 196 households, a 34 percent jump from three months earlier.

The Cleveland suburb of Maple Heights was ranked in the top one-half of 1 percent nationally in foreclosures by ZIP code.

A recent RealtyTrac listing showed 1,101 troubled homes in Maple Heights, including 199 on the auction block, 564 owned by banks and 268 in the early stages of foreclosure proceedings.

At a recent county sheriff’s foreclosure sale, with Brad in the drab auditorium keeping tabs, the auction of more than 120 homes lasted about 81 minutes. Some homes failed to attract a bid, some were withdrawn, and most got a single bid, typically by the lender, for the minimum asking price.

Like loyal bingo players but without the occasional moments of excitement, a few dozen bankers and attorneys and a smattering of contractors and one-man operators like Brad assemble for similar scenes each Monday.

“If you’re willing to work hard, there’s a niche for you in this county,” said Brad, who routinely heads to his rehab house for a day’s work after 24 hours on duty at the firehouse in suburban North Royalton.

Brad, 28, successfully bid $65,000 in June for the home, which had been appraised at $120,000. His goal: sell it for about $110,000, which would mean a profit of $10,000 to $20,000, depending on the final rehab cost.

On his first visit to the house Brad found a trail of personal items including wedding photos, credit cards, bank statements and clothes. “It seems like they left in a hurry,” he said. He discarded the personal items and checked with his church about taking the clothes to give to the needy.

Chipping away at aging kitchen tile between phone calls from his fiancee, he brushes aside the litany of possible complications, such as whether he can sell the house in a community of declining income or find a reliable tenant. He said he was confident his sweat equity — the increased value of the home from his handiwork — eventually would pay off.

“The risk is big, but the rewards can be 10 times that,” he said.

Rehabbing foreclosed homes isn’t for everybody, and Brad worries that the TV shows with 60-minute makeovers may give people the wrong impression of what’s at stake, particularly the money involved. “This is not like TV. They’ve got unlimited budgets,” he said.

Brad has underwritten his rehab work with his savings and money from his father and brother.

Patterson, who has been in the home rehab business for nine years, said getting into the business of fixing up foreclosed homes is sometimes best for someone, like Brad, who has a full-time job elsewhere. That can help smooth out finances if a house goes unsold for months.

“People think as soon as they are done they will be sold. You might have to hold on to it for a year,” the 38-year-old said.

Baez, with the Enterprise organization, said the business can be stressful if you must divide your time between a full-time job and home repairs on the side. He has tried his hand at rehabbing homes in the New York area.

Any way to make it less stressful? “If you have a lot of money you’re not going to have a lot of stress,” he said.

With the public and media’s attention focused on foreclosures, predatory lenders and “flippers” who fraudulently resell homes with inflated appraisals but make no repairs, Brad said a distinction must be made when it comes to individuals who use their money and skills to restore a home to productive use after a foreclosure.

He deflected a question about whether people might look at him as a vulture picking up the pieces from a hard-luck homeowner and blamed credit-card debt as a top reason for foreclosures.

“It’s not my problem they lost a house,” Brad said.

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Real Estate News from the We Buy Houses team

SACRAMENTO — In Washington, Sacramento and the Inland Empire — where 1 of every 43 residences has been subject to foreclosure — officials Thursday offered money, legislation and ideas to help struggling homeowners stay in their homes and stop what critics charge are predatory lending practices.

Time is running out for finding a fix, said California Assembly Speaker Fabian Nuñez (D-Los Angeles). “If you think we are in trouble now, just wait and see what happens,” he warned.

Nuñez urged Gov. Arnold Schwarzenegger to call a special session of the Legislature to quickly deal with the expanding sub-prime mortgage crisis in California and joined Democratic lawmakers in proposing a package of new consumer protections.

In Washington, the focus was on national solutions. Treasury Secretary Henry M. Paulson Jr. met with banking regulators and lenders to find a way to keep interest rates affordable for at-risk homeowners.

And in the Inland Empire, Schwarzenegger kicked off a $1.2-million education campaign to help borrowers and lenders restructure loans before a home is lost to foreclosure. Over the next four to five years, hundreds of thousands of Californians’ mortgage payments are scheduled to jump by hundreds of dollars a month, he warned at a news conference in Riverside.

At the U.S. Treasury Department, Paulson stressed that he wanted to be more aggressive about avoiding foreclosures. “What the secretary has said is that we need a more systematic way to identify those borrowers and reach them faster,” said Treasury spokeswoman Jennifer Zuccarelli.

U.S. officials fear that the rising tide of foreclosures could accelerate the decline in home prices, leading to a vicious cycle of deeper losses for borrowers, lenders and investors.

“We think there’s progress being made toward finding a balanced approach that will help people stay in their homes without negatively affecting the markets,” said William Ruberry, spokesman for the Office of Thrift Supervision, which took part in the Treasury meeting.

Among the ideas that have been floated are encouraging lenders to extend low “teaser” rates on adjustable-rate mortgages to permit borrowers more time to refinance as well as quickly moving borrowers who are up to date on their adjustable-rate mortgages into fixed-rate loans before they go into default.

Indeed, those proposals are similar to provisions of an announcement Schwarzenegger made last week after conferring with four large California lenders, including Countrywide Financial Corp. On Thursday, he touted a plan to educate homeowners about services that could help them hold on to their property through refinancing or counseling.

“Our message is that lenders are willing to work with borrowers on finding a solution. But right now we are seeing homeowners who are afraid to even talk with lenders,” Schwarzenegger said. “In fact, loan officials have not been able to reach borrowers in more than half of all foreclosures. Some of these homes would have been saved, so seek out a solution before it is too late.”

The wave of foreclosures has hit California hard, Schwarzenegger said. According to RealtyTrac, a real estate information service, 1 out of 88 homes statewide is in foreclosure.

Nationally, five of the top 10 metropolitan areas for foreclosures are in California. Stockton ranks first, the Riverside-San Bernardino region third, Sacramento sixth, Bakersfield ninth and Oakland 10th.

In Sacramento, the Democrats’ still-tentative concepts would provide $10 million for independent credit counselors to help homeowners negotiate with lenders. They also would create a standardized process for lenders to restructure mortgages so homeowners can continue to make payments at current interest rates.

Lenders would also be required to keep regulators informed of how many loans they’ve restructured to keep people out of foreclosure.

Among the legislators’ anti-predatory-lending proposals is a ban on so-called yield-spread premiums, a type of bonus that lenders pay to mortgage brokers. Critics contend these rebates may encourage brokers to arrange high-interest or risky loans when buyers could have qualified for safer or lower-interest ones. Prepayment penalties, which make it expensive to refinance loans, would also be banned in some instances.

Speedy action by lawmakers and state regulators is essential to head off personal crises for California homeowners and a potential budget crisis for state and local governments, Nuñez said.

Increased foreclosures and a weak housing market are expected to contribute to an estimated $10-billion deficit for next fiscal year’s state budget.

A spokeswoman said Schwarzenegger was reluctant to endorse Nuñez’s call for a special session. Indeed, he has already ordered special sessions to pass bills to create a universal healthcare program and authorize water storage projects. Those efforts, so far, have yielded no legislation.

Schwarzenegger said he was prepared to sit down with the speaker and other legislative leaders to discuss proposals, said Deputy Press Secretary Sabrina Lockhart.

The consequences of doing nothing are likely to be significant. California lenders filed a record 72,571 notices of default on borrowers in the third quarter of this year, 18% more than the previous record set in 1996, according to DataQuick Information Services, which tracks real estate transactions.

Representatives of the mortgage industry in California said they recognized the seriousness of the foreclosure crisis but were guarded about the Assembly’s plan.

“No one wins in a foreclosure: Consumers lose their homes and lenders lose 20% to 40% of the loan value,” read a statement from the California Mortgage Bankers Assn.

“California’s lenders have stepped up with unprecedented efforts to communicate with borrowers prior to loan reset dates and help homeowners keep their homes through loan modifications, rate freezes, refinancings,” the group said.

The president of the California Assn. of Mortgage Brokers, Peter Ogilvie, urged lawmakers and the governor to seek a balance between “consumer protection and preserving access to the American dream of homeownership” by making it too difficult for prospective buyers to get credit.

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Real Estate News from the We Buy Houses team

Foreclosures continue to rise in Tennessee, earning it the 11th spot among states, according to a U.S. market report released by RealtyTrac.

For the month of October, Tennessee recorded 4,549 foreclosures, or one for every 580 households. That was up from 13 percent from September and 24 percent from October 2006.

The national rate is one foreclosure per 555 households. Mississippi was unchanged from September when it recorded 162 foreclosures.

Nevada recorded the highest foreclosure rate in the country with one for every 154 households in the state.

Including Nevada, the states with the top 10 highest foreclosure rates were California, Florida, Ohio, Georgia, Michigan, Colorado, Arizona, Indiana and Illinois.

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