Global Financial Meltdown

A viewer’s comment on YouTube led me to this terrific inside view of the 2008 financial crisis, and the resulting impact on the world. It rightly blames the entire fiasco on the Tan Man, who pitched his mortgages to Wall Street based on the yields generated if borrowers made their full-interest payments, when in reality, only a much smaller minimum monthly payment was all that was due.

It’s eerie to watch today as our financial markets are in question again:

I make a quick comment in at the 2:38-minute mark, standing in front of the most-expensive REO listing we received in the era – a 2,900sf house in downtown Carlsbad that sold for $603,000 in December, 2009.  It’s still owned by those buyers! The realtor.com estimate today is $973,900.

REO Fraudster Goes to Jail

These are the crimes and attitude required to actually go to jail for real estate fraud:

A former Fannie Mae employee will spend more than the next six years in prison after being found guilty of accepting more than a million dollars in bribes and kickbacks in exchange for selling Fannie Mae-owned foreclosures for less than market value.

Back in January 2018, Shirene Hernandez was charged with accepting bribes for steering foreclosures to certain brokers and even allegedly buying some foreclosures herself at below market value.  And nearly a year ago, Hernandez was found guilty of two wire fraud counts that involved the deprivation of honest services as a result of the scheme.

Hernandez formerly worked at Fannie Mae in California as an REO foreclosure specialist and was tasked with the sale of properties foreclosed on by Fannie Mae.

As a sales representative, a position she held from 2010 through 2015, Hernandez would assign Fannie Mae-owned properties to certain real estate brokers and approve sales of the properties based on offers the brokers submitted.

But, court documents showed that Hernandez demanded and received bribes – mostly in the form of cash – in exchange for brokers getting the listings and commissions those brokers earned on real estate sales in question.

Hernandez also approved sales of Fannie Mae REOs at discounted prices to both herself and to brokers who paid her kickbacks.

As part of the scheme, Hernandez also received bribes for approving below-market sale prices of Fannie Mae properties to the brokers, all of which were violations of Fannie Mae rules and federal law.

Hernandez also helped several family members become Fannie Mae-approved brokers, and then steered nearly $80 million in Fannie Mae listings to them, resulting in nearly $2 million in commissions in less than three years.

According to court documents, Hernandez received more than $1 million in benefits from the scheme, including cash kickbacks and equity in a Fannie Mae property she bought using said kickbacks.

And, according to court documents, Hernandez paid for that property using a duffle bag filled with $286,450 in cash, which she gave to her sister-in-law to bring to the closing.

“The crime that [Hernandez] committed was egregious,” the prosecutors wrote in their sentencing memorandum. “Rather than act in the public’s best interests…she used her position to line her own pockets. [She] is unremorseful and unrepentant, and would seemingly do it all again if she could avoid being caught.”

In addition to the 76-month prison sentence, Hernandez was also ordered her to pay $982,516 in restitution to Fannie Mae.

Link to Article

Carmel Valley REO Closed

We featured this bank-owned property earlier as an online auction (which didn’t work out).

They did find a cash buyer – I hope they got in the house to take a look around!

This is a typical example of an REO sale these days.  The former owners paid $1,650,000 in 2007, and used a 31% down payment.  The original $1,137,500 mortgage was funded by World Savings, and undoubtedly it was a neg-am loan.

It looks like the buyers stopped paying in 2010, but instead of foreclosing and losing a truckload, the bank (Wells Fargo, who bought World Savings) just waited until they knew market value was high enough that they wouldn’t lose money:

The price at the trustee’s sale in November was $1,365,016, and they sold it traditionally for $1,350,000.  It means that after paying closing costs, the bank received 100% of the principal back, plus around $150,000 of the neg-am interest that accrued.

These days, banks are only foreclosing once they can make money on them!

Carmel Valley REO Auction

Here’s an interesting case in 2019.

Wells Fargo foreclosed on this Carmel Valley home in November.  It had been listed on the MLS for the previous 12 months, and it looked like the agent had been trying to process a short sale (it was marked ‘contingent’).

She had it listed for $1,500,000.

Her clients paid $1,650,000 in 2007, and financed $1,137,500 with World Savings.  Times were tough for many, and these folks got their notice of default filed in August, 2010.  It doesn’t look like they made any payments since.

Wells Fargo’s amount at the trustee’s sale was $1,365,016, which is typically the amount owed.  So the former owners got a couple of hundred thousand dollars in relief, but waved bye-bye to their down payment of $512,500.

Wells Fargo then listed the house for sale in January for $1,499,000, and has now sent it to an online auction.  The bidding started yesterday, and will remain open until Tuesday:

Link to Auction Website

The interesting twist is that the house is occupied – probably by the former owners – and no one is allowed to see the house.  They also have only one photo of the exterior.

I’ll help them out by providing a link to the previous listing with photos here:

Link to Previous Listing

The auction website also notes that it needs to be a cash purchase, though it’s not mentioned in the MLS listing.  The buyer has to pay a 5% buyer’s premium on top of the purchase price, and I assume they want you to close escrow with the occupants inside?

What will somebody pay for the home, under those conditions?

The current bid is $1,199,920, though note sure if that is actually a real offer or just the minimum bid.

Stucco Valley

A good example of today’s market conditions. At first, you would think a bank-owned house in the prime Derby Hill community in Carmel Valley would garner a lot of attention, and sell quickly. But this one isn’t tricked out with extras, and it’s not a canyon lot either.

Like most sellers, they added a little mustard to their list price – but they were on the market for 55 days before finding the buyer:

Oceanside Beach Bank-Owned

A rare Bubbleinfo TV trip to the beach area west of Coast Highway in Oceanside to see this very unique custom home that is a three-time loser – it was foreclosed in 1994, 2007, and February, 2017.

A buyer paid $1,500,000 for it in 2005, got foreclosed, then purchased from the bank for $1,012,500 in 2007.

The latest bank had it on the market during the spring selling season last year, but no takers.  Their last list price was $934,900:

We should see it back on the market again this year!

Happy Blog Anniversary!

September 24, 2017 is the 12th anniversary of this blog!  For a little perspective on where we’ve been, here is my most-watched YouTube.

This house originally sold for $927,500 when new in 2005.

I sold it for $485,000 in April, 2009 which was the low point of the San Diego market, as judged by our Case-Shiller Index.  This year there have been sales on the street in the mid-$800,000s!

Thanks for being here all these years!

Pin It on Pinterest