From the Herald News:
The “For Sale” sign at 549 Broadway is an unwelcome addition to Manuel Maldonado’s neat little yard.
The Maldonados, like many other homeowners, faced financial difficulties and refinanced with a nontraditional mortgage — the kind of adjustable-rate loan that has inundated the market over the past few years, promising quick cash or low interest rates.
Now, mortgage payments eat up Maldonado’s entire monthly income. The family’s financial reserves are tapped out. Despite the protests of his family, Maldonado is selling the house.
“I thought I’d live here all my life,” said Maldonado, 62. “Not anymore.”
…
Adjustable-rate mortgages have been around for years, but recently have shot up in popularity. When housing prices exploded in the early 2000s, mortgage brokers began offering them widely.ARMs constitute about a fourth of mortgage originations, but they make up more than 80 percent of the higher-interest mortgages for those with poor or no credit. Between 1998 and 2004, the number of ARMs in New Jersey increased fivefold — to nearly 50,000 — according to the Center for Responsible Lending, a North Carolina-based agency.
…
Equity Source has operated for five years, issuing more than 400 loans in New Jersey, according to state records. The bulk of these were adjustable-rate mortgages or refinances.Michael Finkelstein, the company’s co-owner, said Equity Source helps people in difficult situations. “This temporarily gets people out of trouble,” said Finkelstein in a phone interview. “We’re not looking to hurt anyone.”
Before issuing a loan, mortgage writers calculate the percentage of the borrower’s income that would go to the mortgage and other debts. A healthy amount is 30 percent, though some lenders will push it to 50 percent.
The Maldonados devote more than 53 percent of their gross income to the Equity Source mortgage, according to the loan documents. There are no legal limits to debt-to-income ratios.
From the AP:
KB Home CEO Bruce Karatz Leaving Firm
Homebuilder KB Home announced Sunday that chairman and CEO Bruce Karatz is retiring after an internal investigation uncovered errors in the company’s accounting of stock option grants.
The review found Los Angeles-based KB used incorrect measurement dates for financial reporting purposes for yearly stock option grants from 1998 to 2005, the company said in a statement.
As a result of the errors, the company expects a non-cash compensation expense of no more than $50 million.
The company was still determining whether to restate previously filed financial statements. It said it was cooperating with a Securities and Exchange Commission inquiry.
Karatz’s retirement is effective immediately, the company said. He is expected to return approximately $13 million to the company after accounting for the new measurement dates.
“This temporarily gets people out of trouble,”
…..and permanently destitute!!!
Can anybody explain to me why a 62 year old is financing with an ARM????
Clot,KL,
Is this more widespread than I think???
Now, mortgage payments eat up Maldonado’s entire monthly income. The family’s financial reserves are tapped out. Despite the protests of his family, Maldonado is selling the house.
LOL….what does his family expect him to do?
I wondering the same thing, an ARM?
From Bloomberg:
U.S. Consumers, Unfazed by Real-Estate Slump, Keep on Spending
Lynette Gutridge’s house in Silver Spring, Maryland, is no longer rising in value as it did in recent years. That didn’t keep her from looping by Westfield Wheaton Mall after she voted Tuesday.
“I’ve not modified my spending,” said the 58-year-old psychologist, toting two new pairs of shoes from Ann Taylor as she headed for Macy’s.
Like Gutridge, American consumers nationwide are continuing to make tracks for malls and shopping centers, defying the forecasts of some economists who predicted the yearlong housing slump would keep them at home.
Combined with falling energy prices and a pickup in job and income growth, the buying spree heralds robust holiday sales and economic momentum heading into the new year, economists say.
“Consumers have been reported to be dying time and again, and they’ve risen from the ashes,” says Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh and a former Federal Reserve economist. “Housing is a major negative for the economy, but the consumer is still the best defense against recession in 2007.”
From the Asbury Park Press:
Creditor says to liquidate Kara Homes
Kara Homes Inc. has virtually no chance of surviving in bankruptcy and should be liquidated, one of the home builder’s biggest creditors said in court papers filed Friday.
North Fork Bank of Melville, N.Y., which is owed about $22 million, filed a motion asking U.S. Bankruptcy Judge Michael B. Kaplan to reject the home builder’s bid to reorganize and requested the case be converted from Chapter 11 to Chapter 7.
“The unfortunate truth is that today there is virtually no prospect for a reorganization in these cases,” North Fork’s attorney Joseph L. Schwartz said in his court motion.
East Brunswick-based Kara, one of Monmouth and Ocean counties’ biggest home builders, ran out of money and filed for Chapter 11 bankruptcy protection on Oct. 5. The company said it has assets of $350 million and liabilities of $227 million.
The company’s 22 affiliates — subsidiaries set up for each of its developments — subsequently filed for bankruptcy as well.
OT- Any chance someone can look up info on
2324991
2335709
2320231
Thanks!
What BCBob said.
“Michael Finkelstein, the company’s co-owner, said Equity Source helps people in difficult situations. “This temporarily gets people out of trouble,” said Finkelstein in a phone interview. “We’re not looking to hurt anyone.”
If it’s supposed to be a short-term solution why is it such a long-term loan? It is clear that this guy is a shyster, and when his company gets sued out of existence, that quote will be part of the case. I think he really isn’t looking to hurt anyone, he simply doesn’t care what happens to them. He wants to make money, that’s all.
One line in that story has my head spinning..
Then earlier this year, they discovered additional credit card bills.
Another piece of crap from a realtor-
Is there a disadvantage if you wait to buy?
Potentially, there are a few. First, with more homes than usual currently on the market, it may now be possible to negotiate a price for a home that might otherwise be out of reach. No telling how long that will last. And secondly, while interest rates are still very reasonable, they have been rising steadily for quite a while. Should you choose to wait, it’s likely that interest rates will continue to rise and further reduce your buying power.
Here’s the point: You’re faced with the opportunity to buy a home at a time when many purchase prices have become more reasonable or even more flexible. Considering that interest rates are still near historic lows, you have every reason to buy your new home as soon as you can.
“I’ve not modified my spending,’’ said the 58-year-old psychologist, toting two new pairs of shoes from Ann Taylor as she headed for Macy’s.
Most people are still in denial. Most people believe that even if the housing boom is over, they are still holding a house that doubled in value and that, at worst, housing values might drop a little, but will largely stabilize.
If you look at the stock market crashes of 1939 and 2000, one of the common themes early on in both situations, was an expectation that the broader economy would not be brought down by these crashes. Of course, in both cases they did impact the wider economy.
Check out this article from April 2000. See if it sounds familiar.
http://money.cnn.com/2000/04/04/markets/markets_newyork/
…Sure the NASDAQ is down 17%, but the economy is in a record expansion. The NASDAQ just got a little overheated, but these companies are still strong. It’s a great time to buy!!!
I don’t want this to come out the wrong way, but I think a lot of people just aren’t thinking about paying the money they are spending back. I don’t mean that they are purposely abusing the system, I think they just aren’t thinking about it. Since they’ve never screwed up before, they don’t think they’re screwing up now, the fact that there are people on radio and television screaming at them to borrow money doesn’t hurt either.
Here’s the point: You’re faced with the opportunity to buy a home at a time when many purchase prices have become more reasonable or even more flexible. Considering that interest rates are still near historic lows, you have every reason to buy your new home as soon as you can
Except that with my income 75K/year I can not buy ANYTHING within 2 hour drive of my work – NNJ…… Great time to buy!!!!
It’s a great time to abuse a few starving realtors and money grubbing sellers. Put in bids “at least” 25% below 2005 peak prices. Starters shacks for $400-$500,000 is a joke. remember if you pay that kind of price who you going to sell a starter home for this price. It is going to be really tough like it is now for these greedy grubbers.
yeah and I’m real tired of the bumper sticker slogan about “interest rates are ^nearly^ still at an all time record low” (forget about price)
SHUT UP ALREADY !!!!!!
IF IT’s Such a BUYERS MARKET then…
YOU BUY!!!!!!
“Except that with my income 75K/year I can not buy ANYTHING within 2 hour drive of my work – NNJ…… Great time to buy!!!!”
Sure you can! There a bunch of junkers out there in Union township that you can get below 300k.
If it’s such a great time to buy and own, why is anyone selling?
jb
YEAH GO AHEAD AND BUY.
THEN PASTE A BIG “L” ON YOUR FOREHEAD FOR LOSER!
BOOOOOOOOOOOOOYAAAAAAAAAAA
Bob
READ THIS ONE AGAIN. When you buy a house it’s work and money work and money.Make sure you don’t bite off to much like many fools did the last 3 years.
From the Record:
Little things carry big tickets
Chris Bartlett and Kim Queren had carefully calculated what buying a home would cost.
Within 48 hours of moving in, however, each learned something that takes most first-time buyers much longer to discover: Home ownership costs a lot more than the mortgage and taxes.
Bartlett knew the house he and his wife, Valerie, bought in Waldwick three years ago needed some work, but that didn’t prepare them for the flooded basement — and the hundreds of dollars in repairs — on their second day there.
Queren didn’t even get that much time. Less than 24 hours after moving into her Leonia home, the hot water heater burst, leading to the first in a continuing series of unexpected bills.
Like most home buyers, Bartlett and Queren carefully calculated how much they could afford to pay for the mortgage, taxes and insurance, as well as the closing costs. And they knew upgrades and maintenance would cost more.
But it wasn’t until they moved in that they learned just how much more they would spend on the annual chores, occasional repairs and replacements, and emergency expenses on the less blissful side of home ownership.
Shovel the snow. Clean the gutters. Seal the driveway. Clean the chimney. Paint the trim. Fertilize the lawn. Weed the garden. Prune the trees. Service the furnace. Spackle the cracks. Maintain the pool. Stain the deck.
Or open your wallet wider and pay someone else to do it.
“When you’re buying a home, you never think about the potential costs above and beyond what you’re putting out,” Queren sai
Sure you can! There a bunch of junkers out there in Union township that you can get below 300k.
I hope it was sarcasm……
Plus I do not consider 285K condo really affordable at my salary – which is worse than my apartment right now.
And it will put a strain my savings – basically no free money after food/mortage/insurance – and I still have to pay upkeep…
Anyways – who is ready to move to Elizabeth??
I have better alternative – I will rent for next year and if nothing changes I will move out of NJ. Not that I have a house to sell….. A lot of people I know who did not work in NY already did so. I’ll let NNJ be place for daytraiders/wellfare people.
excellent point. I’ll rent for bit and leave this overpriced shxthole.
Interesting update on the NAR advertising campaign over at The Mess That Greenspan Made:
http://themessthatgreenspanmade.blogspot.com/2006/11/nar-has-much-more-work-to-do.html
Does everything really just balance out in the long run?
Seven years ago, when choosing between buying a small house in CNJ, or taking a [then] short-term rental in PA, I regretted finally making the rental decision. I was using the NJ property tax savings to finance much of our rent in PA. Cheating? I still thought I was shirking responsibility and past due on getting around to buying.
Looking back now, even my husband (who couldn’t care less where we live, actually) thinks we’re going to be net ahead, even if we just wait one more year. He admits we never would have saved what we have, had we bought, and now we can easily do a 15-year mtg., or better. And we haven’t had to mow a lawn or move in years.
Does everything just equalize like this in the long run? I must be missing something. We didn’t spend a lot, and we lived a simple life, while saving for a house. Many who have a house, spend what they have paid into the house, and never get ahead.
The Maldonado family spent, and lost their house, but they did live in it for a long time, I assume. After their BK will they end up much worse? Or will everything equalize for them, also?
Ok I just wanted to give everyone even the realtors on this site a good laugh. Apparantly realtors and seller are doing something wrong. According to thise guy @ http://www.remaxprc.com
He can sell your house in 59 days or less at a price you like. LOL so how come he has all these magically buyers who are willing to buy at prices that is acceptable to the seller and there are all these other agents out there who can’t sell at any price? Yeah I know its a gimmick, but in this market its a bad offer, most houses do not sell that quick
the effects of this slowdown aren’t being felt by everyone yet. right now, the subprimers are getting squeezed. their ARM payments are going up, but they can’t refinance and can’t sell. hence the only thing they can do is cut back on spending, which is why you’re seeing Wal-Mart panicking right before Christmas.
The middle-income consumers have more equity in their homes and aren’t as likely to have ARMs. But they can’t sell either and MEWs aren’t as great of an option as they have been. A lot of these people haven’t been saving and are staring retirement in the face while they watch their “nest eggs” in the form of home equity evaporate. Most of them remain in denial about the state of their finances, but they can only delay the inevitable for so long before they will have to ratchet down their spending.
The high income consumer will be the last to fall. It’s going to take a recession and job losses to kill this group.
RE: “62 year old is financing with an ARM”
I thought it strange too however i think there were a lot of folks that refinanced using an arm with the allure of having a much lower monthly payment and an increase in expendable cash. Of course the notion that you have more expendable cash in cases like our 62 year old friend is a farce. After all they had the same year Maldonado bought his home “his wife had started racking up thousands of dollars in credit card debt while out of work.” Maybe he was trying to do a consolidation loan and was swayed into something a bit more evil.
Check this out:
http://newjersey.craigslist.org/rfs/233954115.html
This house was on the market for $519,900 in May 2006 (mls 2273478). It went under contract for around $510,000 but then when the buyer went to the closing (on 8/10), he said he would only pay $477,500, take it or leave it. The owners were not in a position to put the house back on the market so they took it.
Now it’s back on the market for $739,000. How much money could he have put into that house? It’s so not worth that money or anything even close considering the street it’s on and the fact that it doesn’t have a garage and it looks like only one parking space. The house next door to this one has been on the market for months and is now listed at $510,000.
Interesting discussion on a Mortgage Broker board I lurk on:
“Any thoughts on this: Lawyers Eyeing Option ARM Suits?” http://tinyurl.com/ycsf6z
Reading that board has been eye-opening, to say the least.
Willow, the tale of that house gets even more interesting…I have followed it for a few months…over the summer, there were ads on craigslist and the owner claimed to be someone who had renovated homes before. He/she was offering to allow the buyer to choose their own finishes. Apparently this didn’t work, and weeks later, it was on the market, same claims, for 750. Now today, even before you posted, I saw it and thought, 739? Was there all of a sudden a huge increase in demand in Caldwell?
What on earth is the REAL story with that place?!
Oops, mistake made – originally on for 750, then I noticed it weeks later for 650. Now 739…hmmmm?
Hey NJGal This is the more on the guy selling the place, plus a picture of him…I had a good laugh
http://www.prosper.com/public/groups/member_home.aspx?screen_name=Ariston
Gosh, he’s really impressed with himself.
Are there stats yet on when the majority of the ARMs are going to reset? Spring 07?
If the bulk were acquired in 2005, is 2007 logical for the majority of resets?
Very interesting Homer…isn’t Prosper associated with itulip?
He was so sure he was going to sell that house in a month! Cough cough…Casey Serin…cough cough.
The numbers often thrown around are from the MBA, they are $300 million worth of ARM resets in 2006, and $1 trillion of ARM resets in 2007.
jb
“Willow, the tale of that house gets even more interesting…I have followed it for a few months…over the summer, there were ads on craigslist and the owner claimed to be someone who had renovated homes before. He/she was offering to allow the buyer to choose their own finishes. Apparently this didn’t work, and weeks later, it was on the market, same claims, for 750. Now today, even before you posted, I saw it and thought, 739? Was there all of a sudden a huge increase in demand in Caldwell?”
Wow, I didn’t notice that it was for sale before. Do you know the street? It definitely doesn’t command that price. For goodness sakes, there are parking meters on the street and it is right off of Bloomfield Avenue near the bars.
He is really trying to make a huge profit – can’t imagine he’ll be selling it anytime soon.
“Hey NJGal This is the more on the guy selling the place, plus a picture of him…I had a good laugh”
What exactly does he do?
I think he is some sort of wanna be investor. He thought to himself why should I just get rich with monoply money when I can do this in real life. He was a teacher. So thats a new one a teacher becoming a wannabe superstar investor
He tried unsuccessfully to day trade, dot com. When the margin clerk blew his a** out of the water, he beacame a flipper.
I guess he’s going to need a new career soon. Flipping isn’t going to be worth it.
2005 RE flipper => 2007 burger flipper
Willow, I don’t know the street, but it looks like a corner property (not my favorite type) with a small lot. I noticed it because I thought the house looked neat, and the interior had some nice old detail work. But following it has just made me shake my head. He must not have had anyone who wanted to buy and choose their own finishes, so he chose for the buyer, and charged more for it. Wonder what the outcome will be.
To Quote this flipper:
“I have never defaulted on a loan or missed a payment — nor can I afford to, given that my credit score keeps my borrowing costs low.”
Guess that might change soon, unless some wacko buys this house off him for 700K. But the reality is that there are still suckers around. I still see crap going into contract at crazy prices.
Homer,
Part of me wishes I looked as sharp as he does…and your right from another thread there are spectrums of neighborhoods. If most people cannot afford then you have a huge problem.
Yeah people with more money can go “urban pioneering” or “slumming it” which really is the most degrading term I can think of because who’s already there the SAVAGES.
You know I live in an apartment in fort lee, and well that area shot up crazy high and everything got torn down. And I got angry for a while because of jealousy.
But I know that it’s time to leave here I am not coming back, 700K for a half house is not worth it.
It seems as though the Maldonado’s were experiencing serious financial crisis prior to refinancing which included large amounts of debt, judgements and the risk of losing their home through foreclosure. Consequently, they have a track record of living a lifestyle above their means. In defense of Michael Finkelstein, his company gave the Maldanado’s the opportunity to avoid foreclosure. They were loaned the funds to satisfy their creditors and the time to properly market their home that they couldn’t afford anyway and sell it at market price. Unfortunately, many families these days live above their means by taking on large amounts of personal debt as a way to support this lifestyle. Consumers have a choice of taking responsibility for their actions and lifestyles or blaming their situations on others, as apparantly the Maldonados’ have chosen to do.