Posted on 12/07/2008 9:17:55 AM PST by Bean Counter
Southeast Francesca Lane cuts up and around a hillside to reveal the boom-time promise of Happy Valley circa 2006.
Young families rolled in to snap up $600,000, stone-fronted homes with Mount Hood views. They came for the country meets cul-de-sac life, solid schools and a 4,000-square-foot edition of the American dream. Speculators trailed on their heels for the next get-rich-quick venture.
Francesca Lane circa 2008 isn't dreamy any longer.
One of every five homes or lots on the street has fallen into foreclosure since the neighborhood sprang up three years ago. The street offers a grim picture of how greed dragged Happy Valley, Oregon and even the world into financial turmoil.
*SNIP*
House flips retirees
The Andersons arrived after reading news stories about Happy Valley's charm.
The couple lived a comfortable retirement in Clark County's Hazel Dell neighborhood afforded by Social Security and their public employee pensions. Dick, 70, retired after a career teaching at the Washington State School for the Blind. Aloma, 66, stayed home to raise the couple's three children and worked for a while at Clark College in Vancouver.
Both came from Minnesota and clung to Midwestern values. "We've never had a negative thing on our credit. We were one of those people with a 770 credit score," Aloma says while rocking in a chair in her living room in Hazel Dell, the clothes dryer humming in the other room.
Still, Aloma saw opportunity in Happy Valley's hills.
The couple had never bought an investment property. But by 2006, flipping houses had become so common nationwide that TV networks celebrated it with reality shows. Aloma was certain they could buy a home, resell it for a hefty profit and pad their retirement.
That's how they ended up on Francesca Lane in winter 2006. The Andersons saw a fleet of construction vans and heard nail guns popping. After talking to a salesman representing Buena Vista, they picked a lot with a yard a family could ramble around.
Aloma says the salesman told them the home would be worth as much as $1 million by the time it was finished in the summer. They never hired their own real estate broker.
They closed the deal in August 2006 on the four-bedroom, 5,000-square-foot home for $633,865. It was a steal, they figured, at $125 a square foot. "We thought it was a very simple situation. Good value, good ambience," Aloma says.
The Andersons bought the home with a no-money-down loan and an 8.5 percent adjustable interest rate from Hyperion Capital Group of Lake Oswego. That added a $5,000 monthly payment on top of the $1,500 for their Hazel Dell home.
Within weeks, Aloma put the house on Craigslist for $799,000. She planned to sell it herself and made the 35-minute drive most Saturdays to host open houses. She'd stay for seven hours and usually saw no one, a signal the market boom had wilted.
She lowered the price to $749,000. Even after a year, she still had no offer. The Andersons refinanced their Hazel Dell home twice to raise cash for the Happy Valley mortgage. In late 2007, they raided their IRA.
Still no offers.
By then, the nation's housing market had tumbled as subprime mortgage lenders went belly up. Pollock expected things would get much worse, and he cut his losses. He announced an auction in December 2007 to sell 230 homes, including some on Francesca Lane, at bargain prices. His move drove down home values across the city.
"When he did that to us, it killed us," Aloma says.
She mailed her last payment in January, and the lender declared the mortgage in default three months later. Staring at a loan far higher than the home's value, the Andersons faced losing the home to the bank.
A real estate broker found the Andersons a bargain hunter. The lender approved the sale for $515,000. That's $123,000 less than it had loaned the Andersons 20 months earlier.
The Andersons never spent a night in the Happy Valley money pit. But the mortgage, fees and taxes cost them close to $100,000.
"We did everything we thought we could," Aloma says.
**SCHNIPP**
“No one is going to bail them out, either, because it is a second home. They’ll have to pay the piper, “??
For some reason I doubt they will pay the piper. They took loans out on their first house. I imagine I’ll be paying for that along with my own mortgage, even though I paid 30% down and 30 year fixed at a monthly house payment to income ratio of about 15%.
By the way my 7 kids are stuffed into 3 bedrooms so it is not like we live in even a middle class house. It is over 50 years old and I have done significant repairs on it.
Wrong.
Websites “hotpads” and “trulia” both show 2 foreclosures for sale on SE Francesca. One is bank owned 4-bedroom asking $427,000 and one is a preforeclosure 5-bedroom with minimum auction price of $141,000.
I am not going to spend the time looking for more, just because they aren’t all listed on these websites.
“How is it Constitutional for the Federal Government to “bail out” one set of homeowners like are described in this story at the expense of we people who are responsible homeowners??”
It isn’t.
Some folks are now more equal than others.
“Someone should be in jail” — that’s the ticket. Let’s jail “somebody” because they are at fault. It’s not the fault of the borrowers who obviously have no understanding of basic economics. It doesn’t take a rocket scientist to calculate a mortgage payment, understand how a mortgage operates and figure out the loan-to-value and payment/income ratios.
The problem lies with two people only - the borrowers who thought they could speculate in real-estate.
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