Just read about IndyMac and it reminded me of something I saw and marked..
Saw this the other day and saved it to delicious. It is the timeline of a house purchase in California. Click to read more about specific house here. The time line is what is interesting:
On 1/8/2004 the property was purchased for $465,000 with a $372,000 first mortgage, a $46,500 second mortgage and a $46,500 downpayment.
On 3/11/2004 the owners opened a HELOC for $92,000 and withdrew all their downpayment plus another $45,500.
On 9/20/2004 they refinanced with a $552,000 first mortgage.
On 8/16/2005 they opened a HELOC for $38,000.
On 12/8/2005 they opened a HELOC for $150,000.
On 6/8/2006 they refinanced with an Option ARM for $650,000 and a second mortgage of $115,000.
Total property debt of $765,000.
Total mortgage equity withdrawal of $393,000 over a 2 1/2 year period.
If you click the link you can see they are trying to sell for ~675k (~80k under from property debt). The first thing that comes to my mind is past the first HELOC, who extends loans like this? I mean what do you have to secure for the bank to offset a loan like the 2nd and 3rd HELOC ($188k! - almost 1/3rd the value of the house!)
And we wonder why Freddie and Fannie might be looking for a gov't bailout... which sucks because that means all of us who don't have 1/2 the "value" of our home wrapped up in outstanding LOCs paying a small part to bail out a company who decides to loan out stuff like the above.
From the post: One interesting note: the second mortgage being wiped out is listed as being insured by either Freddie Mac or Fannie Mae.
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