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Old 05-07-2009, 01:38 AM
 
3,853 posts, read 12,867,056 times
Reputation: 2529

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Rich Default on Luxury Homes Like Subprime Victims (Update1) - Bloomberg.com

Article references a Newport Beach, CA man who is in default on his $950,000 home. I've been talking about the alt-a, option arm crisis for a while now. Data clearly indicates that a massive amount of these loans will reset in 2010-2011.

The main difference in the subprime and alt-a bubbles was the loan difference. The median loan balance for subprime was 200k, for an alt-a it was double at 400k. This means a lot of these borrowers were able to buy into middle and upper middle class areas. Notice that during the boom years not only did the lower end areas rise in value but also the upper class areas, this is the reason why.

Right now most of this doesn't make mainstream news. However when jan 2010 rolls around this will be all over the news. Oh and the low income people will not be affected as much, they've already been brought to slaughter. This next crisis is aimed at the upper class areas.

Good luck.
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Old 05-07-2009, 04:59 AM
 
Location: Las Flores, Orange County, CA
26,329 posts, read 93,761,592 times
Reputation: 17831
Good information. Interesting and educational too.
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Old 05-07-2009, 10:16 AM
 
Location: Minnesota
342 posts, read 1,427,918 times
Reputation: 141
And how much would you like to bet that since he was self employed, they did a stated income loan - probably bumping up the income to make it work. It is truly a sad situation for anyone loosing their home, no matter how it happens.
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Old 05-07-2009, 10:41 AM
 
14 posts, read 31,553 times
Reputation: 11
Sounds like good news for those of us looking to move to more "high-end" areas.
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Old 05-07-2009, 03:46 PM
 
3,853 posts, read 12,867,056 times
Reputation: 2529
Quote:
Originally Posted by IloveOC View Post
And how much would you like to bet that since he was self employed, they did a stated income loan - probably bumping up the income to make it work. It is truly a sad situation for anyone loosing their home, no matter how it happens.
No kidding. I wouldn't be surprised if that 500k figure was purely based on projected income as if they continued their growth rate and their consumer base didn't fall off a cliff.

If it just like the greed effect, the idea where a homeowner thinks they are rich because their home is worth 650k. They go out spend, spend, spend then their home plummets to 300k. What they forget to think about was that the gain on their home was an unrealized gain.
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Old 05-07-2009, 04:55 PM
 
12,823 posts, read 24,402,599 times
Reputation: 11042
Some of these folks are actually walking away and not truly defaulting. They can actually afford the payments, but are cry babies about being under water. Despicable.
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Old 05-08-2009, 04:42 AM
 
4,538 posts, read 10,629,904 times
Reputation: 4073
Quote:
Originally Posted by BayAreaHillbilly View Post
Some of these folks are actually walking away and not truly defaulting. They can actually afford the payments, but are cry babies about being under water. Despicable.
Well that is just dumb. At least it the banks are willing to pursue civil judgements.
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