Orange County, California was the capital of mortgage broker lending back in the home loan gold rush days. Some of the nation’s largest brokers set up telemarketing chop shops in the county where there are more BMW’s and fake boobs per capita than anywhere in the world. It was easy pickings for loan officers that used “greed” and “envy” to sell loans to consumers who were more interested in keeping up with the Joneses, than in keeping up with their finances.
Here is how mortgages were sold in OC from 2003-2007:
“Do you have a $500,000 mortgage and would like $1,200 monthly payment to be able to afford the latest BMW 745i?” “Press 1 to lower your monthly mortgage payments and get a free tank of gas for your new BMW now!”
Nowhere in the country could you sell legal mortgage snake oil and make tens of thousands of dollars monthly without going to Leavenworth Prison, like the OC. Simply put, Orange County was the place to sell loans, make obscene amounts of money, be seen in your new BMW and sell toxic loans by the boat load. Now, it looks like these same loans are hitting the proverbial “foreclosure fan” as the OC foreclosure rate is starting to sky rocket. Just as I predicted!
I also predict a lot of divorces in Southern California because when the money is gone, so is the honeymoon!!!
Moe in Slate Magazine April 2008:
Here Comes the Next Mortgage Crisis- Subprime was just the beginning. Wait until California’s prime borrowers start handing their keys to the bank.
Option ARM loans were heavily marketed to upper-tier home buyers in California. It’s hard to know how bad the option ARM crisis will be before it actually happens, but Moe Bedard, an advocate in Southern California who advises homeowners on foreclosure and blogs about the crisis at Loansafe.org says that the difference in the time until the rate rises is the main reason that upper-middle-class Orange County (now facing foreclosures at a rate merely twice the national average) hasn’t yet been hit as badly as places like Riverside.
Moe in BusinessWeek June 2008 – Almost exactly a year later as I predicted
The Next Real Estate Crisis – By April, 2009, hundreds of thousands of option ARM mortgages will begin resetting, bringing on a fresh wave of foreclosures
Moe Bedard, founder of LoanSafe.org in Corona, Calif., a free online forum that helps homeowners negotiate loan modifications, said the larger problem is that banks, many of which laid off scores of loan officers, are so swamped that many borrowers can’t get the attention they need.
Many California homeowners, including some with $2 million homes, are simply making their minimum payment, waiting for the recast. Then they plan to walk away, even if it damages their credit, Bedard said.
“A lot of people are just walking,” Bedard said. “It’s just a business decision; they don’t have a lot of skin in the game.” But for many others it will be devastating.
Today in the LA Times:
There were 8,346 outstanding foreclosure auction notices in Orange County at the end of July, up 12% from June and more than double the year ago total, reports ForeclosureRadar.com.
I previously blogged the July total (it has been revised slightly), but I now have a chart showing the rise in active notices of trustee’s sale (NTS) since the credit crunch got serious in September ‘06 (click on it twice for larger image.). An NTS is filed on a home loan after a notice of default and it announces a property will face a foreclosure auction to pay off debt owed.
Read more from The LA Times Freedom Blog
Sounds like someone has a little OC jealousy. Moe, you’re from the 909 or 951 right?
Grew up in the OC, Anaheim and HB. Then later moved to Big Bear and now Temecula, 951.
Jealous of what?
Moe Jealous of What…
Moe is staing facts that if you took a minute to research, what you will find is that when the market does not change fastest enough to keep up with the negatively amortizing loan when that loan recast and the individual payment goes up 2-2.5 times its minimum amount you can be assured that there will be huges numbers of familys that will NEVER be capable of making the payment. Option ARMS were the most rediculous, greed driven loan EVER devised in the mortgage industry, PERIOD!