If you want to understand what’s wrong with lenders and mortgage finance today, you might want to consider the case of 13688 N 151st Ln. in Surprise Arizona. It’s now on it’s second foreclosure in the past three years. Looking at history of this property, it’s clear that it wasn’t just the lending of the boom years that didn’t make any sense.
Our 2900 sq. ft. property was built by Engle homes in 2006. It sold for $436,158 to Mr. and Mrs. Roberts, who put $5,000 down and closed on Halloween day. The property was in default in less than a year and went back to the bank almost exactly a year later. Interestingly, the Roberts borrowed an additional $10,600 against the home from a private party two months before going into foreclosure. (Kind of makes you wonder if the private party knew they were in default, doesn’t it?) The bank took it back at auction for $329,800.
Seven months later the lender sells the property to the Delmonts. The Delmonts pick up the home for $272,000 and put $21,760 down. They probably figured that since they paid 24% less than the Roberts, they were getting quite the deal.
The Delmonts lasted longer than the Roberts, but now, two years later, they are also in default. The house is scheduled to go on the auction block in January. While I often disagree with Zillow’s Zestimate, in this case, based on a couple of other sales on the same block, their figure of the current value at $202K is probably pretty close.
Both of these mortgages were backed by Fannie Mae.
We are told that we need the GSEs to keep the housing industry moving. There presence is necessary because there is so little private lending any more. When you look at what’s happening with homes like this you realize why the private lenders are absent- because lending money for deals like this makes NO SENSE. While it might be tough to see where home values are a few years down the road, it didn’t take a rocket scientist to see where values were heading in 2006 when this property first sold. The down payment was small, the risk was high and the property went into foreclosure. Even the second time around with a more substantial downpayment, the loan was still risky.
How many other homes are out there like this one, being foreclosed on multiple times and being backstopped by taxpayers every time? Sure this is keeping the housing market from freezing up, but wouldn’t a freeze be better than this?
Edit- I was remiss in mentioning that this data, like so much of my good data, comes from L. Any errors are my own. Thanks L!