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It’s Like History Is Repeating Itself

A report from USA Today. “In a stealth aftershock of the Great Recession, nearly 100,000 loans that allowed senior citizens to tap into their home equity have failed, blindsiding elderly borrowers and their families and dragging down property values in their neighborhoods. Leroy Roebuck, 86, rode the bus his entire career to a nearby curtain manufacturer. When he needed to make home repairs, he turned to reverse mortgages after seeing an ad on television.”

“Roebuck’s first foreclosure notice came in the mail six years ago, and he is still fighting to hold on to the brick walk-up he bought from his parents in 1970, living in it through a special health exemption to foreclosure. ‘I told my son, ‘Never. They ain’t gonna take this house,’ Roebuck said. ‘I’ll go to the deep blue sea, they’re not going to take this house.'”

“Stephanie Moulton, associate professor of public policy at Ohio State University, said cash-strapped minority borrowers were easy targets for ‘bad apple’ reverse mortgage lenders capitalizing on a market shunned by traditional lenders. ‘These areas had demand, and they couldn’t access credit any other way,’ she said.”

“Leroy Roebuck’s home was appraised at $112,000 in 2008. That allowed him to take out up to $83,000 in equity. By the time he was solicited for a second reverse mortgage, an appraiser said it was worth $241,000, allowing him up to $163,000 more. He borrowed $102,000 in all. The 104-year-old house near Temple University is worth far less today, about $165,000.”

“Each foreclosure depresses home values within about 600 feet by 1%, according to a study in 2006 in the journal Housing Studies. As foreclosures mount, the study says, that figure compounds. Five foreclosures in a few city blocks means a 5% loss for every neighbor.”

The Desert Sun in California. “Edmund Dantez de Guerrero, 82, had planned to live out his days in the Southern California home he inherited from his parents, surrounded by his paintings and in the company of his dog, Angus. But in 2018, Dantez de Guerrero received a notice. It said the house, a 1,600-square-foot dwelling hidden behind thick brush in the Dream Homes neighborhood of Cathedral City, could be sold from under his feet.”

“Thirteen years earlier, Dantez de Guerrero had taken out a reverse mortgage on the property. The mortgage, which is only accessible to homeowners 62 and older, allowed him to borrow against the value of his house, gaining cash in exchange for giving up home equity.”

“As long as he continued paying his property taxes and insurance, and maintained the home, he could remain in Cathedral City for the rest of his life. The loan would only come due if he moved out of his house, died or defaulted.”

“But Dantez de Guerrero, who suffers from severe scoliosis and neuropathy that stops him from working, fell $10,000 behind on his taxes. For a while, he said, his mortgage servicer covered the missed payments. In January 2018, Dantez de Guerrero learned that his loan was in default and that a trustee planned to auction off his home to the highest bidder instead.”

“A USA TODAY review of government foreclosure data between 2013 and 2017 found that nearly 100,000 reverse mortgage loans have failed, burdening elderly borrowers and their families and causing property values in their neighborhoods to crater. Among the hardest hit borrowers are people living near the poverty line in pockets of Chicago, Baltimore, Miami, Detroit and Philadelphia.”

“In California, the loans were unusually likely to end in foreclosure in pockets of the Inland Empire, the region of Southern California where Dantez de Guerrero lives. Lenders foreclosed on seniors living in the Inland Empire, which spans Riverside and San Bernardino counties, at two to three times the national average. Reverse mortgage foreclosures were as high as 10 times the national average in Joshua Tree’s 92252 ZIP code, one of the worst-hit neighborhoods.”

“Marlan McClanahan, who works for the Fair Housing Council of Riverside County, a nonprofit organization that helps people avoid foreclosure, advises as many as 100 reverse mortgage borrowers a year. Looking at a list of communities that have experienced reverse mortgage foreclosures, McClanahan recognized some places that were also buffeted by the foreclosure wave of more than a decade ago, when the Riverside metro area had one of the highest rates of conventional home loan foreclosure in the country, following the collapse of the housing market.”

“”It’s alarming,’ he said. ‘At the same time, it’s like history is repeating itself.'”

“Juan De Lara, a geographer at the University of Southern California who studies the Inland Empire, said it appears as if the mortgage lending industry transitioned from targeting one kind of household for subprime loans to targeting a different segment of the population — seniors — for reverse mortgages.”

“‘The same kind of predatory lending going on in subprime then switched over to seniors, another population that was vulnerable because of their fixed incomes,’ he said.”      

This Post Has 45 Comments
  1. ‘surrounded by his paintings and in the company of his dog, Angus’

    Pathos noted.

    ‘But in 2018, Dantez de Guerrero received a notice. It said the house, a 1,600-square-foot dwelling hidden behind thick brush in the Dream Homes neighborhood of Cathedral City, could be sold from under his feet’

    And Angus’ feet too! I wonder where all the money went? Tom Selleck!

  2. ‘it appears as if the mortgage lending industry transitioned from targeting one kind of household for subprime loans to targeting a different segment of the population — seniors — for reverse mortgages’

    Wait til the other shoes drop:

    May 25, 2018

    “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

    “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

    http://thehousingbubbleblog.com/?p=10443

  3. ‘cash-strapped minority borrowers were easy targets for ‘bad apple’ reverse mortgage lenders capitalizing on a market shunned by traditional lenders. ‘These areas had demand, and they couldn’t access credit any other way’

    Bad apples? But Senator Running Deer said no bad apples? She’ll be heap mad when she reads this.

      1. Don’t forget payday lenders overwhelm the hood…… could it be its their financial content of character that is woefully lacking?

  4. “In April 2018, the 87-year-old got a statement saying he only had 37 monthly payments of $1,265 before his monthly reverse mortgage money runs out.

    “When I got into this thing the idea was, you were paid until you croaked,” he said, “My problem is, I might outlive my money.”

    Up until recently, the reverse mortgage had seemed like a great deal for Klinck. He’s not married. He doesn’t have heirs interested in acquiring the house or dependents that would need to live in it after his death.

    But now Klinck worries he might have to make some lifestyle changes in order to pay his living expenses after the reverse mortgage runs out. He has a 2005 bronze Thunderbird and regularly spends weekends out of town showing it at car shows — if need be, he said, he could sell the Thunderbird or the second car he drives.”

    Tears in my eyes. Don’t give away the second collectible! Every single men with no kids is entitled to 2 cars when they turn 87

    1. “He took out his reverse mortgage in 2005, after his partner Robert died. Without Robert, Dantez de Guerrero was convinced he wouldn’t live very long. He used the reverse mortgage to pay off a $34,000 loan and nearly $14,000 in back taxes — and then, Dantez de Guerrero went on a shopping spree, treating himself to a $100 bottle of wine as a birthday present and $900 worth of clothing from the best menswear shop in town.

      But living expenses began to pile up. Dantez de Guerrero had car payments, utility bills and medical issues. He had a small dog, Angus, to feed. He had a shoulder and a hip replaced. He ran out of money from the reverse mortgage and he stopped painting, a passion of his since the mid-1990s.

      Dantez de Guerrero stopped paying his property tax bill, too. ”

      When you need to look good but think someone will pick-up the tab…

  5. “‘The same kind of predatory lending going on in subprime then switched over to seniors, another population that was vulnerable because of their fixed incomes,’ he said.”

    They’re not vulnerable because of fixed incomes. They’re vulnerable because they’re stupid and greedy.

  6. This old guy was only obligated to pay taxes and insurance , so I’m wondering why he went into default on what should of been doable housing costs.

    Something is wrong here like maybe dementia.

  7. Lending to low-income minorities = predatory
    Not lending to low-income minorities = discriminatory

    The Institutional Left is creating a world where there is no way to play the game without showing total submission to their arbitrary and capricious whims, and this never ends well.

    All sane adults understand very well that when they borrow money, they are expected to pay it back, and will face consequences if they don’t. When that loan is in the tens of thousands of dollars, the consequences for default can be very steep indeed. If anything it is bigotry to assume these people are so ignorant that they don’t understand this basic concept.

    The lunatic-left press is attempting to do the same thing they did in the last crash, painting these sympathetic stories of hard-luck seniors being foreclosed on by evil lenders. Their motives are pretty transparent if you read this blog – to forestall the day of real estate reckoning by putting social pressure on banks to delay foreclosures. They never stop to think about all the working class folks who have been completely priced out of the market due to their unscrupulous shenanigans.

    1. Great observation, Vinnie! No indication what makes these loans predatory, except that they are to minorities. Yup, paternalistic racism from the Left.

    1. I have posted this previously, but remember, it is never about the content of a given Narrative, it is about the _control_ of the Narrative.

      Recent examples: the school shooters at Highlands Ranch STEM Academy were themselves bullies who made vocal threats of violence, and who had documented mental health issues. When CO Senator Michael Bennet tried to politicize the shooting at a vigil for the dead student who stopped the attack, the students walked out en masse chanting “mental health.” This didn’t support the Narrative, therefore it was flushed down the memory hole.

      The Virginia Beach city employee who went on a workplace shooting spree was a black male. This didn’t support the Narrative, therefore it was flushed down the memory hole.

      Social media and Real Journalists, people aren’t buying your Narrative anymore. Your Narrative is full of sh*t.

      Anything you ban, censor, and try to silence, I’m going to find it (not on social media) and read/watch it for myself. Funny how that works. Sigh, loosers…

    1. Wow, twice the inventory of last year but no price reduction. I believe this is called the “wishful thinking” phase of the bubble. Look out belooooow!

      I started researching places I wanted to relocate to about 2 years ago and since then every single one of them started skyrocketing in price, leaving me stuck in a city I can barely stand. Maybe Nashville’s back on the menu…but then again, naaah. They don’t deserve me now. haha It’s like a girl who turned you down for a date before and then comes around later to see if you’re still interested. Sorry babe, I done moved on.

  8. Sara Carter’s got some seriously juicy scoops!

    Flynn Hires Sidney Powell. Mueller’s ‘Pit Bull’ Meets His Match, Again.

    “Powell is the author of the New York Times best seller and tell-all book Licensed To Lie, which exposed the corruption within the justice system. The book is based on the case Powell won against prosecutor Andrew Weissmann, when he was deputy and later director of the Enron Task Force.”

    “Weissmann served as Mueller’s second in command for the special counsel investigation into the Trump campaign, despite the fact that his tactics have been highly criticized by both judges and colleagues. He was called unscrupulous and has had several significant issues raised about how he operated during the Mueller inquiry into Trump campaign officials, including Flynn.”

    “Powell has openly stated in columns and on cable networks that Weissmann’s dirty tactics of withholding exculpatory evidence and threatening witnesses to garner prosecutions should have had him disbarred long ago.”

    1. This whole thing has turned into a yawnfest.

      Wake me up when Hillary Clinton is in prison for being accessory to the murder of Seth Rich.

  9. It seems to me that seniors are a special case. Cognitive impairments can reduce their ability to make rational choices. For some, social isolation reduces the opportunity to reality test ideas with others (see if the idea makes sense). If a lender knowingly makes a loan to someone who has cognitive issues, there should be a high price to pay. I was thinking a finger or two

    1. I know a senior who purchased a five thousand dollar stove on credit. The purchase didn’t make sense because he eats out all the time and doesn’t even like to cook.

  10. I know a senior who purchased a five thousand dollar stove on credit. The purchase didn’t make sense because he eats out all the time and doesn’t even like to cook.

  11. What could possibly go wrong here?

    “So-called “hard money,” which comes from sources other than banks and which carries higher interest rates, is hard to track because it’s fragmented and littered with thousands of small players doing one or two deals a year. However, a for-profit trade group called the American Association of Private Lenders estimates the number of hard money lenders and related “private money” lenders at 8,300, or up almost 40% since 2016.

    The surge in housing prices drove down flippers’ average gross return on investment — before renovation and other expenses — to 39% in the first quarter, an eight-year low”

    https://www.bloomberg.com/news/articles/2019-06-12/high-interest-lenders-up-40-even-as-home-flipping-trend-weakens

    1. “Some Western cities are seeing big declines in home flips, including in Seattle and San Jose, California, based on the rate of those types of transactions as a percentage of all sales.”

      These two metros have been the worst for house price insanity. Many of these flips are older houses too.

  12. “The U.S. budget deficit widened to $738.6 billion in the first eight months of the fiscal year, a $206 billion increase from a year earlier, despite a revenue boost from President Donald Trump’s tariffs on imported merchandise.

    The shortfall was 38.8% more than the same period a year ago, the Treasury Department said in its monthly budget review released on Wednesday. So far in the fiscal year that began Oct. 1, a revenue increase of 2.3% hasn’t kept pace with a 9.3% rise in spending.”

    https://www.bloomberg.com/news/articles/2019-06-12/u-s-budget-gap-hits-739-billion-with-four-months-left-in-year

    “This sucker could go down” — George W. Bush, 2008

  13. “I may be 82, but I’m still as sharp as a whistle and I’m going to do everything I can to keep my house,” he said.

    It’s amazing, severe scoliosis and neuropathy stops him from being able to pay his taxes but not from doing everything he can to keep his house.

    From Amy DiPierro, Palm Springs Desert Sun

    The loan would only come due if he moved out of his house, died or defaulted.

    But Dantez de Guerrero, who suffers from severe scoliosis and neuropathy that stops him from working, fell $10,000 behind on his taxes.

    “I may be 82, but I’m still as sharp as a whistle and I’m going to do everything I can to keep my house,” he said.

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