A sign of the times (housing)

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Dale_G
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Location: Central Florida - on the grown up side of 83

A sign of the times (housing)

Post by Dale_G »

I just received a letter from my homeowners association (HOA) - from a reasonably upscale development in central Florida.

There are 1014 completed homes in the development
193 are delinquent in payment of the HOA fees (19%)
152 have been turned over to the attorney for collection
55 liens have been filed for non-payment
22 foreclosure actions have been filed by the HOA
40 foreclosure actions have been initiated by the first mortgage holders

There will be a "special assessment" by the HOA to make up for losses due to non-payment by the otherwise-enabled-owners. I don't have a problem with the special assessment.

What I find interesting is that neglecting the 4-6% of homes in foreclosure, another 13-15% aren't bothering to pay the normal - and as far as I am concerned, nominal - HOA fee. This isn't human suffering - it is "beggar thy neighbor" in action.

Obviously the popular political solution is to rescue these distressed home owners. These are homes with 3,4,5 bedrooms, 2, 3 and 4 car garages, and pools with golf course and lake views.

I think not, I'd rather pay more in HOA "special assessments".

Dale
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chaz
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Post by chaz »

A sad story happening across the country.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
mikec
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Post by mikec »

These are homes with 3,4,5 bedrooms, 2, 3 and 4 car garages, and pools with golf course and lake views.

Thank you for your post. It is very interesting. However, I think that sometimes we are all guilty of not using the appropriate word when a non specific, politically correct alternative can be used. These condominiums are not "reasonable upscale." They are WEALTHY.
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fishnskiguy
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Post by fishnskiguy »

OK, I'll Bite. What's a "WEALTHY condominium?

Chris
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chaz
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Post by chaz »

fishnskiguy wrote:OK, I'll Bite. What's a "WEALTHY condominium?

Chris
One that most people can't afford in a bad economy.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
Gekko
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Post by Gekko »

Dale - if i may ask, how old is the development and how long have you lived there?
inve$t0r
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Post by inve$t0r »

I can't blame people for over-reaching and wanting a fancy big house. I blame the lenders, and don't forget that was depositors' money that they were lending. They debased all financial institutions, and now we all have to bale them out, just like the freeloaders in your HOA.
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Met Income
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Post by Met Income »

inve$t0r wrote:I can't blame people for over-reaching and wanting a fancy big house. I blame the lenders, and don't forget that was depositors' money that they were lending. They debased all financial institutions, and now we all have to bale them out, just like the freeloaders in your HOA.
Why don't you blame people who agreed to a contract and then didn't fulfill their end of it?
PatrickS
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Post by PatrickS »

Even in good times there's a fairly significant number of people who don't pay their HOA dues. A friend of mine was a vice president in an HOA and he said it happened all the time.
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fishnskiguy
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Post by fishnskiguy »

PatrickS wrote:Even in good times there's a fairly significant number of people who don't pay their HOA dues. A friend of mine was a vice president in an HOA and he said it happened all the time.
Not true. Until three years ago I served two years on the executive board in a "fairly upscale development"- 94 moderately priced Victorian homes on small lots priced $350K-$500K almost entirely occupied by families with kids, 54 "patio homes" on postage stamp sized lots advertised as maintenance free in the $500K-$750K range occupied almost entirely by retirees, and 514 "custom homes" priced $850k to $2Mil occupied by millionaire Aspenites that were displaced by billionaires plus a lot of wealthy Texans.

We averaged less than 1% annual delinquencies. I only saw a half dozen notices to file lien sent out, and we only actually liened one home owner who was sailing around the world and who very sheepishly paid up when he found out he was liened.

If I was in Dale's position I would be very, very worried.

BTW, HOA dues was around $225 per month (pool, tennis courts, workout rooms, reading room, sauna and common grounds maintenance) and $450 per month for the maintenance free patio homes.

Chris
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robot
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Post by robot »

Met Income wrote:Why don't you blame people who agreed to a contract and then didn't fulfill their end of it?
These sort of questions are hard to hit back without turning this into another bailout thread. And indeed they are discussed in the bailout thread.

The former owners do deserve ethical blame.

But who would you blame if Wal-Mart started taking IOUs and then ran out of money?

As an investor, I'd blame the execs at Wal-Mart.
Last edited by robot on Tue Oct 21, 2008 9:15 pm, edited 1 time in total.
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robot
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Post by robot »

fishnskiguy wrote: We averaged less than 1% annual delinquencies.
I've seen similar results, albeit with a vacation home association. Basically, everyone paid except the curmudgeon who was sure the association was blowing the money foolishly. No, that was not me!
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fishnskiguy
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Post by fishnskiguy »

inve$t0r wrote:I can't blame people for over-reaching and wanting a fancy big house. I blame the lenders, and don't forget that was depositors' money that they were lending. They debased all financial institutions, and now we all have to bale them out, just like the freeloaders in your HOA.
Ahem, inves$t0r, but is your real name Rip Van Winkle and did you just wake up from a hundred year sleep yesterday?

One of the basic problem with the recent housing crisis is that banks did not use depositors money. If they had, they probably would have done a ton more due dilligence and prevented this mess. They issued mortgages to buyers and then sold the loans to all sort of investors who had no idea who the final buyer was.

If you can't blame the greedy over reachers who were trying to turn a fast buck on flipping a house, at least in part, we have a lot bigger problem than I thought.

Chris
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Kenster1
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Post by Kenster1 »

http://www.cnbc.com/id/28416601
How the Meltdown Wrecked One Family's Mortgage

Cynthia Goldrick's daughter is in and out of the hospital for brain surgery, her mother has Stage 4 lung cancer and her father has moved into a home for the elderly.

So when the Goldrick family's adjustable rate mortgage reset while husband Patrick was off work for a job-related injury, it eliminated the thin margin between their income and the mortgage payment and put them on the road to foreclosure.

While these circumstances may seem extreme -- a perfect storm of bad luck -- the basic economics of a hike in mortgage rates and a bank's inability or unwillingness to modify terms have been shared by many Americans over the past year.
Then there are the rights of bondholders -- the financial institutions that invest in mortgage-backed securities like the pool that contains the Goldrick mortgage.

While modification advocates say it is better for investors to accept a lower rate of return rather than nothing, bondholders don't see much benefit if modifications just delay an inevitable foreclosure.

Moreover, some securitizations prohibit modifications, as is the case with the pool containing the Goldrick mortgage. Such clauses are meant to protect bondholders -- sometimes a hedge fund, sometimes a pension fund -- who have been guaranteed a certain return.

So even though the Goldricks could afford to stay in their home if the interest rate was 6.5 percent, and the bondholders would benefit by continuing to receive income on the loan rather than have it stuck in foreclosure, the servicer of the loan -- Saxon -- cannot budge.

"Your loan modification request has been denied because the investor does not allow modifications for this loan. We apologize for any inconvenience," a Saxon customer service representative wrote to AmeriMod on Dec. 19.
Mortgage bonds from 2006 and 2007 are even more "distressed." Until the credit crisis blew up in 2007, Wall Street institutions were piling into mortgage-backed securities. It was dominated by Lehman Brothers, which has since collapsed, and Bear Stearns, which was sold to JPMorgan Chase in an emergency deal.

Investment banks were making 1.25 to 1.35 percent on securitizations, which would mean a profit of $875,000 to $945,000 on a $700 million pool. "That doesn't sound like a lot, but mortgage markets are so big there's a lot of profitability," said Brad Hintz a securities industry analyst for Sanford C. Bernstein.
SURGEON GENERAL'S WARNING: Any overconfidence in your ability, willingness and need to take risk may be hazardous to your health.
bluemonday
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Post by bluemonday »

Kenster1 wrote:http://www.cnbc.com/id/28416601
How the Meltdown Wrecked One Family's Mortgage

...

While these circumstances may seem extreme -- a perfect storm of bad luck -- the basic economics of a hike in mortgage rates and a bank's inability or unwillingness to modify terms have been shared by many Americans over the past year.

Bad luck? What, that they didn't realize that their rate could adjust? It's unfortunate what has happened to them, but a "cable guy" taking out a $375,000 mortgage ( doesn't say what the wife was making ), sounds like a family pushing the envelope from the start. The only misfortune here is that they didn't sell the home at the peak in 05, and move into more affordable digs, which is what they should be doing now.
rich
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Post by rich »

robot wrote:
Met Income wrote:Why don't you blame people who agreed to a contract and then didn't fulfill their end of it?
These sort of questions are hard to hit back without turning this into another bailout thread. And indeed they are discussed in the bailout thread.

The former owners do deserve ethical blame.

But who would you blame if Wal-Mart started taking IOUs and then ran out of money?

As an investor, I'd blame the execs at Wal-Mart.
I would blame the execs at Wal-Mart and the people who issued the IOU and didn't fulfill their obligation.
Best regards, | Rich
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