Editor’s Note: Put simply this crisis will still be ongoing in 20 years. When you add the student loans that were securitized and which were “non-dischargable” in bankruptcy because of the government guarantee of the “risk” (which never existed because the risk was sold before the loan was ever funded, hence the guarantee should not flow with sale of loans into securitized pools and should therefore be capable of discharge), auto loans, credit card loans etc., it is not just a career to help people ensnared by the derivative trap it is generational.
More than that, this report shows, corroborates and confirms a central thesis to this blog: APPRAISAL FRAUD, KNOWINGLY IMPLEMENTED AT ALL LEVELS OF THE SECURITIZATION CHAIN FROM THE INVESTOR DOWN TO THE BORROWER.
Think about it. 30 million EXTRA homes. It didn’t come from population growth. It didn’t come from rising incomes and people expanding their families. Where did the demand for these houses come from? The conventional wisdom is that the demand came from the people who bought the houses, never mind that they left vacant property to move in and now have moved out leaving vacant property, leaving themselves with less wealth or more debt than they had before.
Look to the result to determine intent. It’s a basic proposition in law, psychology and criminology. Sure accidents happen but this was no accident — everyone can see that. The negative result here is that the investors got bilked out of trillions, the homeowners lost their homes, down payments, monthly payments (which were higher than rental) leaving them with no savings, higher debt, more owed on their credit cards, either no job or less of a job, rising expenses and less money at the end of each month.
And remember we are not talking about a few people who were living high on the hog because they were con artists. We are talking about 30 MILLION nuns, priests, police chiefs, cops, fireman, soldiers who served in our wars, and every day people who worked 9-5 scratching out a living. So the idea that 30 million people somehow connected into a mob and decided to wreck the financial system and their own lives is not very compelling or credible.
No, the all the positive results went to Wall Street. They got the money from the investors, the homeowners, the taxpayers and now the investors again as they “re-securitize” the old toxic crap. So the inescapable conclusion is that the demand came from Wall Street. It was Wall Street that needed new homes and developers who got higher and higher prices for unneeded homes. without the homes they could not sell mortgage backed derivative securities. Yes it IS that simple.
Wall Street needed the homes because they had this new financial toy they were taking out for a spin — but it couldn’t work without more homes at ever higher prices. Since they had amassed trillions of dollars and they were taking about 1/3 of it in their pockets off-shore, it was easy to spread around the gelt and get the securitization and mortgage origination players to pretend these were legitimate transactions when everyone other than the ivnestors and the homeowners knew the transactions were doomed.
It was Wall Street that created the demand and it was Wall Street that bet against the result, knowing that they had artificially pumped up the demand for housing, artificially inflated the value of the property, improperly inflated the appraisal from the rating agencies, and fraudulently sold securities, bought insurance, and abused the taxpayers with their influence in Washington.
NOW we have ghost towns on the rise — rising areas of crime, slums, drug manufacture, gangs and all that a dysfunctional society can offer. Like Harry Truman said, “How many times do you have to get hit in the head before you look to see who’s hitting you?”
It is Wall Street that should bear the brunt of the loss and Wall Street who should pay the taxes they owe on income they never reported and “protected” off-shore, it is Wall Street that owes billions in taxes, fees, fines and penalties to state and local government for the transactions they created involving property within the borders of each state and county.
March 30, 2010 | 3:01 pm
There are hundreds of stories about how the housing crisis has affected people who have lost their homes — but what about the people left behind? Eddie and Maria Lopez can tell you that the flight of families who have walked away or been foreclosed on has completely changed their small gated community in Hemet.
When they moved in, they were enticed by the ducks walking around the development, the lakes, the pool and clubhouse. Families held parties during the holidays; kids would play together on the street. But homes in the gated community of Willowalk plummeted in value — the Lopezes’ home went from $440,000 to $169,000 — and families began leaving in droves.
Now, the Lopezes say just about every house on their block is either empty or rented, and the behavior of some of the tenants makes the family feel uncomfortable. The house next door, for instance, is rented out to a handful of men, each of whom live in a separate room.
Some observers say that these suburban communities could become the new slums of America. As baby boomers age, they won’t need McMansions and will want to live closer to urban centers. And Generation X and Y already prefer walkable residences, according to Arthur C. Nelson, a University of Utah professor who projects there could be 25 million more of these suburban homes by 2030 than are needed.
For more on Willowalk and how cities across the state are coping with gated ghost towns, check out the story.
— Alana Semuels
From bucolic bliss to ‘gated ghetto’
Hemet’s Willowalk tract was family-friendly. Then the recession hit.
 “We loved how everything was family-oriented,” said Willowalk resident Eddie Lopez, left, with wife Maria and six of their children. They bought their 5,000-square-foot house for $440,000 in 2006. It’s probably worth about $170,000 now. (Gina Ferazzi / Los Angeles Times / March 17, 2010) |
By Alana SemuelsMarch 30, 2010
Reporting from Hemet – The gated community in Hemet doesn’t seem like the best place for Eddie and Maria Lopez to raise their family anymore.
Vandals knocked out the streetlight in front of the Lopezes’ five-bedroom home and then took advantage of the darkness to try to steal a van. Cars are parked four deep in the driveway next door, where a handful of men rent rooms. And up and down their block of handsome single-family homes are padlocked doors, orange “no trespassing signs” and broken front windows.
It wasn’t what the Lopezes pictured when they agreed to pay $440,000 for their 5,000-square-foot house in 2006.
The 427-home Willowalk tract, built by developer D.R. Horton, featured eight distinct “villages” within its block walls. Along with spacious homes, Willowalk boasted four lakes, a community pool and clubhouse. Fanciful street names such as Pink Savory Way and Bee Balm Road added to the bucolic image.
Young families seemed to occupy every house, throwing block parties and holiday get-togethers, and distributing a newsletter about the neighborhood, Eddie Lopez recalled.
“We loved how everything was family-oriented — all our kids would run around together,” said Lopez, a 41-year-old construction supervisor and father of seven. “Now everybody’s gone.”
Home foreclosures have devastated neighborhoods throughout the country, but the transformation from suburban paradise to blighted community has been especially stark in places like Willowalk — isolated developments on the far fringes of metropolitan areas that found ready buyers when home prices were soaring but then saw an exodus as values crashed.
Vacant homes are sprinkled throughout Willowalk, betrayed by foot-high grass. Others are rented, including some to families that use government Section 8 vouchers to live in homes with granite countertops and vaulted ceilings.
When the development opened in 2006, buyers were drawn to the area by advertising describing it as a “gated lakeshore community.” Now, many in Hemet call Willowalk the “gated ghetto,” said John Occhi, a local real estate agent.
There are dozens of places like Willowalk, and they are turning into America’s newest slums, says Christopher Leinberger, a visiting fellow at the Brookings Institution. With home values at a fraction of their peak, he said, it no longer makes sense to live so far from the commercial centers where jobs are concentrated.
“We built too much of the wrong product in the wrong locations,” Leinberger said.
Thanks to overbuilding, demographic changes and shifts in preferences, by 2030 there could be 25 million more suburban homes on large lots than are needed, said Arthur C. Nelson of the University of Utah. Nelson believes that as baby boomers age and as younger generations buy real estate, the population will abandon remote McMansions for smaller homes closer to shops, jobs and the other necessities of life.
Whatever their number, the presence of unwanted or abandoned homes stands to be a burden on local governments for years to come, as cash-strapped cities and counties have to spend precious resources to patrol the neighborhoods and clean unkempt yards and abandoned houses.
“There are cities saying to us, ‘I used to have eight code enforcement officers, and now I have one,’ ” said Bill Higgins, a staff attorney for the League of California Cities.
About 80 California municipalities are striking back, enforcing ordinances that fine lenders up to $1,000 a day for not maintaining properties that have been foreclosed, Higgins said. But most cities don’t have the resources to force absentee owners or renters to keep up their properties.
In Hemet, city officials have simply boarded up homes in some troubled neighborhoods. Plywood covers the windows of dozens of apartments on Valley View Drive; resident David Hall says it keeps prostitutes and drug dealers out.
Willowalk presents a different challenge. The development promised a Tiffany neighborhood for what was then something closer to a Target price.
“Leave the world behind as you unwind by our picturesque lakes,” cooed one advertisement, which touted “intimate botanical gardens and walking trails, tranquil lakes” and other attractions.
At first, the reality matched the come-ons.
Maria Lopez, a stay-at-home mother, recalls gazing at the mountains in the distance as her children played with groups of neighbors their own age. The community pool was just a few blocks away, and she says she used to let her older children, ages 13 and 14, go there by themselves.
Now she accompanies her children to the pool — though it has been closed of late — because the people who now hang out there “have no class,” she said, and she sits out front with her children if they play in the yard.
“My next-door neighbors — there are so many people living there, I don’t know who they are,” she said.
Walking through the development, there is not much evidence of the well-kept yards and friendly families Maria Lopez fondly recalls.
Many of the people answering a knock say they are renters, and won’t open their doors more than a crack to see who is on their doorstep. Red-and-white “for sale” signs dot the neighborhood, clashing with the golds and browns of the homes. The contrast between occupied and empty houses is evident on one block, where high grass in weedy clumps gives way to a neatly mowed lawn with handwritten signs pleading “Please do not let your dog poop on our yard.”
Homeowner Norma Hernandez, one of the few people outside on a recent sunny afternoon, can point out which families are permanent on her block.
“Rented, owned, rented, rented, rented,” she said, gesturing at the gargantuan houses across the street, one after another. “It’s bad,” she said, shaking her head.
Nacho Gomez is paid by absentee owners to look after their rental properties. Currently, he’s taking care of 17.
Doing a check of the homes on a recent Thursday, he left his van’s engine running as he inspected a shattered window in one property.
“A lot of them can’t pay the rent, and they leave the house a mess,” Gomez said, referring to tenants.
He has had to fix holes punched in walls and replace refrigerators, dishwashers and other appliances — even ovens — stolen by renters on their way out.
Those tenants appear to be the exception, and the renters provide at least one benefit: Without them, there would be even more vacant homes. Even so, their presence has fundamentally changed the character of what was once sold as an exclusive community.
The Willowalk Homeowners Assn. is trying to recapture some of the community’s lost spirit. In recent months, it launched a trash committee — members pick up rubbish in the park — and started a neighborhood watch group to keep an eye on residents’ homes.
But it wasn’t enough for Angelica Stewart and her family, who are leaving the $318,000 home they bought in 2006. To Stewart, living in a gated community is absurd when drug busts are a regular occurrence.
“It’s not worth it for us to live in this neighborhood,” she said.
The Lopez family plans to stick it out, knowing they can’t sell their house for anywhere near the $440,000 they paid for it. Based on comparable prices in the neighborhood, the place is probably worth about $170,000 now, and maybe less. They’re petitioning their bank for a loan modification.
Despite the financial loss and the fact that Eddie Lopez’s hours at work were cut because of the construction slowdown, the family holds out for a brighter future.
They’re hoping that Willowalk will someday become the idyllic neighborhood they once knew, nearly as perfect as advertisements had promised.
“When we moved in, everybody was homeowners, now everybody’s renting them out,” Eddie Lopez said. “But I have to stay. There’s nothing I can do.”
alana.semuels@latimes.com //
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Filed under: bubble, CDO, CORRUPTION, currency, Eviction, expert witness, foreclosure, GTC | Honor, HERS, Investor, Mortgage, securities fraud | Tagged: Alana Semuels, Arthur C. Nelson, bankruptcy, Christopher Leinberger, D.R. Horton, derivative, ghost towns, government guarantee, Hemet, Housing crisis, L.A. Times, McMansions, non-dischargable, risk, securitized pools, student loans, suburban communities, University of Utah, Willowalk | 14 Comments »
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