Category Archives: foreclosure

Morgans Hotel: A Zombie Company Defaulting on Debt and Burning Through Cash

I wrote another cheery article on Seeking Alpha, this time about Morgans Hotel Group (ticker:MHGC).


Proof banks are sitting on severely delinquent home loans

The housing market is not going to bounce back because there’s a huge pipeline of severely delinquent and underwater mortgages out there that still haven’t been absorbed by the market.

Courtesy of the NY Fed, here’s concrete proof banks are sitting on huge numbers of bad loans rather than foreclosing and letting them hit the market. (Ignore the data for 2006: there were few foreclosures back then. Focus on the early 2007 to early 2009 trend.)

This first set of graphs shows the probability that once a borrower goes 60 days late, he then fails to make his next payment and goes 90 days late:

Note the percentage of supposedly “near-prime” Alt-A loans where a 60-day-late borrower cures has plunged from 25% to 5%. The percentage of delinquent loans that get repaid in full because of a refinancing (in yellow) has also dropped from low to virtually zero.

So we see once borrowers miss a couple payments they have no ability or no intention to get current.

You’d expect, with this trend, for banks to then be more aggressive about foreclosing on seriously delinquent mortgagers. Yet we see the opposite: The next set shows what banks do for loans than are 90+ days delinquent.

So banks have gone from foreclosing on about 45% of their severely delinquent Alt-A loans each month to 20%.

So if you own a house that’s underwater, in practice you can probably keep living there (or collecting rent payments) for a year or so without making payments to the bank. You have 3 months before the loan is bad enough for the bank to foreclose, around 3 more months before the bank starts the foreclosure process and who knows how much longer before the bank actually moves to take possession of your home.

On that last point, the next graph shows the declining percentage of Alt-A loans in the foreclosure process that resolve out of foreclosure (i.e., short sale or refinance) and the likewise declining percentage of these loans banks are taking possession of:

Finally we see soaring losses on first mortgages:

This would be much worse if you included second mortgages, and worse still if banks weren’t propping up the market by sitting on bad loans. Worse still, banks are sitting on bad loans in the weakest markets the longest.

Bottom line, U.S. banks are still not owning up to their bad mortgage debt. Our government is turning a blind eye hoping the problem will go away. It won’t. This policy was tried and failed in Japan, where the economy never really recovered.

In fact, the Japanese stock market lower now than it was 24 years ago in 1985:

Nikkei Historical Graph

California Foreclosures Soar To New Records In August

An article focusing on Riverside and San Bernardino’s problems is here:

The highlights are grim:

With 11,485 foreclosure-related filings last month, Riverside County ranked fourth nationally in foreclosure activity, with one filing for every 64 households. San Bernardino County ranked sixth with 9,651 filings, or one for every 69 households.

In Riverside County, total foreclosure-related filings were up 58 percent from a year ago and 39 percent from July, while in San Bernardino County, total filings increased 98 percent from August 2007 and 34 percent from the month before.

Most of the growth was in bank repossessions. There were 4,165 in Riverside County, up 248 percent from a year earlier, and 3,172 in San Bernardino County, up 348 percent.

A press release with national figures on the real estate decline is available here.

The figures are so bad it is hard to wrap your mind around them. In several California counties, 1 in 50 or 1 in 60 households were hit with foreclosure notices in just a single month.

Chula Vista’s full of cut rate foreclosed McMansions

Median income in Chula Vista’s 91914 zip code is above the national average. The problem, however, is that it’s not far enough above the average to support the insanely high prices of the 2003-2007 bubble years. Banks that loaned money for purchase of these homes during this time have only just began reporting what will turn out to be many millions of losses from these loans. Of course many of these loans ended up in mortgage-backed securities. Investors in these instruments also will lose millions, just from this single, lightly populated suburban zip code. Here is a small sample of the losses. All of these are either foreclosures or short sales:

2936 Ranch Gate Road
sold 6/06 $1.763M
resold by bank after foreclosure for $919K
-$844,032 (-48%) drop from 2006
897 Chesapeake Pl
sold 4/05 $1192K
for sale @ $678K
-$495,000 (-43%) drop from 2005

329 Plaza Paraiso
sold 5/05 $760K
For sale @ $475K
-$285,000 (-37%) drop from 2005

324 Plaza Paraiso
sold 5/07 $1000K
For sale @ $500K
-$500,000 (-50%) drop from 2007

982 Adirondack Pl
sold 2/07 $1.25M
For sale @ $639K
-$611,000 (-49%) drop from 2007

2912 Winding Fence Way
sold 4/06 $1.155M
For sale @ $750K
-$405,000 (-35%) drop from 2006
1042 White Adler Place
sold 5/05 $1.167M
for sale @ $689K
-$478,465 (-41%) drop from 2005
1015 Silver Oak Place
sold 7/05 $1.075M
For sale @ $649K
-$426,000 (-40%) drop from 2005
2916 Winding Fence Way
sold 3/06 $1.177M
For sale @ $699K
-$478,140 (-41%) drop from 2006
1019 Mountain Ash Ave
sold 5/06 $1.24M
For sale @ $850K
-$390,250 (-31%) drop from 2006
1046 White Adler Ave
sold 5/05 $1.058M
for sale @ $599K
-$459,450 (-43%) drop from 2005
2241 Lago Madero
sold 10/03 $334K
resold by bank after foreclosure for $280K
-$54,000 (-16%) drop from October 2003
957 Wind Cave Place
sold 6/03 $500K
resold by bank after foreclosure for $430K
-$70,000 (-14%) drop from June 2003

San Marcos Real Estate Collapse: prices down more than 50% from peak; well under 2004 pricing

San Marcos is one of the older cities in San Diego’s North County region, with a historic downtown. Nonetheless it has experienced rapid residential and commercial development, doubling in population from 39,000 in 1990 to about 78,000 today. Its population roughly mirrors the rest of San Diego, with a median family income of $75,860 ($6,000 higher than the US average) and 9.8% of families below the poverty line.


5XX Debra Place, 2 bed / 1.5 bath
Sold 10/06 290K
Bank owned foreclosure sold 6/08 @126K
-$164,000 (-57%) drop from 2006

Mission Park Condominiums #2xx
sold 8/05 $349K
resold 4/08 $160K
-$189,000 (-54%) drop from 2005

11XX Arbor Lane
sold 3/04 $260K
REO, for sale at $155K
-$105,000 (-40%) drop from early 2004

Mission Park Condominiums #1xx
sold 12/05 $312K
REO, for sale at $150K
-$162,100 (-52%) drop from 2005

57X Beverly Place
sold 3/06 $325K
For sale at $150K
-$175,000 (-54%) drop from 2006

-$3,900 (-3%) drop from previous sale in 6/2002

153X Grandon Ave.
sold 9/05 $315K
resold 5/2008 $140K
-$175,000 (-56%) drop from 2005

16XX Rue de Valle
sold 6/05 $310K
for sale at $149K
-$161,000 (-52%) drop

142X La Loma Lane
sold 2/06 $749K
Resold after foreclosure 6/08 $431K
-$318,000 (-42%) drop from 2006

343X De Leone Road
sold 6/04 $334K
For sale at $159K
-$174,900 (-52%) drop from 2004

353x De Leone
sold 7/06 $375K
REO, for sale @ 136.35K
-$238,650 (-64%) drop from 2006

4338 Altadena Ave #1xx
sold 9/05 $300K
REO, For sale at $161K
-$139,000 (-46%) drop

Detached Homes

158X Rambla Puesta
sold 5/04 $420K
resold 5/08 $212.5K
-$207,500 (-49%) drop from 2004

82X Mulberry Drive
sold 11/04 $540K
For sale @ $350K
-$190,100 (-35%) drop from 2004

23X Falcon Place
sold 6/04 $675K
resold 5/08 $500K
-$175,000 (-26%) drop from 2004

73X W Bel Esprit Circle
sold 4/06 $750K
resold 5/08 $507.5K
-$242,500 (-32%) drop from 2006

143X La Linda Drive (2/2, 1800SF)
sold 1/05 $750K
REO, for sale @ $327.75K
-$172,250 (-34%) drop from 2005

61X Hillhaven Drive (3/3 1500SF)
sold 9/04 $490K
short sale, for sale at $375K
-$115,000 (-23%) drop from 2004

81X Via Bella Donna(4/2 1200SF)
sold 8/04 $440K
REO for sale at $220K
-$220,000 (-50%) drop from 2004

106X Camino del Sol (5/3 2900SF)
sold 11/04 $655K
short sale, for sale at $475K
-$180,000 (-27%) drop from 2004

1308 Camino del Sol (4/3 1700SF)
sold 8/05 $555K
REO, for sale at $399K
-$156,000 (-28%) drop from 2006

Meltdown in San Ysidro: 47-68% price drops from ’04-’06 prices


San Ysidro is located about 15 minutes south of Downtown San Diego and the last neighborhood before the US/Mexico border station. Washington Mutual (WaMu) seems to be the major mortgage bank serving this region.


As ugly as the market looks from these big losses, a lot of these are closed sales that were priced in 2007 or REOs where the borrower fell behind 4-10 months ago. In other words, they reflect 2007’s economic problems, before the economy was in a recession. As 2008 wears on, these numbers will get much worse.


Don’t miss the sneak preview at the end of this post of my forthcoming look at the market in San Marcos, a middle-class suburb and college town in northern San Diego county.


2 bed/2 bath Condo at Villa Serena

Sold 6/06 293K

Bank owned foreclosure for sale now at @110K

-$183,000 (-62%) drop


3 bed/2 bath condo on San Ysidro Blvd

Sold 1/06 360K

For sale @ 154.9K

-$205,100 (-57%) drop


15xx Smyth Ave 3 bed 2.5 bath

Sold 6/05 $385K

For sale @ $199

-$186,000 (-48%) drop


Sunset Village #6X (1 bed unit includes new granite/maple/chrome kitchen, patio, and fireplace)

Sold 9/04 235K

For sale @ 75K

-$160,000 (-68%) drop


1545 Terrace Pine Lane #X (3 bed/1.5 bath)

Sold 6/05 320K

For sale now at @135K

-$185,000 (-58%) drop


1816 Isla Del Campanero (4 bed/2 bath 1978 build SFH)

Sold 5/06 560K

Bank owned foreclosure for sale now at @299K

-$261,000 (-47%) drop


2 bed/2 bath Condo at Villa Serena

Sold 4/05 285K

Sold 4/08 125K

-$165,000 (-56%) drop


2746 Terrace Pine Dr #X (2 bed/1 bath townhouse w/granite kitchen and hardwood floors)

Sold 6/05 313K

Bank owned foreclosure for sale now at @139K

-$174,000 (-62%) drop


2 bed/2 bath Condo at Villa Serena

Sold 6/06 293K

Bank owned foreclosure for sale now at @110K

-$183,000 (-56%) drop


3095 Iris Ave #E (3 bed/2.5 bath condo)

Sold 10/05 360K

Sold 1/08 159.9K

-$200,100 (-56%) drop 

– San Marcos Sneak Preview –

5XX Debra Place, 2 bed / 1.5 bath / built 1975


Sold 10/06 290K

Bank owned foreclosure for sale now at @132K

-$158,000 (-54%) drop

Escondido, CA market in freefall, many many examples of 40%+ price drops

Escondido is has a population of 133,000, making it the 4th largest city in San Diego County and 178th largest city in the USA. As you can see from the examples below, price drops of 40% or more are getting very common. And remember these aren’t even 40%+ drops from the absolute peak of the bubble, but from sales in 2004. So these losses may be excluding 2nd mortgages written off due to short sales or banks deciding to eat losses rather than pursue deficiency judgments.

Pepperwood Unit #10x
Sold 6/04 $240K
Bank owned foreclosure for sale now at $125K
-$115,100 (-48%) loss
Pepperwood Condos Unit #9x
Sold 5/04 $225K
Resold 1/08 $126K
-$119,000 (-44%) loss
Pepperwood Condos Unit #3x
Sold 9/05 $245K
For sale @ $118K
-$127,000 (-52%) loss
2566 White Oak Place #x
Sold 9/06 $309K
Bank owned foreclosure for sale now at $150K
-$159,100 (-51%) loss
31xx Sycamore Crest Place
Sold 2/05 $735K
Bank has approved short sale $450K
-$285,000 (-39%) loss
2012 E. Mission Ave #xx
Sold 6/05 $231K
For sale @ $120K
-$110,700 (-48%) loss
16xx Hawk Ridge Pl (5 bed 2.5 bath 2820 SF on cul-de-sac!)
Sold 8/06 $588K
For sale @ $320K
-$268,000 (-46%) loss
475 N Midway #2xx
Sold 5/04 $225K
Bank owned foreclosure for sale now at $125K
-$100,000 (-44%) loss
Sun Mountain Springs Condos – 520 Sandalwood #1x
Sold 10/05 $318K
Bank owned foreclosure for sale now at $175K
-$142,500 (-45%) loss
7xx Goldenrod St. (3 bed 2 bath single family with big yard)
Sold 9/06 $488K
For sale @ $220
-$267,000 (-55%) loss
24xx Hawthorn Glenn
Sold 8/06 $365K
Bank owned foreclosure for sale now at $200K
-$165,100 (-45%) loss
2912 E Valley Parkway #x
Sold 5/05 $355K
For sale @ $180
-$175,000 (-49%) loss
1xx Foxdale Place (2/1 bungalow with small garage)
Sold 5/05 $331K
Bank owned foreclosure for sale now at $180K
-$151,100 (-46%) loss
915 N Fig St #x
Sold 9/06 $275K
For sale @ $120K
-$155,000 (-56%) loss
1xx Espanas Glenn
Sold 10/05 $320K
Bank owned foreclosure for sale at $149K
-$171,500 (-54%) loss
1405 N Broadway #x
Sold 6/06 $386K
For sale at $195K
-$191,000 (-49%) loss
8xx Daisy St
Sold 1/06 $480K
Resold 1/08 $283K
-$197,000 (-41%) loss
10xx Nightingale Place
Sold 8/04 $560K
Resold 12/07 $322K
-$238,000 (-43%) loss
280xx Glenmeade Way
Sold 2/07 880K
Listed for sale 12/07 by foreclosing bank @ 570K
-$310,000 (-35%) loss (bank lost 300K+ on this loan in less than 10 months! Likely a first payment default)