FacebookTwitterGoogle+RedditEmail

The Mechanic’s Tale

In the late 1990s, an entrepreneurial mechanic with a wife and one child bought a house for $65,000 with a down payment of $1,500?and took a fixed-rate FHA mortgage. His wife, a beautician, got a job as a clerk at a discount store. In the midst of the speculative real estate boom in Merced six years later, now with three children and a warehouse job, he took out an equity loan for $126,000, did some remodeling on the exterior (new stucco, paint, new lawn turf, foam sculpture), bought furniture, a big-screen TV and a nearly new Escalade. It is estimated that about $35,000 went for the home improvements and goods. Where did the other $91,000 go? It didn’t go into the property. Why wasn’t the equity loan monitored for home improvements?

A year later, with four children and two big SUVs, the speculative real estate boom in full force, he took out a conventional variable equity loan on his house for $246,500. The paperwork doesn’t reveal if this was a wraparound loan, including the mortgage and the first equity loan. He bought a five-bedroom, two-story house for more than $300,000. He put about $160,000 down on the new house, bought $60,000 worth of new furniture and another used Escalade, and hoped to put a pool into the yard of the new house.

It can only be speculated if or when he got an equity loan on his new house.

He rented the old house to relatives, with an option to buy. The rent was based on the variable equity loan. It began in 2006, at about $500 a month. The relatives have two children. The husband built trailer homes; the wife had a good job in food service. In the next two years, they had another child and the husband lost his job and she quit her job to go to school –?while expecting to?buy this house.

In April 2008, payments on the variable loan of $246,500 increased to more than $2,500, and the owner informed the relatives with the option to buy that the rent had increased fivefold. The relatives had no clue that the loan was variable. It’s possible the owner didn’t quite grasp that either. In any event, the relatives went shopping for a loan, without success, as the boom was turning into a bust.

If the owner of the two houses, now with five children and a new custom Escalade including the latest in rims, had just stayed in his first house and not taken out two equity loans, he would have been paying between $400-$500 a month on his mortgage. Even if he had spent the entire $126,000 to expand his 900-square-foot house on a 10,000-square-foot lot and not borrowed another $246,500 – in part, to buy another house and more good-life toys he might have been able to survive.

Result: the relatives had to move out, the house is empty and in foreclosure, and the owner is months behind on his mortgage payments on his present house, and his variable on the new house will kick in next year.

Late last year someone seeking to buy the house contacted a realtor. The realtor, after examining the documents for a month or two, told the prospective buyer that it was extremely difficult to tell who actually owns this house, title being clouded by: 1) sloppy title company work to begin with; 2) the number and size of the various, variable loans; and 3) the mystery of who might possibly own those loans now.

So, here is an empty house worth between $50,000-$75,000 for cash, given that few if any will qualify for a loan on it in the present lending climate. Meanwhile, the grass has died in the front and back, junk was left behind, an old pickup stands in the driveway. It has joined that ever-growing number of residential properties in foreclosure, in decline and its title may be clouded by the different loans, all with different companies. Nor is it clear to realtors or prospective buyers whether there was a consolidation of loans or not. It will not be clear before the house goes through auction on the county courthouse steps.

What were the owner and his lenders thinking? At a broader level, what were all the Valley business and political leaders thinking, as they approved project after project, predicting the growth boom would go on forever and universal prosperity would come to the Valley without jobs to support the inflated prices of the real estate? The entrepreneurial warehouseman should not have been given the first equity loan on his first house. Politicians, from city councils to boards of supervisors to state legislators to members of Congress, and the media are blaming poor people for their irresponsibility.

Meanwhile, in Merced, the foreclosure section of the Merced Sun-Star announced in late October, 2008,  that Hank Vander Veen, the publisher of the Merced Sun-Star, presumed to be far better educated, more worldly and wealthier than the warehouseman, walked away from a $507,000 house in suburban McSwain.

BILL HATCH lives in the Central Valley in California. He can be reached at: wmmhatch@sbcglobal.net.

More articles by:

January 22, 2019
Patrick Cockburn
On the Brink of Brexit: the Only Thing Most People Outside Westminster Know About Brexit is That It’s a Mess
Raouf Halaby
The Little Brett Kavanaughs from Covington Catholic High
Dean Baker
The Trump Tax Cut is Even Worse Than They Say
Stanley L. Cohen
The Brazen Detention of Marzieh Hashemi, America’s Newest Political Prisoner
Karl Grossman
Darth Trump: From Space Force to Star Wars
Glenn Sacks
Teachers Strike Dispatch #8: New Independent Study Confirms LAUSD Has the Money to Meet UTLA’s Demands
Haydar Khan
The Double Bind of Human Senescence
Alvaro Huerta
Mr. President, We Don’t Need Your Stinking Wall
Howard Lisnoff
Another Slugger from Louisville: Muhammad Ali
Nicole Patrice Hill – Kollibri terre Sonnenblume
The Scarlet “I”: Climate Change, “Invasive” Plants and Our Culture of Domination
Jonah Raskin
Disposable Man Gets His Balls Back
Thomas Knapp
Now More Than Ever, It’s Clear the FBI Must Go
January 21, 2019
W. T. Whitney
New US Economic Attack Against Cuba, Long Threatened, May Hit Soon
Jérôme Duval
Macronist Repression Against the People in Yellow Vests
Dean Baker
The Next Recession: What It Could Look Like
Eric Mann
All Hail the Revolutionary King: Martin Luther King and the Black Revolutionary Tradition
Binoy Kampmark
Spy Theories and the White House: Donald Trump as Russian Agent
Edward Curtin
We Need a Martin Luther King Day of Truth
Bill Fried
Jeff Sessions and the Federalists
Ed Corcoran
Central America Needs a Marshall Plan
Colin Todhunter
Complaint Lodged with European Ombudsman: Regulatory Authorities Colluding with Agrochemicals Industry
Manuel E. Yepe
The US War Against the Weak
Weekend Edition
January 18, 2019
Friday - Sunday
Melvin Goodman
Star Wars Revisited: One More Nightmare From Trump
John Davis
“Weather Terrorism:” a National Emergency
Jeffrey St. Clair
Roaming Charges: Sometimes an Establishment Hack is Just What You Need
Joshua Frank
Montana Public Schools Block Pro-LGBTQ Websites
Louisa Willcox
Sky Bears, Earth Bears: Finding and Losing True North
Robert Fisk
Bernie Sanders, Israel and the Middle East
Robert Fantina
Pompeo, the U.S. and Iran
David Rosen
The Biden Band-Aid: Will Democrats Contain the Insurgency?
Nick Pemberton
Human Trafficking Should Be Illegal
Steve Early - Suzanne Gordon
Did Donald Get The Memo? Trump’s VA Secretary Denounces ‘Veteran as Victim’ Stereotyping
Andrew Levine
The Tulsi Gabbard Factor
John W. Whitehead
The Danger Within: Border Patrol is Turning America into a Constitution-Free Zone
Dana E. Abizaid
Kafka’s Grave: a Pilgrimage in Prague
Rebecca Lee
Punishment Through Humiliation: Justice For Sexual Assault Survivors
Dahr Jamail
A Planet in Crisis: The Heat’s On Us
John Feffer
Trump Punts on Syria: The Forever War is Far From Over
Dave Lindorff
Shut Down the War Machine!
Glenn Sacks
LA Teachers’ Strike: Student Voices of the Los Angeles Education Revolt  
Mark Ashwill
The Metamorphosis of International Students Into Honorary US Nationalists: a View from Viet Nam
Ramzy Baroud
The Moral Travesty of Israel Seeking Arab, Iranian Money for its Alleged Nakba
Ron Jacobs
Allen Ginsberg Takes a Trip
Jake Johnston
Haiti by the Numbers
Binoy Kampmark
No-Confidence Survivor: Theresa May and Brexit
FacebookTwitterGoogle+RedditEmail