Now in Legal Rebels:
Posted Aug 13, 2007 04:20 pm CDT
A single foreclosed home in Southern California is part of a much bigger story.
It’s emblematic of what went wrong in the U.S. subprime mortgage industry, leading to turmoil in world financial markets and a downward spiral of decreasing real estate values that isn’t expected to end anytime soon. As more owners lose their homes and more foreclosures sit unsold, the situation will deteriorate further, experts predict–creating lots of work for lawyers in related practice areas, but shifting the recent real estate boom into a relative bust, according to the Los Angeles Times.
The downward slide for the attractive, three-bedroom single-family home in Riverside County began with a June 9, 2006 notice of default. It is now vacant. Initially offered by the lender last spring at $445,000 (the listing agent then suggested an asking price of $425,000) it is now offered at $419,500 (the agent now says it might sell if offered at $379,000, in “the worst market I’ve ever seen”).
Purchased brand-new for $148,000 a decade ago, it was refinanced by original homeowners Theodore and Cassandra Judice in 2000, 2001, 2003, 2004 and 2005, who ended up with a mortgage balance of $447,500. They put the house on the market for $480,000 in September 2005, because they couldn’t afford to live there any more–and found they also couldn’t afford to sell it for a price that would pay off their mortgage.
A notice of default, traditionally, can be “cured” by homeowners, whose lenders want them to see them get current because foreclosure costs everyone money. But the Judices, who owed $13,402 at that point, “didn’t even try,” the Times reports. “That’s likely to be the pattern for many homeowners this time around. The sums involved are just too high.”