Bad timing in Santa Cruz: Builder, lender, tenants hurt after p...

You'd have to try to do a worse job of reporting than this! It's only until the last paragraph that we discover that the couple who live in this townhome are renters. But we never learn:

1) How much the T.H. sold for originally
2) When it was purchased
3) When the project was completed (or if it was)
4) The status of the other three T.H.s
etc. etc.

C'mon Senile, REPORT for cryin' out loud!

I was going to pretty much repeat what the first commenter said. Who even owns the unit? Is it the developer? An initial investor buyer? More important: Are they pocketing the rent paid by the couple in the article without paying the Mortgage?! Pretty sleazy if so, but you can't tell from the article.

As of earlier this year a federal law became active that required the lender, when they take a property back in foreclosure, to honor all leases for the property. So, if the tenant has a lease for a year then the new owner (usually the old lender) has to recognize it and the tenant stays for the time of the existing lease or 90 days whichever is longer. There are some restrictions however but, based on reading the facts in this adticle, I do not believe they apply.

PS The article could have been slightly more informative if it contained more information about what the tenant's rights were. IMO The government should be more proactive about getting such information out to its citizens.

Home loans made to "NINAs" (no income, no assets)borrowers are not at all "unusual" in California.

Welcome to housing bubble withdrawal folks. I can't say I'm sorry to see lenders and developers finally lose a little skin in this stupid game of out of control prices that they created. The shame is that these same toads are forcing people to leave their homes with the hope that property values will rebound to the absurd heights of the great housing bubble, and that they can then resell them to some new schmuck.

BTW, greedy lenders originally listed these Doyle St units at 430,000 in October, but the new housing bubble has them re-listing at $450,000 in Nov. They even tried 465,000 a few days before. These home are short sales so they'll make sure they drag any potential buyers through the fire to get them. Don't be the fool who buys now.

"Silestone counters, stainless steel appliances and radiant floor heating"

yadda, yadda, yadda

So original and creative... a pile of marketing crap eagerly gobbled up by clueless yuppies...

Good Luck sub contractors getting any money out of this, you're last in line and maybe, just maybe, you might see pennies on the dollar.

Lots of folks truly thought they were going to make a klling in real estate back in 2005! No money down, low interset or interset only Adjustable rate 1-5 year sub-prime balloon loans all with the expectation of making money and getting rich on the never ending increase in property values. Just live in your home for a couple of years and you'll be able to sell for a huge profit to the next greedy schmuck! Jump on the bandwagon folks, easy money to made by all! Ignorant greedy fools!

Wayne Miller, the designer of the 4 units owns all 4 townhomes on Doyle Street. Collective rent for all 4 units is about $9000/month.... and yes, it appears as if they haven't been paying the Mortgage.

Reality Check wrote:

I was going to pretty much repeat what the first commenter said. Who even owns the unit? Is it the developer? An initial investor buyer? More important: Are they pocketing the rent paid by the couple in the article without paying the Mortgage?! Pretty sleazy if so, but you can't tell from the article.

The townhome never sold. After it was built in 2007, it wasn't even put on the market. Tenants were placed after construction was completed. The two front TH are for sale. It has been implied the second two rear TH are going to be up as a short sale soon.

Cruzer wrote:

You'd have to try to do a worse job of reporting than this! It's only until the last paragraph that we discover that the couple who live in this townhome are renters. But we never learn:
1) How much the T.H. sold for originally
2) When it was purchased
3) When the project was completed (or if it was)
4) The status of the other three T.H.s
etc. etc.
C'mon Senile, REPORT for cryin' out loud!

They refused to renew/renegotiate any lease with the front two tenants.

Renters Advocate wrote:

As of earlier this year a federal law became active that required the lender, when they take a property back in foreclosure, to honor all leases for the property. So, if the tenant has a lease for a year then the new owner (usually the old lender) has to recognize it and the tenant stays for the time of the existing lease or 90 days whichever is longer. There are some restrictions however but, based on reading the facts in this adticle, I do not believe they apply.
PS The article could have been slightly more informative if it contained more information about what the tenant's rights were. IMO The government should be more proactive about getting such information out to its citizens.

Steinbecker wrote:

Home loans made to "NINAs" (no income, no assets)borrowers are not at all "unusual" in California.

Just ask Democrat Barney Frank and his little Democrat buddies, Chris Dodd and Charles Schumer? All proponents of sup-prime loans to unqualified losers al la Fannie Mae and Freddie Mac courtesy of their influence provided by their position s within the Housing, Banking and Finance Committees in the House and Senate! Frank is now beginning to complain again that low income folks can't get back into the real estate market! Wow!

Did the tenant, who was a real estate agent, know that they were renting from the people that did the development? This project was obviously not built to be a rental project. That should have sent flags up immediately. All it would have taken is a call to Title Company to find that out clues to the likely financial status. As a project these common interest development units would not have separate mortgages and instead would have a construction loan or loans that applied to the whole property. Knowing that construction loans are temporary and that the rents being asked wouldn't be coming close to covering payments, a real estate agent could have understood the risks, though that's not true of most other tenants.

This is good news for the tradesmen that haven't been paid. Mechanics liens are senior to all others except taxes. That means a property transfer of any kind requires that they be resolved.

While of course it's bad for the developers and lenders who made their bets based on higher property values, the tenants, while having to move, perhaps would like to become owners in the future. All those who don't own but would like to and could become able are helped by lower house values.

The tenants are entitled to a 60-day notice. But often, especially in the case of a sale rather than a foreclosure, tenants will get "cash for keys" as buyers don't want to have to deal with evicting a tenant.

We can't afford to stay here but can afford to have another child.

The HOMEOWNERS haven't been paying the mortgage. The tenants have been paying the rent and can afford to stay.

We re Smart wrote:

We can't afford to stay here but can afford to have another child.

Angel- maybe not a good time to get into real estate right now. You and your wife have at least 3 kids to support.

Time to go see the King Tut exhibit a perfect example of our species trying to take it with them when they go onto the other side. I wonder will the "Silestone counters, stainless steel appliances and radiant floor heating" fit in my coffin when I leave????

disabuser wrote:

This is good news for the tradesmen that haven't been paid. Mechanics liens are senior to all others except taxes. That means a property transfer of any kind requires that they be resolved.

This is flat wrong. A foreclosure of a development project will typically scrape off the mechanics' liens, which are junior and don't have priority to a senior mortgage. A voluntary sale is different, and would require the contractors to be paid or agree to an accomodation. Ergo, it probably goes to foreclosure.

What in the world is someone doing for a living in Santa Cruz to afford a $700k townhome. There are only a few high wage jobs here on the westside, and most UC workers make under $65k. With a 30 yr mortgage at 5%, the amount of dollars leaving your pocket is 700000x1.05^30=$3,025,000 - or $1,450,000 for a 15 yr mortgage. That is sort of a large fraction of anyone's income. I hope they own a hotel.

Learned Hand wrote:

<quoted text>
This is flat wrong. A foreclosure of a development project will typically scrape off the mechanics' liens, which are junior and don't have priority to a senior mortgage. A voluntary sale is different, and would require the contractors to be paid or agree to an accomodation. Ergo, it probably goes to foreclosure.

I stand corrected. I read that some mechanics lien could have priority if the work underlying them was began before the deed of trust was filed although I don't know how common that would be. I looked into a construction loan and one of the things they said was don't start any work, that they would look at the property before issuing the loan to make sure none had begun. That would seem to leave only pre-construction work like design and planning where a mechanics lien might have priority.

It does seem like mechanics liens of any size would be an incentive to foreclose. I've also heard the many of the owners of seconds that were common in and a cause of the bubble, but are worthless at foreclosure nevertheless are able to use their power to reject modifications to loans in order to extract some payment.