Ladera Ranch

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[quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. <strong>The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008</strong>.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>


I'm sorry, but option ARMs do not have some sort of two year schedule. They vary from loan to loan, rate by rate, LTV to LTV. <a href="http://www.irvinehousingblog.com/blog/comments/mortgage-magma-the-coming-eruption-of-option-arms/">I did a blog post about it long time ago</a>. You must be confusing a 2/28 ARM with option ARMs. I'd go into more detail, but a search for option ARMs from the main blog will give you all kinds of results on how they work, mostly posts by me. I really think you should too, because it appears you don't really understand how they work. Not being a jerk, just pointing out a fact.
 
[quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>


The problem with Ladera and all of south inland oc is it is not unique. It all looks exactly the same. The only real differentiator is proximity to job center. ladera doesn't fair well there. So it competes with that strike against it almost purely on price. not a good position to be in. There is a reason that LA, Long Beach, and the more established areas of OC (northern and coastal) are holding and will continue to hold better. That said obviously everywhere is and will continue to decrease. But the decreases will likely be more in ladera and south inland oc in my opinion.
 
<a href="http://www.redfin.com/CA/Ladera-Ranch/7-Basilica-Pl-92694/home/5962031">7 Basilica was foreclosed on today for $1.071mil</a>. I can honestly say that I believe homes like this will eventually sell in the $800k range in the next few years. Especially, if you look at the foreclosure backlog in Covenant Hills.
 
[quote author="ScubaSteve" date=1240612437]I have been living in LR for the past 6 years (renting from friend) and I love it here, but it is pretty damn far from Irvine, which is where I work. I have been looking on Redfin and see a lot of really good prices- however they are all shortsales. Are these prices legit? For example, this <a href="http://www.redfin.com/CA/Ladera-Ranch/15-Arlington-St-92694/home/7218839">place</a> here is listed at 365K but last sold for 595K? I see a lot of houses short selling for over 150K off their original purchase price. Can anyone explain to me exactly how a short sale works? Are the low prices used to attract people into a bidding war?</blockquote>


In your listing example, the difference between the short sale listing price and the previous sale price does not surprise me. However, I think it would sell for about $15K-$20K less as REO, today. For all the reasons we've discussed in this thread (proximity to job centers, multiple HOAs, first sold right before or during the bubble to subprime or MEW buyers, etc...) the lower-end properties in Ladera were hit hard and early, and IMO they'll fall further when the high-end implodes. However, many of the REOs in Ladera are in excellent condition and so if you decide it's the right time for you to buy, you may find REOs in "turn-key" ;) condition.
 
[quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>






<a href="http://mortgage-x.com/calculators/option_arm/optpay_hybrid_libor.asp">5/1 OPTION Arms with recast at five years</a>
 
I think the lower-end properties are going to continue to depreciate modestly, but the Covenant Hills homes and any other "higher-end" home will start to take much bigger dips in the coming 2 years. I really believe the ARMs will affect the LR market until 2011 or 2012.
 
[quote author="awgee" date=1240724179][quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>






<a href="http://mortgage-x.com/calculators/option_arm/optpay_hybrid_libor.asp">5/1 OPTION Arms with recast at five years</a></blockquote>


Ok, I'm not going to argue with the mortgage experts here. But I just remember seeing that people who make the minimum payments hit the neg am cap very quickly, between year 2 and year 3 no matter what their schedule is.



If they weren't making neg am payments then the recast wouldn't be an issue, but if they are, they've probably already recast. That was my thinking when saying that 2008 was the big neg am shakeout with some coming into 2009. You just can't make 5 straight years of neg am payments.



I'm sure people have all kinds of option mortgages so the carnage could be spread over years.
 
[quote author="Goofy" date=1240893202][quote author="awgee" date=1240724179][quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>






<a href="http://mortgage-x.com/calculators/option_arm/optpay_hybrid_libor.asp">5/1 OPTION Arms with recast at five years</a></blockquote>


Ok, I'm not going to argue with the mortgage experts here. But I just remember seeing that people who make the minimum payments hit the neg am cap very quickly, between year 2 and year 3 no matter what their schedule is.



If they weren't making neg am payments then the recast wouldn't be an issue, but if they are, they've probably already recast. That was my thinking when saying that 2008 was the big neg am shakeout with some coming into 2009. You just can't make 5 straight years of neg am payments.



I'm sure people have all kinds of option mortgages so the carnage could be spread over years.</blockquote>


No argument from me, and I know very little about mortgages.

It did not occur to me that the payments on a 5/1 option ARM would recast before the five years was up. Technically, I suppose the payment will recast as soon as the total loan amount to original loan amount or original appraised value exceeds a preset limit, but I can not help but wonder if the lenders avoid the recast until the interest rate reset. I have no good reason for thinking so, just wondering.

Maybe some of the mortgage experts can fill us in. And there are some real mortgage experts in here. Lendingmaestro? Graphcakes?
 
[quote author="awgee" date=1240897437][quote author="Goofy" date=1240893202][quote author="awgee" date=1240724179][quote author="Goofy" date=1240623325][quote author="awgee" date=1240620646]Some will re<strong>CAST</strong> in addition to resetting, and the result will be ugly no matter if the interest rate lowers or raises.</blockquote>


It is my understanding that only option pay loans will recast. A 5/1 type loan will just adjust. The option pay loans ceased in 2007 and almost always have a two year schedule so those are pretty much done as of now, with the bulk of them in 2008.



I'm not trying to be "Captain Save a Ho(od)", but LR is a pretty nice area and the people that "I KNOW" are just normal folk that are a little stretched. The hummer driving real estate investors foreclosed a while ago, and the mom n pops are left with their toddlers and big house payments. The new post-foreclosure replacements in the neighborhoods seems to be nice as well. Its really neighborhood dependent. CH being the epicenter of obnoxious Real Housewives OC wannabe's, but there are some nice homes.</blockquote>






<a href="http://mortgage-x.com/calculators/option_arm/optpay_hybrid_libor.asp">5/1 OPTION Arms with recast at five years</a></blockquote>


Ok, I'm not going to argue with the mortgage experts here. But I just remember seeing that people who make the minimum payments hit the neg am cap very quickly, between year 2 and year 3 no matter what their schedule is.



If they weren't making neg am payments then the recast wouldn't be an issue, but if they are, they've probably already recast. That was my thinking when saying that 2008 was the big neg am shakeout with some coming into 2009. You just can't make 5 straight years of neg am payments.



I'm sure people have all kinds of option mortgages so the carnage could be spread over years.</blockquote>


No argument from me, and I know very little about mortgages.

It did not occur to me that the payments on a 5/1 option ARM would recast before the five years was up. Technically, I suppose the payment will recast as soon as the total loan amount to original loan amount or original appraised value exceeds a preset limit, but I can not help but wonder if the lenders avoid the recast until the interest rate reset. I have no good reason for thinking so, just wondering.

Maybe some of the mortgage experts can fill us in. And there are some real mortgage experts in here. Lendingmaestro? Graphcakes?</blockquote>
I believe there are basically 3 kinds of ARM loans.



1. Regular ARM loans where you make P&I payments. The interest rate is locked in for the first 1-10 years (depends on which how long your ARM loan is) and then your rate adjusts every 6 or 12 months (using either LIBOR or Treasury rates plus a 2-3% margin). Every payment includes P&I and loans have a 30-year amortization. These loans will actually re-cast with lower payments as the LIBOR/Treasury indexs are down.



2. Interest Only ARM loans where you make interest only payments during first 10 years. The interest rate is also locked in for the first 1-10 years and then your rate adjusts every 6 or 12 months (using either LIBOR or Treasury rates plus a 2-3% margin). After the 10th year, the loan will amortize over 20 years. Again, these loans will actually re-cast with lower payments as the LIBOR/Treasury indexs are down. The huge hit comes year 11 when you start amortizing the loan.



3. Option ARM loans where you can make payments of less than the interest with the difference adding to your loan balance. A lot of these loans let people pay 1-2% interest of the loan balance (or the regular interest only, 15-year amortization payment, or 30-year amortization payment) as their mortgage payment for the first 2-3 years. Generally once the current loan balance exceedes 110% of the original loan or some LTV level, the payment reverts to a regular amortizing payment over the remaining term of the loan. There are super toxic loans will that blow up in people's faces.
 
[quote author="Goofy" date=1240893202]Ok, I'm not going to argue with the mortgage experts here. But I just remember seeing that people who make the minimum payments hit the neg am cap very quickly, between year 2 and year 3 no matter what their schedule is.



If they weren't making neg am payments then the recast wouldn't be an issue, but if they are, they've probably already recast. That was my thinking when saying that 2008 was the big neg am shakeout with some coming into 2009. You just can't make 5 straight years of neg am payments.



I'm sure people have all kinds of option mortgages so the carnage could be spread over years.</blockquote>


I didn't feel it was arguing, but rather educating. People are defaulting on option ARMs regardless of the recast right now. Many are just giving up because they are underwater or there was fraud involved. It isn't the recast or the interest rate, and here is what I mean...



People who make the minimum payment of 1% would be calculated as if it is the P&I payment. I.E. if you have $300k loan the minimum would be $965. Right now interest rates are at all time lows (see chart below), and if the borrower had a "normal" margin of 2.75% the current MTA rate is 1.5%, making the real interest rate of 4.25% and an interest only payment of $1063. 110% of the loan balance would need to grow by $30k, which at $100 a month neg am amount would take a long time for it to recast. Now, here is the other thing, if the loan is about to be on the third year, the minimum would have increased to $1115, meaning that a whole $52 would be applied to principal. One of the rules of option ARMs is when the minimum is greater than the I/O payment, it is the required minimum. The loan that has neg am, also is the loan that could force you to pay principal.



Now, after all that blabber, does everyone realize that high school dropouts should never have been selling these loans... ever?



http://mortgage-x.com/general/indexes/charts/a_cmt_cofi_codi_mta.gif
 
[quote author="graphrix" date=1240900954]Now, after all that blabber, does everyone realize that high school dropouts should never have been selling these loans... ever?</blockquote>


And they should never have qualified for them either.
 
After months of searching, I finally decided to buy one of the lower end condos in LD. For my budget (low 300's), I just felt like this was the nicest place in OC to get a relatively new condo at a reasonable price, but of course outrageous HOA, mello roos, and property tax fees.



As much as I'd love to live in Costa Mesa or Irvine where my work is, it's quite simply impossible to find a relatively new, clean, decent condo around here. I'm getting a 1300SQFT, 2BDRM condo in LD for $305K ($234/sqft). All the recent comps come in around the $309K-$315K range. The biggest downside is that there's basically NO patio, yard, NOTHING like that, but in my price range, I guess I can't get too picky. So what I'm wondering about is that let's say 5 years from now, you guys don't foresee a similar monster drop in the prices of these lower end condos as we've seen the last 2-3 years do you? I think this particular unit I'm looking at was originally bought for about $500K. I just hope this thing doesn't drop to like $200K after a couple of years!
 
Congratulations Al. I hope you are happy in your condo.



Monster drop in that range; I doubt it, but still dropping; yeah.
 
did you already make the purchase?



If so: congratulations.



If not: yes, the lower end (and by this I mean the product (small condo with no outside space far from jobs) and not the price range) is going to get hammered over the next few years.



For example, if in a year you could buy the same or better housing unit in Irvine instead of fraudera, wouldn't you pick that instead? Or if you could buy a 3/2 SFR in Aliso for that price? The market for this product is going to go way down over the next couple of years, and the prices with it. It is already happening with all the converted apartment condos *in Irvine*.
 
I would buy in Ladera over Irvine(except Shady of course). You get so much more for your money...newer, landscraping, good schools. I don't get why people like Irvine so much.
 
[quote author="socalmd" date=1241092451]I would buy in Ladera over Irvine(except Shady of course). You get so much more for your money...newer, landscraping, good schools. I don't get why people like Irvine so much.</blockquote>


socal - The more I look at Shady Canyon, the less attractive it seems to be. It has great schools and freeway proximity and work proximity, but you can get all that for much less in Quail Ridge or Turtle Ridge or even better, Turtle Rock. Shady is "exclusive", but so what? I have never seen children playing in a cul de sac or anywhere else in Shady.
 
[quote author="socalmd" date=1241092451]I would buy in Ladera over Irvine(except Shady of course). You get so much more for your money...newer, landscraping, good schools. I don't get why people like Irvine so much.</blockquote>
Good schools, one of the safest towns in the US, in the heart of OC, and home of many companies. That being said, there is too much of an Irvine pricing premium versus other nice cities in OC.
 
Knocking off another $700,000 for a total of $1,151,000 or 26% off the 2007 sales price.









<a href="http://www.redfin.com/CA/Ladera-Ranch/3-San-Jose-St-92694/home/5934587">3 San Jose</a>
 
<a href="http://www.zillow.com/homedetails/24-Sheridan-Ln-Ladera-Ranch-CA-92694/63120161_zpid/">24 Sheridan sold for $609k in 2005</a>, today it sold at the foreclosure auction for $290.5k. The debt was $620k and the minimum bid started at $285.3k. I guess the lenders don't want any more properties in 92694, because that is the kind of discount you would see for a Santa Ana or an Anaheim house. Ouch!
 
Serious ouch. We have a couple of friends that have homes in Ladera that bought in 2005-6. They can't be happy to hear stuff like that.
 
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