California man losing nine homes (sic) in mortgage mess

[UpInArms]

Source: Reuters

LOS ANGELES (Reuters) - A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it a mistake to have invested in the real estate market.

Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.

"Everyone stumbles. I'm not going to hide or run or live in denial, or with regrets," Forgaard told Reuters in an interview. "On the surface it looks like total devastation but it's just the opposite. I'm confident our lives will be much, much richer as a result."

Forgaard bought a house in Santa Cruz, about 60 miles (100 km) south of San Francisco, in 2000. Four years later, using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans -- in which payments do not cover the interest so that a borrower's balance grows over time.

Read more: http://www.reuters.com/article/bondsNews/idUSN0952458820080511?sp=true

---

the headline called them "homes" - but they were "houses" - you can only live in "one" home at a time.

This software guy had no business speculating and using negative amorization loans - it's just another form of gambling.

:eyes:

[notesdev]

1. This guy is Exhibit A

as to why there should be no housing bailout. Not only did he do the wrong thing to begin with, making life more expensive for others, but the banks who lent to him also deserve to recoup nothing from this scandalous misallocation of resources.

[Warpy]

6. Plus, he kept housing off the market

while people were desperate for homes, just to try to make a killing off them when he finally decided to let go.

I have no sympathy for housing speculators, just like I have no sympathy for the hedge funds driving commodities futures higher right now.

Speculators in necessities are scum.

[Dreamer Tatum]

9. You nailed it

And shame on the lenders that allowed him to borrow on nine homes. They got what they had coming.

[The Backlash Cometh]

34. All of the above.

That's my answer.

[H8fascistcons]

10. Sorry, Disagree...

A simple line to the effect that a bailout would only apply to your primary residence, why should hard working people with only one house pay for the sins of this greedy loser? I personally know of someone who has lost two and possibly their third job to outsourcing to China and India. BTW, each consecutive job paid about 25% less than the previous one...
Regards..............

[Merlot]

14. Agree with your disagree

Yesterday I was listening to "This American Life." They devoted the whole show to summing up the mortgage crisis and how it happened. They gave as one example a guy who was a vet and though he was eligible for a vet loan at a good interest rate, the mortgage broker steered him to a really bad loan. The mortgage broker made $18,000 in commission on the loan.

I'm not sure if this guy was aware at the time that he qualified for the vet loan. The broker had put down the guys monthly salary at something like $14K, when in actuality he made over $3K per month. He had no idea the broker had lied.

Good show if you can find it.

[catzies]

22. It was broadcast Friday on NPR's All Things Considered/link to it here:

This is the original NPR segment:

http://www.npr.org/templates/story/story.php?storyId=90327686

And TAL expanded on it in their Saturday show:

http://www.thisamericanlife.org/Radio_Episode.aspx?episode=355

[Lance_Boyle]

51. He should have read the paperwork

"He had no idea the broker had lied." He should have. The "stated income" portion of the stated income loan is in black and white in the mortgage paperwork. It is the borrower's responsibility to know, understand, and agree to everything printed in those documents. How am I supposed to have any sympathy for people who simply declined to read their mortgage documents before signing them? I can tell you, if I'm looking through my loan paperwork and see that the broker has inflated my stated income, that's a big hint to run (don't walk) away from that broker. IMMEDIATELY.

Enough of this "people didn't know what they were signing" bullshit. It was people's responsibility to know what they were signing. If they didn't live up to that responsibility, it's their own fault.

[Hugin]

30. You'd also need to add a provision that the 'primary residence' couldn't then...

be used as collateral on new real estate purchases.

I applaud your compassion, but, I've seen many cases where after a so-called bail out these people turn around
and play the same game.

Of course, this leads to relying on some sort of regulation or due diligence on the part of the loan brokers who
are also culpable.

[notesdev]

49. to your question

>why should hard working people with only one house pay for the sins of this greedy loser?

A lot of those hard working people bought far more house than they could afford to buy - and more house than they can afford right now. A bailout doesn't help those people - all a bailout is going to do is going to help the bank cut their losses. When the bailout is said and done, all that bailout cash will be sitting in the banks' hands, and the borrowers will still be mostly underwater on properties that were too expensive for them in the first place. And if we look at the situation objectively I think we will find that even people who own only one house were often motivated to buy above their means by the same speculative greed that motivated the object of this article.

I propose a little different way of looking at the problem, which is:

Why should potential home buyers pay the price premium for the various sins (speculation, fraud, predatory lending) that led to the valuation bubble?

Because that's the situation now. Joe Youngadult, looking to buy his first home, pays not only the value of the land and the home that sits on it, but also premiums based on: a) the ease of borrowing money; b) subsidies for mortgage payments; c) speculation (yes there is still quite a bit of speculative value yet to deflate);

... and now d) bailout bubble valuation, in which Joe Youngadult pays twice through his taxes to weaken his own buying power.

Labor is already undervalued significantly relative to asset holdings, and a bailout would only further skew things in the wrong direction. The housing valuation collapse is a GOOD THING for the hard working person, as it will drastically reduce the amount of time that person will need to spend in debt bondage in order to own a home.

[cstanleytech]

24. Actually I disagree somewhat.

Yeah this guy should not be helped, he took a risk and in fact was even part of the cause (investors causing the costs to rise by speculation) however there are single family home owners who should perhaps be given a helping hand.
It needs to be done on a case by case basis though so as to not help people like this guy out.

[notesdev]

50. Done on a case by case basis

I think you would be surprised at how many don't want their cases looked at on a case-by-case basis - I would venture to say we're talking between 40% and 70% of the entire pool of borrowers (and an even greater percentage of loan originators, underwriters, and securitizers) here, who have at some point benefited by fraud.

To address your point more specifically, there are quite a number of benefits already in the law that apply only to the primary residence. What we found was the result of that was speculators going in on a number of properties and claiming on the loan docs for EACH that it was the primary residence, fraudulently gaining rate and tax advantages by that means.

[question everything]

40. I would like to have each case reviewed individually

which means a mess of bureaucracy. As a society, we are better off when there are not whole neighborhoods - yes, even in the inner cities - not vacant by abandoned houses, with extra burden on municipality to clear snow in front of them, to clear weeds that could harbor sick animals, and that attract thieves to steal copper pipes and even causing gas explosion. And many people were lured to purchase homes that should not have by unscrupulous brokers.

But a man like that, certainly, does not deserve any help.

[kestrel91316]

53. The ONLY possible bailouts should be for owner-occupied housing.

NO bailouts for real estate speculators. Especially this guy.

[izquierdista]

2. Thick

He took $800,000 in 2004 and sunk it into real estate? I wonder how much he would have if he put it into corn options and Euros.

[Captain Angry]

39. Well, if he put $800,000 into Apple stock in January 2004,

That $800,000 would be $146,000,000, or an 18,200% return.

Oops.

[Tiberius]

52. Well you're off by a decimal point...

.. but it's still an astounding thought. His $800,000 at $10/share would be worth $180 a share, or roughly $15 million.

[Tangerine LaBamba]

3. What's really astonishing

is that this whining little prick has no regrets, no shame, nothing. He's just going to pack up and start all over somewhere else, leaving others to clean up after him.

He deserves nothing. Greedy little fucker.

[AndyTiedye]

12. Doesn't Even Seem to be Whining Actually

I'd fire up a string quartet for him
:nopity::nopity::nopity::nopity:

but I don't think he is really asking for one.

The companies that took his gambles and others like them and sold them as "AAA rated securities" are the problem, and they are the ones getting the bailouts.

[gristy]

26. He is in the fortunate circumstance that he is still young - 37

If he was 57 or even 47 he'd be in bigger trouble.

[stimbox]

4. No sympathy for him. Looks like he is keeping his 10th home.

The bailout should only be for the primary residence.

[ckramer]

28. I say let the guy become homeless

that's only way he can learn a lesson.

[GreenEyedLefty]

5. I-D-I-O-T

Who in the hell uses a negative amortization loan on an investment? Who in the hell ISSUES such a loan? Greedy feckers, all around. No sympathy here.

[Jackpine Radical]

15. Hell, I didn't even know there WAS such a thing

as a negative amortization loan. To my simple mind, such a thing makes no sense whatsoever.

[skepticscott]

20. It make sense

only if the value of the home appreciates faster than the principal, so that you can always sell the home, pay off the mortgage and still make a profit. For a while that was happening in most places, so people felt there was no real risk. But when home prices start dropping, you're screwed.

[tidy_bowl]

7. This is why a bailout of these people is wrong...

.....are you or I getting extra funds for our mortgages because we pay them on time? No, and neither should they just because they defaulted. If you gambled or bought above your means and lost, that is your fault not mine or anyone else's.

[Gormy Cuss]

8. "homes (sic).." Thank you.

A home is where one lives. He had one home -- the rest were investment HOUSES or housing units.

The housing bailout should be limited to homes, not real estate gambling.

[Clear Blue Sky]

11. He gambled. He lost. Bad luck...

[evilkumquat]

13. You Guys Realize You're Sounding Like People Who Hate Welfare, Right?

People who want to do away with the welfare state in its entirety often pick one or two examples of welfare cheats in an attempt to do away with the entire system, regardless if 95% of the rest of the people on the dole deserve the help.

Using this greedy idiot as an example of why there should be no bailout of homeowners hit by this slump is no different.

Yeah, plenty of people out there were greedy, or stupid, and yeah, they probably do not deserve any aid.

But I work in a real estate office in a state that has been hit badly by home foreclosures, and every day I see people who are losing their homes not just because they got suckered into predatory lending, but because the economy simply sucks right now, and their incomes have dropped horribly.

Before one makes a blanket statement condemning any governmental help to those suffering from these times, consider that there are more reasons for the need of such aid than simple greed or stupidity.

Personally, I would rather see tax dollars go toward bailing out my neighbors so they can keep their homes through this recession than bombing more and more brown people thousands of miles away.

[Merlot]

16. Tax dollars going toward bailing out neighbors makes sense

If a house is foreclosed and goes empty and gets trashed, it draws down the value of other homes in the neighborhood. We have two houses in my neighborhood where the "investors" ran out of money, the houses are in a state of half repair, the weeds are 4 ft. high.

This affects everybody, not just the people who are loosing their homes.

Why these people trying to save their homes should "not deserve" aid while the big banks and brokerages are getting bailouts to fill their coffers is beyond me.

[UpInArms]

17. no blanket condemnation here - only "condemning" 9 houses with

negative amortization loans as gambling.

Nothing about the single family homeowner in a pickle because some feckless loan officer put them in an ARM without their complete understanding of the reality of the increased payments due to rising interest rates (which had/has to happen because of Greenscum's duplicity).

:toast:

[nbcouch]

25. VERY well said

Bravo! I would only add that people need to consider why an otherwise reasonable person would bite on some of these mortgage deals in the first place. The answer for many of them is that they were desperate - desperate for anything that would keep them afloat even temporarily.

For most people in this country the "recovery" from the '01 recession was no recovery at all, so this current recession is only a matter of degree. Things have gone from bad to worse - not from good to bad - these last few months. And the Two Americas were never more real than they are today.

[greengestalt]

18. No sympathy

Whenever there's a "Boom" of some sort, there's a fascist mentality around it... "I don't like negativity in my department, you're fired." The booms are highbrow "Pyramid" schemes, just by people so high up the government doesn't approach them.


Look at, for recent example, the "Dot.com" boom. The enthusiasm was generated by the media, and the original starters were already grossly rich. But, stories of rapid inflation of profits in new technologies fueled a lot of investment, with companies that owned companies that owned companies having TV shows that promoted stocks they owned.

But, what did we get?

IMHO, the only good thing is better computer power, though I think the 'progress' was deliberately slowed and in some cases (multi-processor systems) stifled for a while. In the meantime we had "Companies" that only existed in the heads of blatant tripped out MIT grads that went from their dope fantasies to being traded for a total worth of US$1 Billion in the dow. Despite lack of silly things like "A business Model", a product to manufacture, customers... And they disappeared overnight after absorbing a lot of real money.

Oh, a lot of companies hired new college grads for "IT" jobs, but this also kept massive social unrest from occuring over the bleeding of older, but REAL jobs to "Outsourcing". Given how idealist people started out in the 90s, it was probably a direct strategy. By the end of the 90's, the IT jobs were being "Outsourced" just as furiously and that's what triggered the "Dot.com" burst. The country was poorer for it, and the pigs went laughing to the bank.


The rich elite didn't even give a decade to recover. They went right to promoting the "Real Estate" boom. Too many ex-ITs had been paid good money for their services, why not get them to "Invest" in homes, hoping to become "Land Barons"... And rent to WHO!? A bunch of other "DotCom" strugglers who could be laid off any day? A bunch of illegals and other laborers who'd ruin the homes cooking Meth in them?


Along the way, plenty of people knew this all didn't add up. But the media mocked them as Luddites, naysayers, greifers, negativists... Oh, and "Hicks"... I fall into the latter category...


I'm in a northern western town. The dot com boom meant lots of IT companies moving in, but they didn't hire locals that much, except as janitors, or disposable workers. Even if you went to school and through real life experience and personal training you could do far better than lots of these out of state grads, you were still second class to them. Save a company $8 million one week, get a pat on the back, nothing else, then be fired the next because somebody's college friend lost half the clients. And they indeed started buying up homes, for their own high tech resting places. That drove real estate prices up, along with the property taxes for everyone.

Now, here, the bubble is bursting leaving lots of new real estate empty and people struggling against foreclosure. Not because they dabbled or went wildly into debt, but because they couldn't afford the property tax and/or their job disappeared or was diminished.

We have a lot of homes on what used to be farmland. One by one, there's an "Arson", often blamed on ELF, but its so obvious (except to the cops) its the investor looking for insurance money to re-coup the investment. After all, the insurance company will just pay him his investment since things like "Auto insurance" is mandatory, so they can just raise prices elsewhere to re-coup it.

[UpInArms]

23. welcome to DU, greengestalt!

glad to have you here!

:hi:

[Chovexani]

47. Now that's some real talk

:thumbsup:

[notesdev]

48. Arson and the ELF excuse

Interestingly enough, my business' general liability insurance policy came with a no-liability-for-terrorism rider this year.

Arson has apparently become quite the fashion as an 'out' for underwater borrowers. I blame in part all those Toyota commercials that promoted insurance fraud as a means to buy a new car - it's not a big step from vehicle insurance fraud to real estate insurance fraud.

[pattmarty]

19. Ya know what I say; too fucking bad.

[ohio2007]

21. Playing "flip this house" the bubble burst....he loses. It was a risk he accepted playing

get rich quick real estate tycoon.

the bigger losers were the people who couldn't afford to pay a mortgage that were given mortgages.

[ckramer]

27. Yet the same risky speculation by the big banks were bailed out

by the Fed using billions of our taxpayers' money today. F***!

This is called socialism for the rich.

[InkAddict]

29. By this time I know I'm wasting my breath, and most of you

have probably put me on ignore...but geesh, where was the support and outrage for the forerunners of this clusterfu*. NOW, you want to give bailouts to "deserving" folks. It reminds me of a dangerous intersection without a stop light...to get TPTB to put up a signal, a certain amount of people need to be killed, maimed for life, or otherwise inflicted with loss before even an investigation or signal request can be put forward let alone installed. You hear the stories, but that happened to somebody else, an isolated incident...only after that indeterminate # of crashes has occurred so EVERYBODY knows that intersection is plenty dangerous, does anything at all happen.

Where was the support for those of us who lost whole lifetime careers and stable incomes,as well as our homes, not investment units, while we tried to balance the escalating costs of college for our children and caring for WWII folks to came to feel that they had "earned" not only their government subsizied housing, but their big bonuses, vacations, Cadillacs and Beemers, their fully paid healthcare and pensions, those MFs that after bailing out their stupid kids unwittingly caught in gas wars, outsourcings, and etc..., that their "hard work" was somehow morally superior to their children's labors. Mozilla got his billions, your employers got their tax cuts so they could improve what? your salaries, your equipment, or precious phony well-being in "teambuilding outings," and self-contratulatory office parties featuring bowls full of shrimp and erotic cakes, and pizza lunches on the boss, but it wasn't your job that went bye-bye...

I'm not against welfare for people with work ethics that demand one contribute to the system not leach off of it; however, I'm pretty bitter that only NOW does anyone want to assist those getting the shaft and not because they lost job(s), sometimes in multiple industries after retraining,...no...because they can't read their loan documents...or they gambled and lost big time.

Would you rather have had the kids hanging around on the street corners instead of studying hard to join an increasingly competitive GLOBAL workplace. Finding a niche that fits isn't as easy as it once was, and now that struggle may hardly be worth the struggle. Would you rather decide that your Mother or Father, your child, be institutionalized at the lowest level of care on your tax dollar, especially if they took the time or extended their charity to you as you grew and found your way?

I was reading about "economics" at this site: http://www.econlib.org/library/Enc/PhillipsCurve.html

I found two things outdated with the message: 1) It continues to talk about the US, as if there was a closed box around it (for statistical use, of course :sarcasm:, but the globalists who've taken over don't recognize national boundaries; 2) It doesn't account for the corruption of "basic" rules of lending: one doesn't give loans to persons who have insufficient income to meet the terms of the loans they are cut nor how sleight of hand changed "bad" debts into assets.

Then I checked out a faculty working paper here (LOL):

This looks like it should have been entitled "The Fed Chairman's Excuse..." It was all very simple, really, just HUMAN error; they were just blinded by illusion...yet behind every illusion, there are the creators, the magicians...Why are we still watching the show...because we're entertained and pleasantly lulled and distracted by the magic that hasn't YET hit YOUR reality buttons. Finish later, TORNADO SIRENS.

[Hugin]

31. ...

No ignore here, InkAddict.

Valid point.

[rumpel]

32. but then again,

the system is as such that it freely lends to people who do not need a loan, and deny a loan to those who want to generate and create an income.

[UpInArms]

42. tornado sirens????

:scared:

be safe, InkAddict!

[InkAddict]

44. Sorry, the sirens went off after a funnel cloud was sighted in

W. Jefferson, outside the NW 270 Columbus beltway early this afternoon and I didn't have time to post the 2nd link. It's here for those interested:

WARNING: PDF FILE:

http://harrisschool.uchicago.edu/about/publications/working-papers/pdf/wp_06_02.pdf

[jmowreader]

33. I don't think this guy WANTS to be bailed out

Introducing Shawn Forgaard: the Welfare Mother Driving A Cadillac of the New Millennium.

Mr. Forgaard decided to flip nine houses using the riskiest form of mortgage I ever heard of. Negative amortization loans are an even more advanced form of insane than the traditional interest-only loan, where the payments at least cover the interest. If the economy would have stayed good, he would have turned a profit on all nine deals and we'd be reading about him in the paper as a great, wonderful leader of the new financial vanguard, or whatever you want to call someone who gambled huge and won. Unfortunately for him, the economy hit the skids and his whole financial world fell apart.

Oh fucking well. It's a gamble that went to shit, but relatively speaking it wasn't huge--it's possible to lose millions shorting stock or buying futures. And he's handling it fairly philosophically--I fucked up, I won't do it again.

The real problem here isn't that Shawn Forgaard lost $800,000 gambling on the real estate market, but that our right-wing media is going to use him as The Example of why banks, builders, material suppliers, Realtors and everyone else in the housing-market foodchain except for homeowners deserves to be bailed out. Because, you know, banks would never push people into rotten loans, builders would never stop building well-constructed, sensible houses in favor of $500,000 3000-sf castles with 20-year shingles, Masonite siding and polybutylene pipe embedded into concrete slab foundations, and Realtors would never change a mortgage application to get a family who makes $2500/month into a $400,000 home...but homeowners will routinely buy ten houses using paper so bad it doesn't even cover the interest. (Skinner, when is the "extreme, biting sarcasm" tag coming out? I need that.)

[mulsh]

35. bail out the vast majority of home owner but enact regs which

exclude greedy idiots like Shawn Forgaard.
10 houses, ocean from property in Santa Cruz, that's not the low rent area. I'd say he really hasn't learned his lesson. bet he gets the small business equivalent of a negative amortization loan. I wonder where he got his MBA.

[Zuiderelle]

36. "he now considers it a mistake to have invested in the real estate market"

:rofl:

[benld74]

37. $800,000 in stock options and put it into Real Estate!

A true project manager knows the risks of doing things. To him 800K into real estate in 2004 wasn't a risk? I hope to hell he doesn't EVER work for me as project manager. At least the poor bastard still has a home for his family to live in. Alot of people don't have that. He must have taken the infomercial course on flipping houses for fun and profit!

[Sen. Walter Sobchak]

38. I am also in the no bailouts camp

The problem I have with a bailout is first and foremost that you really aren't helping a homeowner by keeping them in a half-million dollar mortgage on a house that isn't going to be worth half that.

Secondly the purpose of the bailout is to keep people in those houses to prevent a total melt-down in housing prices.

A total melt-down in housing prices would be a GOOD thing as it would enable REAL home ownership by ordinary people actually being able to OWN a home - rather than Bush home ownership built on sucker-punch mortgages you will never pay off.

While painful for a time, resetting the housing market would be the best thing that could happen for the comming generation of Americans.

[xioaping]

45. You have it right

the only thing I would add is that the foreclosed home inventory is not shrinking faster than it is growing. While there are still a bunch of them out there, there are also people buying up foreclosed homes.

The same is true for inventory of new homes. Developers are selling at half price and finding buyers. They are just trying to get their money back, minimize their loses.

It is no longer a situation of not being able to sell a home at any price. The bottom has been found. I'll qualify all that by saying I am not an expert and happy to have any differing views.

[NorthernSpy]

41. speculators like him drove up the cost of housing, but I don't have the heart to bash him...

It's just a bad situation all around, that's all.

[mcollier]

43. It is bad...

Renters are paying almost as much as homeowners. No talk of bailout to renters who have seen their cost go up like crazy... The banks have been helped significantly ( 1.6 trillion dollars in cash into the financial markets in 9 months), it goes back to who has a voice in Washington... Its obviously not the ordinary American family.

[xioaping]

46. People I know that are renting are finding

that the can get a great deal on a brand new home and no longer have to settle for a shack at a high price. Or they are making the move to buy because what they are paying in rent is the same they can buy for.

As long as they qualify and have some money for a down, they can own a home. That is the plus side of what has happened. The bailout was to save the country from economic collapse. It is also the reason the dollar has fallen so far in value. Print a trillion and the value goes down.