Archive for September, 2009

Madoff’s Mansions on the Market

Marshalls are preparing to put Madoff’s mansions on the market, and victims of his ponzi scheme are hoping to cash in big time. Based on court records, the FBI is revving up to sell an estimated $30 million in real estate and property, all of which will go to his victims. The three homes on the way to market are a penthouse in Manhattan, a Montauk beach house on Long Island and a waterfront Palm Beach retreat.

Vacation real estate Madoff owned in Côte d’Azur that was seized by the feds back in March has since been sold. The chic three-bedroom Cap d’Antibes home netted $1.48 million noted the Justice Department. Funds from the sale are being held at the U.S. Marshall’s office.

Marshalls opened the doors to Madoff’s Manhattan luxury penthouse earlier in September giving the public a glimpse into the lifestyle of the previously rich rip-off artist. The two-story apartment was the location of Madoff’s confinement during his house arrest.

Four fireplaces, a baby Steinway piano, antique rugs, custom-made furniture and other fine furnishings must have made Madoff quite comfortable while carrying out his Ponzi scheme. U.S. Marshall Roland Ubaldo said that the Manhattan penthouse was the crown jewel of all Madoff’s properties seized by the government. It’s easy to see why with all the lavish decorations and furnishings.

A wraparound terrace provides a stunning view of southern Manhattan. His and her closets contain Madoff’s handmade Belgian shoes and boxes of designer clothing that are all packed away and awaiting auction. His den does not disappoint, either, with cherry paneling and a leather bull – his personal trademark.

According to court filings, the apartment was valued at $7.5 million by the FBI. One New York appraiser has his doubts about the appraisal. Miller Samuel appraiser, Jonathan Miller, said that what he’d seen of it so far would be considered fairly modest, in his opinion. He cited that it was not actually a Park Avenue duplex, which is what the press coverage had been calling it. Its address is on 64th Street and it sits a block east on the corner of Lexington.

The Montauk beach house with 3,000 square feet of living space sits on a one-and-a-half acre prime lot atop a bluff overlooking an ocean beach. It sits closer to the water’s edge than would be allowed today due to earlier more lax zoning regulations.

Feds estimate its worth at $7 million, but tax assessments indicate its value at $3.3 million. Regardless, one real estate agent noted that the history and high-profile of the home may cause it to sell for as much as $10 million. Purchased in 1980, the Madoffs originally only paid $250,000 for the home.

Listed under Madoff’s wife’s name, the Palm Beach hideaway is valued at $7.5 million. Featuring a pool, 8,753 square feet of living space, five-bedrooms and seven-bathrooms, the two-story home sits on a waterfront half-acre plot. Included in the property is a boat dock where Madoff parked his now-seized yacht, the Bull. It is a 55-foot fishing vessel reportedly worth $1.5 million.

Well shaded by lots of large trees and a large second-floor veranda, the house sits just down the shore from a location where Madoff lured in many of his victims, the Palm Beach Country Club.

Madoff is making amends in his not-so-luxurious jail cell and the hope is that the victims he left as carnage will be reimbursed for some of their loss and suffering.

Ki lives in Central Austin. He works in the Austin real estate market. His website lets people search the Austin MLS. His site also has information on Austin real estate as well as a search for Homes in Pflugerville

Mortgage Rates Remain at Summer Lows

Mortgage rates remained steady this week. The 30 year again was at 5.04 which is a low for the summer. The other mortgage products remained relatively stable this week except for the 1 year arm which fell from 4.58 to 4.52. Below are rates for the last few weeks. As we can see overall for the last month rates have been steadily falling. But overall the movement has been very small with 30 year rates only dropping 1/10 of a point in the last month.

Sep 24, 2009
30-yr 5.04 15-yr 4.46 5-yr ARM 4.51 1-yr ARM 4.52

Sep 17, 2009
30-yr 5.04 15-yr 4.47 5-yr ARM 4.51 1-yr ARM 4.58

Sep 10, 2009
30-yr 5.07 15-yr 4.50 5-yr ARM 4.51 1-yr ARM 4.64

Sep 03, 2009
30-yr 5.08 15-yr 4.54 5-yr ARM 4.59 1-yr ARM 4.62

Aug 27, 2009
30-yr 5.14 15-yr 4.58 5-yr ARM 4.67 1-yr ARM 4.69

Feb 19, 2009
30-yr 5.04 15-yr 4.68 5-yr ARM 5.04 1-yr ARM 4.80

In addition to rates we like to look at mortgage payments to provide some perspective. We determined mortgage payments for a 200k loan based on today’s rates and rates from September 10th and February 19th.

Sep 24
30-yr $1078.53
15-yr $1525.9
5-yr ARM $1014.55
1-yr ARM $1015.74

Sep 10
30-yr $1082.21
15-yr $1529.98
5-yr ARM $1014.55
1-yr ARM $1030.07

Feb 19
30-yr $1078.53
15-yr $1548.44
5-yr ARM $1078.53
1-yr ARM $1049.33

This kind of shows the same thing in that there has not been a lot of movement in mortgage rates. A payment two weeks ago would be $3.68 more a month (or 0.3% percent more).

Its also interesting that rates are exactly where they were six months ago. Of course six months ago mortgage rates were more newsworthy because at the time 5.04 (for a 30 year mortgage) was an all time low. So although 5.04 is no longer an all time low (rates dropped below 5 in April) and we are not seeing as many stories in the news mortgage rates are still very, very low by historical standards.

The two questions of course are why mortgage rates are not moving, and how long they will stay this low. The expectation is that eventually mortgage rates are going to move up. Some have suggested that mortgage rates could move above 10 percent in a year or two. The idea is that once the economy recovers mortgage rates (along with inflation) will start marching upwards due to the massive government spending during the recession. It seems that although the economy is recovering its doing so rather slowly and this is helping keep mortgage rates down for now. The other question is how long mortgage rates will stay down. My expectation is rates will probably not see that much movement until we see movement in the economy. Once the economy starts moving we should see rates start to move upward.

Ki bikes Shoal Creek when he is not working. He has focused on Austin real estate since graduating. People interested in the Austin market can perform a graphical Austin home search on his site. His site also has a graph of historical historical mortgage rates along with a mortgage rates widget.

Foreclosures of the Rich and Famous

Although the rich and famous are rich and famous, it doesn’t mean that they are impervious to the popping of the real estate bubble. Many have succumbed to real estate woes as of late.

Ed McMahon had tabloids a talking when his real estate troubles became front page news last year. The now deceased celebrity attributed his dollar difficulties to alimony paid out to ex-wives and the economic downturn.

Aretha Franklin set the record straight about her exclusive Detroit suburban home. It went into foreclosure due to non-payment of property tax. She could have lost her $400,000 home to foreclosure due to $445 in back property taxes that accumulated into $20,000, since 2005. She said it was an oversight by her attorney. Once alerted of the situation, the Queen of Soul satisfied the debt.

Amber Frey, infamous ex-mistress of convicted murderer Scott Peterson lost her home northern California home to foreclosure. At auction, the asking price was over $200,000 less than the original purchase price. No one snatched up the deal at a low $305,000. She ended up surrendering the property to the bank.

Fantasia of American Idol fame came close to losing her home in Charlotte, North Carolina. The R&B singer settled with her Florida lender just days before the auction was scheduled to sell her pond-front home.

Extreme Makeover scandal hit the Harper family home in Atlanta, George when it went into foreclosure and would have been sold had it not been for … even more … generous donations. The most expansive Extreme Makeover ever seen was completed with much dedication, sweat and effort by volunteers, along with a deluge of donated dollars. Taking out a $400,000+ loan for a construction business that went belly up put the Harper’s home in harm’s way.

Laura Richardson, California Congresswoman, fell behind on property tax and mortgage payments in 2008. To the disdain of Sharon Helmar who sold it to her, the Long Beach home went into foreclosure and was sold. Neighbors noted that she did not keep up the lawn or take out her garbage.

Sports figures are not unfamiliar with foreclosure, either. Latrell “Spree” Sprewell, former NBA guard known for choking his then Coach P. J. Carlesimo, lost his 70-foot yacht and his Milwaukee home to foreclosure. Assessed at a mere $668,000, the home’s value was nowhere near what most other sports professionals in his pay range own.

Jose Conseco experienced women woes, which caused him to lose his expansive 7,300 square foot Encino, California mansion. At least, that’s his story. He said he lost $7 to $8 million on his two divorces that left him hard up for cash and was unable to pay his mortgage.

Not to anyone’s surprise, Michael Vick’s home was in foreclosure, since he was in prison and no longer could come up with the cash. Once NFL’s highest paid player, the dog-fight diva was convicted and was to serve 23 months in prison. He was released earlier this year to serve out the rest of his sentence in home confinement.

Evander Holyfield, famous for his fight with Mike “I’ll Bite Your Ear Off” Tyson, had his Fairburn, Georgia home in foreclosure. He was also behind on child support payments to a mother of one of his eleven children, and being sued for not paying $550,000 he loaned he owed to a consulting company.

Michael Jackson (King of Pop), MC Hammer (Hammertime fame), Veronica Hearst (Randolph Hearst widow), Scott Storch (previous hip-hop producer), Damon Dash (hip-hop mogul), Doug E. Fresh (rap icon), Vin Baker (former NBA star), Wyclef Jean (Fugees’ frontman) and other famous actors, performers and sports professionals have all experienced foreclosure.

Ki graduated from UT with a CS degree. Now he works with Austin real estate. He has a website allowing buyers to search Austin MLS listings. He also keeps an updated blog on Austin Texas real estate.

How to Avoid Mortgage Fraud

News articles throughout the U.S. headline stories about indictments for mortgage fraud. Although you may think you could never be scammed, you should think again.

Above-average, intelligent, middle-class professionals have been duped as well as the average Joe. Almost no one is beyond the long arm of a mortgage scammer’s reach. You can, however, become better educated in the antics of fraudsters in order to thwart the most common scams used.

Today, the most common mortgage scams played out in the media are perpetrated against those who are in danger of losing their homes to foreclosure and homeowners who are eager to sell their properties. Other types of mortgage fraud exist, too, though.

A good example of fraudulent practices against homeowners facing foreclosure is in the case of a recent Florida indictment. One financial company with offices statewide was indicted on several counts of defrauding trusting homeowners in default or facing foreclosure. Promising to help homeowners who were in default of their mortgages to keep their homes, the company was taking money from the homeowners without providing any assistance. Homeowners ended up losing their homes to foreclosure. More often, low-income and Hispanics were the victims.

In order to avoid mortgage fraud, you’ll want to understand the motivation behind it. There are two basic classifications of mortgage fraud – fraud for property or housing and fraud for profit.

Fraud for property or housing typically occurs when a potential homebuyer desires certain property that they clearly cannot afford. The borrower submits intentionally fraudulent information regarding income, employment, assets or debt in order for the income to appear inflated qualifying the applicant for the loan. This is done with the thought that no one will dig deep enough to discover the facts. Sometimes, the borrower will enlist family members or mortgage professionals to assist in the fraud.

Lenders, however, often detect this kind of fraud through thorough review and validation of documents and by keeping diligent records. Contrary to what many might think, it is against federal law to assert intentional incorrect information on loan applications. Those who do are at risk of being charged with a felony and serving time in prison.

Fraud for profit scams often involve a group of mortgage professionals who defraud a potential homebuyer, a potential lender or a homeowner in danger of foreclosure. One example of this is a mortgage scam played out in the Midwest just recently. A builder, real estate broker, mortgage broker, and appraiser were all involved in a scam to inflate the value of homes in order to skim off the excess of the actual value. The difference of the value of the home versus the loaned amount was distributed among everyone involved in the scam.

After the discovery of the fraud, homeowners find out that they are stuck with paying for property that is valued less than what they actually loaned. Lenders, on the other hand, were forced to foreclose on some of these properties that ended up being worth far less than the amount owed on the property.

Another example may be the case of a dishonest mortgage broker who presents loan documents for a straw buyer – a buyer who does not exist, so fraudulent information is presented on the loan documents to create the illusion of a real buyer who can afford the property. The loan is dispensed and the mortgage broker walks away with the money with no intent to live in the home or pay for the property.

Sometimes straw buyers are represented by real people who participate in the fraud for financial gain. This often occurs, again, when there is no intent to live in the home and often with no intent to pay for the mortgage.

There are more mortgage fraud examples than there is space to write about them. The Federal Trade Commission (FTC) provides thorough information on mortgage scams and how to avoid them. Just go to their site at ftc.gov and search under look for the tabs under Consumer Protection. You’ll find all you’d ever want to know about how mortgage fraud occurs and how to avoid it.

If you are facing financial difficulties that are making it difficult to pay your mortgage payments, you may want to enlist the assistance of an experienced financial advisor. If you do, however, make sure the company you hire is reputable. Check with your lender to see what programs they may offer or if they can refer you to a reputable financial advisor. You may also want to visit Fannie Mae or Freddie Mac sites for new federal programs available.

In addition, free advice is available through the U.S. Department of Housing and Urban Development (HUD) certified agents. Speak to a HUD certified housing counseling user by calling (888) 995-HOPE.

Ki works and lives in Austin. He has been involved with Austin real estate for a decade. His site escapesomewhere.com developed a Austin MLS search with houses and commercial properties. His site also has a Austin real estate blog with news and statistics.