Who’s got the lower IQ? Wells Fargo or these owners?

Interested in 100% financing? Well, read on for a how-to guide on “getting 100% financing in this market.”

Take a trip with me into the heart of Santa Ana… Get off Interstate 5 at First Street and head west. Make a left on South Flower Street. Go about five blocks and then make a right on West Camile Street. You have arrived… welcome to the street of housing woes, where bad judgment meets financial misfortune. I’ve posted about this little street numerous times before (Camile St in Santa Ana – A Warning Bell of Things to Come? and Sold Homes on Santa Ana’s Streets of Woes come to mind). Last year, the OC Register claimed that the 900 block of Camile Street had one of the highest rates of subprime mortgages in the nation. The result was an onslaught of foreclosures and nice people losing their homes.

Sounds pretty dismal, huh? Sounds like not many homes would be selling here… unless they are super cheap distressed properties, huh? Well, not so! Would you believe Mario Gomez and his family just bought a three-bedroom for $625,000? Would you believe Wells Fargo gave them a loan for it? If not, then you clearly have not read OC Register columnist John Gittelsohn’s article from Friday (”$625,000 house on a street wrecked by subprime loans?“).

Per the article, according to loan documents, the purchase price was $625,000, with $125,000 down and $500,000 financed by Wells Fargo. Well, according to Gomez, no money was put down, his loan is 100% financed, and the purchase price was only supposed to be $500,000. He says someone else, not him, paid the $125,000.

I have a hard time picturing some masked super hero floating around paying down people’s loans. If he is out there, please send him my way! So, if not a super hero, who was it? Well, while there’s no paper trail, it’s pretty clear, to me, who was the culprit. Let’s hear about what Gittelsohn has to the house and the seller Sergio Praslin, manager of Asset Disposition Venture Capital LLC:

“A year ago, the house at 920 W. Camile St. in Santa Ana was bank-owned, deserted and tagged with gang graffiti, a symbol of how the subprime lending bonanza had blighted a city block.

In October, the house sold at auction for $304,500, little more than half what a buyer using 100-percent subprime financing paid in 2006.

Today, 920 W. Camile has been renovated, repainted and floored with faux marble.”

Add to the flip job, the fact that Praslin said to Gomez, “No money, no problem,” as well as promising an extra $30,000 and a 52-inch LCD TV, you’ve got something suspicious. Gittelsohn talks about how Praslin was able to get his buyer:

“For the seller, the advantage of paying the down payment was getting Wells Fargo to cover the $500,000 mortgage – as much or more than the house would fetch on the open market.”

So, who made the bigger blunder here, Gomez or Wells Fargo? Gomez, who now has buyers’ remorse and never did get his 52-inch LCD TV, seems to have not fully understood what was happening. He just says, “We wanted a place with three bedrooms.” Well, for three bedrooms, he could have gotten this one just down the street for only $245,000. Now, I don’t know if it comes with a 52-inch TV, but I would think you’d be saving enough to be able to go out and buy your own. I just can’t believe there are buyers out there so clueless to what’s happening with the housing market… and so trusting. Along with the $30,000 to pay the first three mortgage payments, Gomez also thought Praslin would cover the property taxes and insurance (about $7k per year). As if the wheeling and dealing behavior from the seller wasn’t enough to raise a red flag, what about when Gomez went to sign escrow papers and saw the purchase price of $625,000 and that “someone” had paid a $125,000 down payment. This wasn’t odd to him? He saw that it was wrong, but still signed the papers. Now, he’s stuck with a loan for $500,000 ($2,760 monthly payment fixed for 10 years). God forbid he or his wife lose one of their jobs, they’ll surely be headed for foreclosure.

Now, let’s not forget about Wells Fargo. A big bank who would seem to have their act together. They won’t refinance me and I’m not even trying to buy a house for $625,000 worth $250,000. Just think, in October the very same house was valued at $304,500. Less than a year later, the value doubles while surrounding houses drop. Unless they painted the walls with gold or something, I can’t believe the sellers poured over $300,000 into upgrades into this place. So, why did they give these two a loan? Were they duped into believing that a 20% down payment showed the owners wouldn’t take a hike later? Was their appraiser totally off? Were they just plain blind? I mean, anyone with an internet connection can pull comps on that street and clearly see they have no business financing a house for $625,000 here.

Very, very strange indeed.