California man losing nine homes in mortgage mess
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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.

It was those "neg-am" loans, which include triggers causing payments to balloon if the debt reaches a certain percentage of the original balance, that would come back to haunt him.

"I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.

"I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were," he said.

The mortgage market has melted down in the past two years in a crisis that began in the subprime sector and has left millions of Americans facing the possibility of foreclosure on their homes.

'THIS COULD GET UGLY'

Forgaard bought his first investment home in the booming housing market of North Las Vegas in 2004, followed in the next two years by eight others in such hot markets as Phoenix and Palm Springs, California, before he realized in 2006 that the situation was worse than he had feared.

"I knew that the market was soft but at that point I'm realizing that this could really get ugly," he said. "At that point I had a bad feeling in my stomach."

Forgaard thought he still had enough equity in the homes to "take a huge hit," possibly losing most of his investment, but thought for a while that he could still ride out the storm.

"It really wasn't until five months ago that I realized, 'Hey, you know what? Not only am I going to lose everything I have invested but this is going to force me into bankruptcy," he said.

"I'm going to lose my car and my primary (home) and we're not going to be able to live in Santa Cruz, where I was born and raised, and live by the beach. And that was pretty tough to take."

Experts say speculators like Forgaard, who count on real estate values to keep rising to pay off their debt, play a risky game and doubly so when they use neg-am loans.

"You are essentially betting the house on the strength of the housing market and if you're that leveraged in debt and the market goes down, you're going to lose your shirt," said Austin King, director of the community organizer ACORN's Financial Justice Center.

"To do it eight or nine times over is eight or nine times as foolish as just doing it once," he said.

The Forgaards likely will sell their Santa Cruz home and declare bankruptcy before banks start foreclosing on his properties. With a newborn son, they intend to start over in his wife's Northern California hometown.

Forgaard said that some good has come out of the experience and that his family is optimistic. He is relieved that he no longer has to deal with 10 homes at once and now will pursue a lifelong dream of starting his own business.

"Where I went wrong is I invested heavily in an area that wasn't my passion and I had a really demanding full-time job so I couldn't pay attention to nuances, the little indicators telling you the housing market was going soft," he said. "I was in over my head."

(Editing by Xavier Briand)




© Thomson Reuters 2008 All rights reserved

I live in AZ, this seems to be a common story here.

Quote:

THIS COULD GET UGLY

And entertaining! I'm going to be laughing my ass off at these losers. I hope California takes a real raping in this because that's what it's going to take to learn the lesson that we seemed to have forgotten from the last Depression.

And I admit I'm going to be HAPPY these people are destitute because they walked around my office with their arrogant, "I'm taking a HELOC because, hey, it's free money. Do you have free money like I do?"

(Well not technically free, I do have something called "savings". You can read about "savings" on Wikipedia).

I have no sympathy and I'm sad that it doesn't snow in Los Angeles because the appropriate time to kick these losers out of their houses is when the snow is deep and cold.

LMAO

That article headline is wrong. This jackass is losing 9 investment homes plus his own home for the total of 10.

This is insane. I can see taking a chance and losing one or two properties but to have 9 investments?

I think he should be bailed out. We need to encourage this reckless behavior. I am going to forward this story to my congressman and ecourage him so that we bail out these idiots and possibly add a multi-billion dollar aid package called the Gamblers Second Chance Stimulus Package. This stimulus will be aimed to help Americans who have lost money at the casinos the last 2 years. The catch will be that the checks must be spent on a casino floor. We need to backstop any and all reckless behavior.

Sarcasm off.

Bozonian -

How do you really feel? ..."kick these losers out of their houses is when the snow is deep and cold."

BK may be the least of this guy's worries. He doesn't seem too bright so it wouldn't surprise me in the least if he lied about the occupancy status on some of these loans (i.e., primary vs. investment). He also would have to disclose the number of homes he owns on the apps. Yeah, yeah, that should show up on the credit report, but then that would assume some level of underwriting at origination, no? And given that these were CA/Vegas option arm loans, I think we can assume there was none. Lying on a loan app about anything material-- and both examples would be-- is a Federal offense.

It also follows that the bagholders for these loans have seen this article. I'm sure they are digging through the loan apps right now. Even if they are purchase money loans (typically non-recourse), the lien-holders ALWAYS have recourse in cases of fraud.

Again, if this guy lied, then a BK judge is going to take that into account. And my guess is he's not gonna be understanding either.

What a friggin' dumbass. Why in the hell would you give an interview and put yourself in potential civil and criminal jeopardy? 15 minutes of fame?

Sorry, I'm trying to hold back how I really feel. We're in polite company you know.

The Banks that made these loans need to be shut down.

It used to be you had to have money to make money. You were required by banks to put your nuts in a vice before they would even think of giving you a loan.

OH well let the mother ****er burn.

"The Banks that made these loans need to be shut down."

Say good bye to Chase, Bank of America, Wachovia, Citibank, and every major brokerage firm in the United States if that happens... These guys are all holding loads of **** sandwiches!!

At least he did put 10-40% down. That is still more than most people! But, he did choose 3 of the worst housing markets possible, so, burn baby burn.

Notice how the article does not even mention the rent he was getting on these investments. If he had taken that same 800k and bought rental properties in the DFW area putting 10-40% down, he would own many more than 9 rental properties and they would all generate enough rent to cover his costs. Of course, this assumes he was smart enough to buy houses in the 110k-130k range that rent for about 1.2k.

He's smarter than some. He recognizes now that he was totally out of his depth and it was his own fault.

Some people still whinge incessantly and blame others.

"I knew I was sitting on time bombs," Forgaard said. "I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.

"I didn't anticipate a downturn of epic proportions such that home values are 40 percent less than they were," he said.


He is a Project Manager.
I wonder how that is working out for him based on his stupidity in managing this personal project. Glad I do not work for the company he works for.

I actually like his positive attitude given his situation. It is a good way to live life BUT that amount of leverage in an investment?!! Yowzah! He didn't even do it properly with an LLC or such...

The dumb ****er had $800,000 in stock options and couldn't be satisfied. Hubris, arrogance and ****ing GREED.

Now he has to leave the area, uprooting his kids/wife...I'm sure that will go well.

Idiot.

Makes you wonder how a fool and his money ever got together in the first place.

America, the land of BOLD action. Bold is what makes the man. We're oh so bold, those of us with the cajones! Yes, but no one explained that the leverage of bold action make stupid moves even stupider.

This isn't just an issue of greed, or of stupidity - it is a cultural issue foisted upon the gullible by all forms of popular media.

And there is no better example than the man at the top of it all.

Always look on the bright side of life ......

^
Some things in life are bad
They can really make you mad
Other things just make you swear and curse.
When you're chewing on life's gristle
Don't grumble, give a whistle
And this'll help things turn out for the best...

And...always look on the bright side of life...
Always look on the light side of life...

If life seems jolly rotten
There's something you've forgotten
And that's to laugh and smile and dance and sing.
When you're feeling in the dumps
Don't be silly chumps
Just purse your lips and whistle - that's the thing.

And...always look on the bright side of life...
Always look on the light side of life...

For life is quite absurd
And death's the final word
You must always face the curtain with a bow.
Forget about your sin - give the audience a grin
Enjoy it - it's your last chance anyhow.

So always look on the bright side of death
Just before you draw your terminal breath

Life's a piece of ****
When you look at it
Life's a laugh and death's a joke, it's true.
You'll see it's all a show
Keep 'em laughing as you go
Just remember that the last laugh is on you.

And always look on the bright side of life...
Always look on the right side of life...
(Come on guys, cheer up!)
Always look on the bright side of life...
Always look on the bright side of life...
(Worse things happen at sea, you know.)
Always look on the bright side of life...
(I mean - what have you got to lose?)
(You know, you come from nothing - you're going back to nothing.
What have you lost? Nothing!)
Always look on the right side of life...

The funny thing is that this moron got greedy as so many others in the CA market. Between 2004 and 2006 investors in the CA real estate market realized +30% gains. He could have very easily dumped these at a very nice profit however it seems as this idiot sat on a goldmine thinking the upward move would last forever. In my opinion he deserves everything he is getting. CA needs another 40% -50% haircut in order for the homes to be at fair value. Case and point [http://www.ziprealty.com/buy_a_home/logg....]

Jay wrote..

What a friggin' dumbass. Why in the hell would you give an interview and put yourself in potential civil and criminal jeopardy? 15 minutes of fame?

Even if you didn't commit fraud - why do a ****ing interview? That's idiotic on the face of it -

Stupidity beyond belief.

Granted, I am a private person, if I had made ten million on the houses or lost ten million - no ****ing way I would give an interview or even tell anyone other than my wife and maybe one or two of the kids.

Now he's gonna pursue his dream of starting his own business?

Out of touch with reality - Is he gonna take his family down the path to total destitution?

A shining example of ****tard.

A Big Budczynski in the making. Please someone save the wife and kids.

I love when positive thinking meets reality.

I doubt he'll ever see a lump sum like that ever again to "invest".

Zero strategy, instead of buying where he could supervise and manage his properties, he bought scattered "hot markets" where any positive gains would have been paid to the management company.

Just plain stupid, what else can you say?

This reminds me of the Casey Serin story... very similar situation and he was stupid enough to blog about it. He is the poster boy of the housing bubble, including admissions of fraud, greed, and an endless positive attitude that if he just made one more "sweet deal" he would be on his way to riches. He was also a great example of the gullible and starry-eyed mentality of get rich quick folks in California. Armed with a glass half-full attitude, a library of Robert Kiyosaki and Donald Trump teachings, and easy credit, these investors will see themselves jobless, divorced, ruined credit, and ridiculed for their financial ruin.

Sadly, as demonstrated here, they will emerge with an entitlement mindset and will blunder on fueled by the next late-night informercial or ponzi scheme. These guys don't really think that they are losers, they are quick to blame an "extraordinary market condition" or "not sweating the little details" or some mistake that they won't make the next time. I hope they just leave their investing to lottery tickets for next time.

BTW, if you haven't heard of Casey Serin, I'm sure there is a wiki on him. Last I checked his blog was taken down and he was pursuing a book deal on how he lost his 10+ properties. Truly stranger than fiction!

There are old speculators and bold speculators but no old bold speculators