Foreclosure at 3023 N. Kenmore Sells for 62.5% Off 2006 Price
Remember the bank-owned condo at 3023 N. Kenmore in Lakeview?
The three-unit building had been converted into expensive condos at the peak of the boom.
See our February 2008 chatter and more pictures here.
The bank-owned unit has sold.
A quick refresher on the building’s history:
The building originally sold in October 2004 for $739,000. It sold again in June 2005 for $998,000. The three units were then sold as condos in 2006.
Unit #3:
- Sold in October 2006 for $669,000
Unit #2: 3 bedrooms, 2 baths
- Sold in October 2006 for $664,000
- Bank-owned in 2008
- Was listed in February 2008 for $339,500
- Sold in January 2009 for $249,000
- Henry Jones at Jones Realty had the listing
Unit #1: (no idea size of this unit)
- Sold in October 2006 for $574,000
- Went to foreclosure auction in February 2008 for $459,200
- Sold in August 2008 for $172,500
hahahaha, OK, nice catch on this – this is one the most egregious cases of flipping nonsense I’ve seen in a while.
also illustrates what I’ve been saying about ARMs – I’ll go out on a limb and say that the three mortgages taken out for the individual unit sales were not 30 year fixed ones.
this is insane inflation for no/little value added (the swell tile notwithstanding) – the three units sold in Oct 06 totaled a whopping $1.9m, compared to the building’s sale price 17 months prior of 998K in Jun 05, which already was ridiculously inflated from the $739K in Oct 04.
greed, greed, greed.
Unit 3 is also a foreclosure and on the market right now for $269,900, it’s a 3 bed/2 bath, no parking. The $664,000 price is when the former owner re-fied. It was originally sold for $574,000.
Unit 1 is a 2 bed/2 bath and did not have parking.
Also there is no active homeowners association, so no reserves, etc. Unit 2’s listing mentions there are some plumbing problems. My guess is something shady (ie mortgage fraud) was going on here, and nobody ever really lived in the units.
Here’s my boldest prediction ever – the remaining non-foreclosed unit will end up in foreclosure! Could it possibly be that all three sales were blatant mortgage fraud?
JC beat me to it on Unit 3.
Also they were all conveniently sold at ridiculously high prices all in October 2006? Somebody got rich off this fraud, and the bank should be made to pay the price by going away and being liquidated.
You make shady loans, you should be made to pay the price. We’re all adults here and if there are no consequences for bad decision making history WILL repeat itself.
Letting these banks survive is like letting a fifth time DUI offender only do a weekend in the tank. Like drunks can’t help it the bankers greed will blind them to similar risks in the future if we don’t let the ones holding these loans go under and fire their management and employees.
If we do it your way Bob, we won’t have to worry about insane financial risk-taking in the future.
Sure, maybe whatever lender bought these wholesale loans (not checking, just informed speculation) should have disbelieved the lies they were told, but should they have financially-strip-search every loan applicant?
anon(tfo),
I wish we could get granular detail on those three mortgages. I’d be willing to bet that not one of the three had an extended credit history here in the US. Yet this, or three different, banks gave each of them over half a million dollars.
Sorry but if I was running a bank I’d stick to the common sense principle that I’d want an extended credit history, background check, employment history and residence history before handing over a sum of hundreds of thousands of dollars. In fact you can get all this information on someone fairly easily off the internet for under $50.
Bob its funny how you speculate that because something is overpriced – a fraud must be involved.
suckers – yea, fraud – no, it takes more to prove
“I’d be willing to bet that not one of the three had an extended credit history here in the US.”
Well, sure, but that’s one of the problems with wholesale lending–you’re outsourcing your credit review to a 3d party who works on commission. The incentives are screwed up. And the Bank, reasonably I think, doesn’t assume fraud on the part of the broker. It’s way too easy to dummy up all the docs, including the credit report.
Sure, the Bank will catch on at some point, but if the con is run fast enough and big enough, you clear a few million and become a ghost. And once you’re committed to participating one fraudulent loan transaction, may as well be in for the pound.
Speaking of mortgage fraud (considering I just returned from court on a case involving it); it was prevalent and widespread. Lending standards went out the window; and sellers regularly set up inflated deals with straw buyers. Dummying up docs (to release liens and such) was only gravy. You would be shocked if you truly knew how much fraud was perpetuated. This deal was probably fraud. If it looks like fraud, smells like fraud, etc…..I only see a portion of what went on out there and it’s truly shocking the numbers involved. Figure a couple million per fraud per crew per year; and figure dozens if not hundreds of crews per major city….
Totally fraud. anon tfo is right.
Hey does anybody have the Steve Rental “Back of the napkin” formula? I want to check something.
dotcost I wish there were a way we could bet money on my speculation. From looking at the transactions in this building it is painfully obvious it was a fraud perpetrated by colluding parties to me. Tough to prove in court? You bethca because its my guess you’d have trouble even locating the parties these days. I’d bet somebody is smoking a stogie counting his euros in Bratislava by now.
anon(tfo) you raise some good points. I still feel solomon’s sword should fall on the bank then for outsourcing this critical piece of the transaction. Wholesale lending is imploding right now and for good reason. I wouldn’t trust anyone else to do a thorough screening if I were loaning someone hundreds of thousands of dollars.
And lets be honest: the banks went the wholesale lending route likely because it was a cheaper way to originate loans. They saw the short term margin gains from this and decided it was a good idea. Well we all know the adage that sometimes you get what you pay for. The fact that they made the poor business decision to outsource their due diligence for short term profits does not change my opinion.
It wasn’t just eastern europeans in on mortgage fraud. It is in every ethic community; more common in some than others.
Obviously post-ante (in hindsight), wholesale lending was a bad business practice whose long term returns did not justify the risk.
However, pre-ante, there was disagreement among various bank management teams about the long term risk adjusted returns of wholesale lending. There were smaller banks who never engaged in wholesale lending or dealt with mortgage brokers.
Obviously these smaller banks were correct in hindsight and the other banks were not. I would venture to say these banks that were correct have more competent management teams than those who were incorrect.
Why are you so against letting the banks with the inferior management teams go under and be absorbed by the banks with the superior management team who were proven correct in retrospect? Is America still a meritocracy?
One more issue: a lot of these fraudsters are difficult to track down because they never operated in their own name; they used straw buyers, forged powers of attorneys, fake releases of liens, etc. When they did operate in their own name, there were usually unlicensed. The number of unlicensed real estate brokers and realtors putting together deals and looking for commissions in some communities was mind boggling. Especially those people in the mortgage rescue scam; they would cash out the equity in a victims house by selling it to a 3rd party straw buyer for an inflated price, never using their own name and then on top of it all, try to collect a commission for putting together the deal or loan. I’ve seen cases where the scammer put fake liens on homes on behalf of shell companies they control for the sole purpose of siphoning off equity at the closing. Unbelievable, really.
“because something is overpriced – a fraud must be involved.”
I know you didn’t address this to me, but: No, not because it was overpriced. Because all three of them sold for prices higher than “normal” for the area and unit-quality on a psf basis and all three of them defualted w/in 18 months.
**PLUS** no association was formed–even tho a condo dec appears to have been filed, the whole thing could be had for less than the 2004, un-reno’d, price AND the lis pendens on unit #1 was filed 6 months and 2 days after closing, on unit #2–5 months and 12 days after closing which both indicate that NOT ONE PAYMENT was made.
Also, the “unit 3 was refi’d” isn’t supported by the record–2 mortgages at closing for 100% of the $669k. This is the big winner in not having lis pendens filed for 14 months and 5 days–with an intervening assignment of the mortgage which might explain some delay.
This isn’t overpaying, it’s fraud.
“does anybody have the Steve Rental “Back of the napkin” formula? ”
12*(monthly Rent-assessments)-Taxes/.055/.8 = Value.
Drop the /.8, and it’s not absurd, assuming that the unit can be financed for 5.5% fixed rate or less (or you’re happy with a 5.5% cap rate).
eastern europeans? shoot, just look right here in Chicago where the Gangster Disciples had a cottage industry going (they apparently watch the Sopranos):
http://chicagogangs.org/index.php?pr=NEWS15
as for this:
“Letting these banks survive is like letting a fifth time DUI offender only do a weekend in the tank.”
Considering the TARP bailout, I’d say the analogy is closer to giving them a bottle of bourbon along with their keys back.
“Why are you so against letting the banks with the inferior management teams go under and be absorbed by the banks with the superior management team who were proven correct in retrospect?”
Because I don’t think that the managment of Your Neighborhood Bank could run just the retail banking operations of Citi, or BofA or Wells (or any of the other top 40 banks), nevermind the other parts of the operations.
And, while I’ll admit that it is possible that letting the top 40 (or whatever–at least the top 10 did buy wholesale loans) US banks fail *might* not lead to an economic cataclysm, I wouldn’t bet $5 on it w/o very, very long odds (any winnings to be paid in Yuan).
And, even if the US top 40 were allowed to fail, they wouldn’t be taken over by YNB, N.A., they’d be taken over by banks from Europe, China, Singapoer, etc. and while I’m not xenophobic, I don’t think that’s a good idea for a lot of reasons.
anon(tfo),
You try to sound rational and detached but I am convinced you are in bed with the US banking system in some form or another and stand to lose personally if my position comes true.
Obviously the management teams of Citi, BofA and Wells aren’t very good at running their retail banking operations either as they took grave risks with the balance sheet of their organization and now they stand to have them shut down (hopefully).
Retail banking isn’t rocket science. Trust me I’m an account holder at a credit union as well as one at a megbank. Other than different logos and login screens things aren’t very different. Retail banking is not very complicated.
Things would be just fine letting the banks that have effectively failed go away.
” in bed with the US banking system in some form or another and stand to lose personally if my position comes true.”
I don’t think that there is *anyone* in the USA with above-median assets/income that isn’t “in bed” with the banking system to an extent that would cause them to lose if your scenario came about. So, with that out there, you’re right. I think I’d lose–badly–but not in any much worse proportion than everyone else.
“Things would be just fine letting the banks that have effectively failed go away.”
Hey, you believe what you like, I think you’re wrong. I think **you** stand to lose personally if your position comes true–and I say that with the assumption that your assets are entirely held in gold secreted (a) in a vault in Switzerland or (b) under your bed.
But I’m done with this discussion for today, in large part b/c we’ve already driven off most of the other regulars.
PS: “Retail banking is not very complicated.”
The process isn’t, but making sufficient money off of it in a competitive market is a little more so.
Anywho I showed this building a few times. The last time I showed it was around this time last year. The bottom units floors were coming up and the pipe was half exposed on the ground. There was some definite problems going on down there. The enitre unit needed soo much work it wasnt even funny. The middle unit was in OK shape, but two of the “bedrooms” were tiny. I would say one was 8×7 and the other was 9×9. The “master” was like 10×11. I dont think you could fit a twin in one of the bedrooms. It was that tiny. The upstairs unit was in ok shape as well, but the room sizes were really small again. There was no HOA and I was told that they would only accept cash offers. (I am not sure if that was still the case) I am pretty sure the porches had some violations against them by the city, but if they didnt, they soon will. They are in terrible shape. I could only imagine how bad of shape the roof was in. Plumming throughout this building seemed to be a huge issue as well.
I wonder whether the 2005 “purchaser” condo’ed the building and then refinanced via “purchase” of three separate mortgages for three newly created units. Original unit prices seem outlandish, but creative scamming may have occurred.
“via “purchase” of three separate mortgages for three newly created units.”
Three different, fairly white-bread, names for the buyers/borrowers. 05 buyer/06 seller has a filipino name
anon(tfo),
I trust William K. Black’s opinion and position over your fear mongering:
http://www.pbs.org/moyers/journal/04032009/watch.html
Anon (TFO):
“Well, sure, but that’s one of the problems with wholesale lending–you’re outsourcing your credit review to a 3d party who works on commission. The incentives are screwed up. And the Bank, reasonably I think, doesn’t assume fraud on the part of the broker. It’s way too easy to dummy up all the docs, including the credit report.”
Mortgage brokers do not underwrite the loans or perform credit review. It isn’t outsourced to a third party. When a mortgage loan is brokered, the funding bank actually does all the due diligence and credit review.
Pass through lenders or correspondents (basically brokers with credit lines) will underwrite and fund loans and sell them to larger banks post closing. However, the risk is that we actually have to buy the loan back from the bank if it doesn’t perform whereas pure mortgage brokers do not.
Nevertheless, anytime I hear a bank claim that a mortgage broker submitted bad loans or that mortgage broker loans don’t perform as well, I have to call BS on the part of the bank. The bank creates the loan products and underwrites the loans, not the broker.
Not saying there aren’t shady mortgage brokers, but brokers have been unfairly targeted in this mess. Yes, this property has mortgage fraud written all over it.
Banks caught on to the flipping shenanigans around late 2006 when they started requesting 12 month chain of title. Prior to then, banks weren’t really paying attention to the ownership chain/mortgage chain which is why you see all these purchase, cashout refi, and then foreclosure patterns.
“I trust William K. Black’s opinion and position over your fear mongering”
I read the whole interview. He never says what will happen, if we let the banks fail, just that (1) we should let them fail, because they perpetrated a massive fraud, and (2) everyone in the administration (who has better info than he does today) is afraid of the consequences of letting them fail. He’s probably right about both of those things. But he doesn’t offer **any** insight as to what would happen if we let them fail beyond “we can rely on deposit insurance”. WooHoo! Deposit insurance!
And I’m “fear mongering” to the same extent that you are calling for tar and feathering.
“brokers have been unfairly targeted in this mess”
Ed:
I’m sorry you’re in the same biz that a bunch of crooks inhabited, but you’re just talking your book. Hopefully, you and you peers will impose some self-regulation and do a better job at it than the NAR.
There were certainly bad brokers in the business and I have been saying for years that the associations need to do something about it. Fortunately, most of the scumbags have gone back to the car lots or started doing loan modifications or went to work at big banks in their boiler rooms. Unfortunately, the remaining true professionals have to pick up the pieces and deal with the political fallout.
Nevertheless, my point was just that these fraudulent loans are so prevalent because the banks simply chose to ignore that it was going on since everyone was making so much money. The foreclosures aren’t really the crisis… the true crisis is the amount of fraud and speculation that invaded the market place which is what is vastly underreported in the media. I would bet more than half the foreclosures in Chicago are due to outright fraud.
We’ve worked our way through much of the fraudulent loans; today most foreclosures are due to shoddy underwriting and giving mortgages to people who should have never gotten them in the first place and investors who have just given up. A while back I saw a rate sheet for indymac – they were giving 95% ltv to people with 580 FICO scores. Amazing.
“brokers have been unfairly targeted in this mess”
Ed:
I’m sorry you’re in the same biz that a bunch of crooks inhabited, but you’re just talking your book. Hopefully, you and you peers will impose some self-regulation and do a better job at it than the NAR.”
Ha Anon! you forgot the rest of the crooks – attorneys, insurance salesman, doctors, drug companies, lenders, stock brokers, money managers, car salesman, investment bankers, politicians, ect, ect ,ect. This is capitalism at its best. You see to make money you have to take someone else’s money. The rich take a lot of others peoples money and the poor take just a little. Some do this in suttle fashion and some do it all at once and run.
“This is capitalism at its best.”
Capitalism = theft, Stevo? I had no idea you were a Marxist.
Or would it be more accurate to call you a Proudhonist?
Out of 32 comments, only one person, steele, hasn’t talked about banks, eastern europeans, etc. Has anyone else been inside the building and if so, what did you find?
http://chicagoismynewblog.wordpress.com
I actually looked at the middle unit a few weeks ago. I echo Steele’s comments. All three of the bedrooms are very small and there was water damage in one of the smaller ones. The master has a very odd block windowed wall. There are no appliances in the kitchen. The building seems likely to have a few other problems as well. Seems like a pretty big risk and a potential nightmare.