A vacation, a new Lexus... and then, default

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An e-mailer (thanks, TW) pointed out this Wall Street Journal story about the foreclosure mess in Corona. The story contains one of those anecdotes that deserves retelling.

As the Journal tells it, the family in question buys a four-bedroom house in 2004 for $557,000, then refinances three times, most recently last year, for $835,000. They use most of the refi money to pay off credit cards. Got it.

Now owing $6,300 a month on the refinanced house, they try to sell it -- for $839,000 -- into a market swimming with inventory. No deal. Meanwhile, eyeing a new life in Texas, the family buys a 3,600-square foot home outside Houston this summer for $283,000. ‘It was easy,’ says the wife, Karenn Oropeza. ‘We had good credit. The deal was done in seven days.’

Now they own two houses. Got it.

Over the summer, the family of four takes a vacation to the Caribbean and buys two cars: a Lexus and a Suburban. They stop making mortgage payments on the Corona home in June, and they move to Texas. The California house is in default, and likely headed to foreclosure -- the Oropeza’s doubt they will be able to sell it. ‘We’re sad because there goes our credit, and because people think we are a bunch of flakes who walked away from the house and tried to make money,’ Mrs. Oropeza told the Journal.

TW observes, ‘They pulled about $300k in equity (based on inflated appraisals) out of their California home. They spent the proceeds on vacations and new cars and a new house in Texas. They then walked away from the California home. ... They basically got a free house and a couple nice cars in exchange for a bad credit score for a while.’

Your thoughts? Comments? Insights? Email story tips to peter.viles@latimes.com.
Thanks, TW.